Blagojevich balances $1.7 billion deficit without increasing income and sales taxes; boosts funding for education, health care and public safety

SPRINGFIELD - Governor Rod R. Blagojevich today unveiled a budget blueprint for Fiscal Year 2005 that delivers on his promise to reform education, further protect the citizens of Illinois and better spend taxpayers' dollars.  Just as he proposed last year, the Governor's budget plan fulfills these promises without raising the state sales or income tax. 

 

"The change and reform we began last year has to continue," Blagojevich said.  "And like last year, there are no easy answers.  We're going to make tough decisions.  We're going to make painful cuts.  We're going to ask those who, for a long time, have benefited from the system, to give something back and to lead in the shared sacrifice.  That's what we will do.  What we won't do is balance the budget on the backs of the hard-working people of this state."

 

Speaking to a joint session of the Illinois General Assembly, Blagojevich presented a general operations budget for all funds of $43.5 billion.  The Governor's proposal allocates an additional $400 million for K-12 education and puts new Illinois State Police officers on the streets. His budget proposal solves the $1.7 billion structural deficit caused by major expenses, including Medicaid and employee health insurance, growing faster than revenues.

 

Overall, Blagojevich proposed balancing the upcoming year's budget by reducing operational costs by $840 million, and adding $945 million in new revenue to the state's coffers by taking a number of steps, including maximizing the amount the state receives from the federal government and closing loopholes that allow wealthy corporations to avoid paying their fair share in state taxes.  The Governor also projected a modest 1%, or $280 million, growth in base revenue.

 

With his comprehensive efforts to cut waste and even the tax burden, the Governor again fulfilled his goal of investing more in education, public safety and health care.

 

 

 

 

While he was pleased to make more resources available for critical services that directly benefit the public, Blagojevich emphasized that it's time to take aim at past spending and budget practices that caused the deficit.  The Governor proposed a series of fiscal reforms to bring accountability and restraint to the state budget process.   

 

"If we are smart and don't squander this opportunity, we can use the next few months to not only solve this year's budget deficit but to finally begin budgeting in a way that recognizes that the decisions we make today, impact our budgets and our plans for tomorrow," said Governor Blagojevich.

 

The fiscal reforms include:

make sure hospitals, nursing homes and pharmacies that provide services for the state get paid on time.  It sets the goal of paying all bills within 30 days, but never longer than 60 days.  It also would create a revolving loan of credit to reduce interest costs. 

 

In addition to better budget practices, Blagojevich proposed reducing operational costs by $840 million dollars.  To achieve those savings, the Governor proposed consolidating government agencies and streamlining departments to reduce administrative costs, decreasing the number of non-frontline state employees, closing some state facilities and reducing or eliminating some grants.  Reductions in operational costs include:

 

 

In an effort to balance the state tax code for both businesses and individuals, Governor Blagojevich's budget proposal includes closing various tax loopholes associated with the

corporate income tax and business sales taxes. In 1980, corporations paid $1 for every $4 paid by individuals.  By 2003, for every $1 paid by corporations, Illinois taxpayers paid $8.  Income tax revenues forecast for FY 2005 shows that ratio increasing to $1 to $9.  It's estimated closing various corporate income tax loopholes will generate an estimated $223 million, closing various business tax loopholes will net $98 million and other tax adjustments will generate another $80 million.  Among the various tax changes the Governor proposed: 

·    Tax all corporate income as business income: $29 million

·    Eliminate the foreign tax haven: $40 million

·    End exemption to unitary reporting by domestic subsidiaries: $21 million

·    Use straight line instead of accelerated depreciation: $74 million

·    Limit the farm chemicals tax exemption to include only small farms: $27 million

·    Collect sales tax on software packages, currently paid by consumers but not by businesses: $64 million

·    Eliminate luxury watercraft use tax loophole: $7 million

 

All employee bargaining unit contracts expire on June 30, 2004.  As the state continues to negotiate with each of the unions representing state employees, Governor Blagojevich expressed willingness to discuss wage and all benefits.

 

"As Governor, my job is to present a balanced budget," Governor Blagojevich said.  "That's what I just did.  I presented spending cuts, headcount reductions, loophole closings and I told the unions they'd have to sacrifice.  In other words, these are the real options and I think that considering the priorities of the people, not paying more in income and sales taxes and having more money for education, health care and public safety, it's a tough budget, but it reflects the people's priorities."