HispanicBusiness

Every time it seems Illinois might be pulling out of its budgetary tailspin, a new crisis hits.

The latest one, which Democratic Governor Pat Quinn wants lawmakers to address during a special legislative session Friday (August 17), is the state's ballooning annual pension payment. Those payments have become so large they are eating up all of the state's new tax money and still forcing cuts to schools and Medicaid.

Getting those required payments under control will be no easy task, especially in a one-day session sandwiched between summer vacations and the campaign season. The House will be preoccupied Friday with a vote to oust one of its own members, who was indicted for taking bribes. Many expect a consensus on pensions will not emerge until after the November elections. In the meantime, Quinn faces intense opposition over pension changes that are merely being considered. On Wednesday, he was heckled by a crowd of protesters from public-employee unions in an appearance at the Illinois State Fair.

Even if legislators solve the latest pension problem, their relief may be short-lived. The state still has a backlog of some $8 billion in unpaid bills, and even under the rosiest predictions Illinois still will owe $6 billion at the end of the fiscal year. Furthermore, big pieces of a major Medicaid cost-cutting law could fall apart if the federal government rejects them. And huge tax hikes that shored up the state's finances recently are set to expire in little more than two years.

Getting religion

All the bad news, though, makes it easy to miss the fact that Illinois has started to move past the wink-and-nod budgeting of years past. Illinois, after all, is a state that has not had a balanced budget in at least 10 years. But there are signs Springfield is finally getting religion when it comes to fiscal responsibility.

The tax hikes were unpopular, but they gave elected officials breathing room during the recession. They also came with spending caps and requirements that will force legislators to look ahead more than one year when weighing how much to spend on certain services.

Quinn's office says state spending has been pared back to what it was five years ago. One of the most dramatic examples of that is a bipartisan plan, passed this spring, to reduce the state's Medicaid bill by $2.7 billion. Roughly a third of that amount will come from new revenues, such as a cigarette tax hike, and two thirds from spending cuts. The law reduces state payments for 62 different items, including eyeglasses, dentist visits, nursing home rates and medicines.

And one reason the pension payments are so suddenly painful is that the state is actually paying them, instead of borrowing money to cover the costs.

"We are on a solid fiscal footing," Illinois Senate President John Cullerton, a Democrat, told Stateline. "We clearly have a balanced budget this year, and we took $1.3 billion to pay down old debts... We hope, of course, that the economy will grow between now and [the expiration of the tax hikes] so we won't have to have a problem with our future balanced budgets."

"The day of reckoning was when Moody's downgraded us" in January, says Representative Patti Bellock, a suburban Republican. Other rating agencies warned that they, too, would lower the state's bond ratings if lawmakers made