NEW LAW ALLOWS GOVERNOR AND LT. GOVERNOR TO RUN AS TEAM

An election bill, signed July 12, requires the Governor and the Lieutenant Governor to run as a team in the general primary election.

House Bill 5820 (P.A. 96-1018) was introduced following controversy surrounding the 2010 Democrat primary election win of a largely unknown candidate, Scott Lee Cohen.

Cohen later bowed out of the race following media revelations that raised serious concerns about his qualifications and character.

ILLINOIS IN ‘WORST FISCAL POSITION IN ITS HISTORY’

Comptroller Dan Hynes released a report July 7 that showed “Illinois ended the year in the worst fiscal position in its history.”

At the end of the Fiscal Year 2010, which concluded June 30, the state’s General Revenue Fund (GRF) balance was negative $4.692 billion—the lowest budgetary balance in Illinois history.

The backlog of Illinois’ unpaid bills was a historically high $4.712 billion. Last year, the backlog was $2.785 billion.

Lacking revenue to pay the state’s bills, in June it took a record 153 working days for the comptroller’s office to reimburse vouchers. At the same time in 2009, the delay was 99 days.

Unfortunately, the report doesn’t predict any relief on the horizon. Hynes anticipates that even with an economic boost or with additional revenue that may come from budget cuts, borrowing measures, or tax increases advanced by Governor Pat Quinn, “the state will likely end fiscal year 2011 with a GRF bill backlog significantly higher than that at the end of fiscal year 2010.”

BUDGET CUT LESS THAN ONE HALF OF ONE PERCENT

On July 1, the Governor announced what he says will amount to approximately $1.4 billion in budget cuts, though the cuts are actually in the neighborhood of $155 million—a spending reduction of less than one half of one percent.

I am supportive of any plan to scale back state expenditures in the face of a $13 billion budget deficit, but I am skeptical that these proposed cuts will be made. In 2009, the Governor promised to cut $1 billion from the state budget, and even produced a list of cuts that he planned to make. Yet most of those budget reductions were never implemented and, in fact, the Governor managed to overspend by $2 billion and increase Illinois’ backlog of bills from $4 billion to $6 billion.

Though short on specifics, Quinn provided a list of his $155 million in vetoes by agency. He plans to cut spending in many areas of the budget including elementary and high school education, higher education, human services, aging, corrections, health, law enforcement, agriculture and natural resources.

ILLINOIS NOW WORST CREDIT RISK

With a second credit downgrade this month, Illinois has overtaken California as the worst credit risk in the United States.

The credit default swap spread for the Illinois general obligation bonds increased to 313 basis points for a five-year contract, which means a bondholder must pay over 3% of the bond’s face value per year to be insured against default. California’s five-year credit default swap is currently at 293.

Illinois has been downgraded 17 times in its history, with almost half of those occurring during the past one-and-a-half years.