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Illinois’Budget
State fiscal year: July 1 — June 30
Appropriation: A legislatively-determined spending cap for a particular purpose
Illinois Budget Facts
What is a Balanced Budget?
Revenues Expenditures
What has Caused the State’s Financial Crisis?
Spending Growth Has Outpaced RevenuesHigher Level of AccountabilityRates of
Increase
Inflationary growth rate is 13.4%
General Revenues 11.2%
K-12 Education 18.5% Debt Service 34.4% Medicaid Liability 46.3% Pensions 52.3%
No pension holidays
No debt deferrals intofuture years
• General Funds• Special State Funds• Federal Trust Funds
What Makes Up Illinois’Budget?
9.9%
46%
44%
Special State Funds $14.8 billion
General Funds $15.5 billion
Federal Trust Funds $3.3 billion
TOTAL: $33.7 billion
How the State’s Budget Has Changed Over the Last 10 Years
Fiscal Year 1995
8.5%
35.8%
55.7% Federal Trust Funds $5.7 billion
Special State Funds $36.8 billion
General Funds $23.6 billion
Fiscal Year 2005
TOTAL: $66.1 billion
How the State’s Budget Has Changed Over the Last 10 Years
RevenueSRevenueS
General Funds
35.8%
Fiscal Year 2005
General Taxes and Fees
Discretionary
Negotiated Spending
$23.7 billion
Individual Income Tax
Corporate Income Tax
Sales Tax
Public Utility Taxes
Gaming Sources
Other Taxes
Other Transfers
Federal Sources
Individual Income Tax
Corporate Income Tax
Sales Tax
Public Utility Taxes
Gaming Sources
Other Taxes
Other Transfers
Federal Sources
32%
Individual Income Tax
• Flat tax rate: 3%
• First imposed: 1969 at 2.5%
• Permanently changed to 3% in 1989
• 10% of collections goes toward income tax refunds
• Of the remainder, 10% goes to local governments
Individual Income Tax$ in millions
Fiscal Year
$4,000
$5,000
$6,000
$7,000
$8,000
$9,000
($ i
n M
illi
on
s)
Steep rise: late 1990s
Recession: 2002 and 2003
Individual Income Tax
Corporate Income Tax Sales Tax
Public Utility Taxes
Gaming Sources
Other Taxes
Other Transfers
Federal Sources
5%
Corporate Income Tax
• Flat tax rate: 4.8%
• First imposed: 1969 at 4%
• Permanently changed to 4.8% in 1989
• 24% of collections goes toward income tax refunds
Of the remainder, 10% goes to local governments
$600
$700$800
$900
$1,000
$1,100$1,200
$1,300
$1,400
$1,500$1,600
$1,700
$1,800
Fiscal Year
Corporate IncomeTax$ in millions
Change to single sales factor
Decoupled from federal accelerated depreciation
Individual Income Tax
Corporate Income Tax
Sales TaxPublic Utility Taxes
Gaming Sources
Other Taxes
Other Transfers
Federal Sources24%
Sales TaxGoods taxed at 6.25%: 5% to state and 1.25% to local governments (services not taxed in Illinois)
Food & Drugs taxed at 1%: All goes to local governments (value of this exemption is $1.12 billion)
First enacted: 1933 at rate of 2%
Increased several times: 6.25% reached in 1990
After distributions: 72% of total collections are considered general revenues
Sales Tax
Fiscal Year
$4,000
$4,500
$5,000
$5,500
$6,000
$6,500
$7,000
$ in millions
Individual Income Tax
Corporate Income Tax
Sales Tax
Public Utility TaxesGaming Sources
Other Taxes
Other Transfers
Federal Sources4%
Public Utility Taxes
• Electric Excise– Residential: up to 1/3¢ per kilowatt– Non-residential: 5.1%
• Telecommunications Excise– Tax rate: 7%– 1% for school construction
• Natural Gas Revenue– Tax rate: 5%
Public Utility Taxes
Fiscal Year
$ in millions
Drop in land line phone use
5%
Individual Income Tax
Corporate Income Tax
Sales Tax
Public Utility Taxes
Gaming Sources Other Taxes
Other Transfers
Federal Sources
• First enacted: 1990 at flat rate of 20% of gross receipts
• Graduated tax rates since 1997. Current range: 15% to 70%
• Law allows 10 riverboat licenses. All 10 operational between 1991 and 1994 (1 closed in 1997 and remains inactive)
• 95% of collections are considered general revenues (Education Assistance Fund)
Gaming Sources• First authorized: 1974• 1/3 of sales goes to state general revenues (Education Assistance Fund)
• 38 other states have lotteries; Illinois ranks 8th in net receipts
Lottery
Riverboats
Gaming Sources
Fiscal Year
$ in millions
Lottery
Riverboats
Tax rate increase and dockside gaming
Tax rate increase
Individual Income Tax
Corporate Income Tax
Sales Tax
Public Utility Taxes
Gaming Sources
Other TaxesOther Transfers
Federal Sources
5%
Cigarette Tax: 98¢ per pack
Estate Tax: Imposed on an estate in excess of $1.5 million before distribution to heirs
Insurance Tax: Vary by type of insurance sold
Franchise Taxes: Based on paid-in capital
Liquor Taxes: Per gallon basis; varies on type of liquor
Other Taxes
Other Taxes
Fiscal Year
$ in millions
Estate
Insurance
Cigarette
Corporate Franchise
Liquor
Individual Income Tax
Corporate Income Tax
Sales Tax
Public Utility Taxes
Gaming Sources
Other Taxes
Other TransfersFederal Sources
9%
Other Transfers
Governor’s Initiatives– Administrative chargebacks– Fee transfers– Fund transfers
Intergovernmental Transfers – Cook County: Local aid for Medicaid costs– U of I: Aid for hospital services
Other Transfers$ in
millions
Fiscal Year
Beginning of Governor Blagojevich’s administrative chargebacks, fund transfers, and fee increases
Individual Income Tax
Corporate Income Tax
Sales Tax
Public Utility Taxes
Gaming Sources
Other Taxes
Other Transfers
Federal Sources
16%
Federal Sources
• Reimbursements for state Medicaid spending
• Food stamp assistance
• Miscellaneous human services reimbursements
Federal Sources
Fiscal Year
$ in millions
Temporary increase in federal reimbursement rate from 50% to 52.95%
10-Year General Funds Total
$14,000
$16,000
$18,000
$20,000
$22,000
$24,000
$26,000
$28,000
$30,000
ExpendituresExpenditures
Types of State Spending
•Mandatory
•Priority
•Discretionary
• Medicaid
• Debt Service
• Pensions
• Constitutional Mandates
Mandatory Spending
MedicaidPrinciple factors driving Medicaid spending include:
Rate: amount paid for services provided (rates set by the state)
Population: number of people eligible for and enrolled in program
Utilization: amount of services used by enrollees
MedicaidThe federal government mandates that all states provide basic healthcare for the following low-income individuals:
Elderly over age 65
Blind and Disabled
Children up to age 18
Pregnant Women
Illinois provides and covers optional services and populations:
Note: FPL for a family of 3 is only $15,670 a year.
KidCare: offers healthcare coverage to children up to age 18 whose families make up to 185% of the Federal Poverty Level (FPL).
FamilyCare: offers healthcare coverage to parents of children enrolled in KidCare up to 133% of the FPL.
Dentistry, podiatry, and chiropractic services.
Prescription drug coverage: fastest growing portion of Medicaid budget.
Medicaid
68%
30%
15%
43%
11%6% 24%
Children, Pregnant Women, and
Parents
Blind and Disabled
Elderly
SeniorCare 3%Persons Served Payments
Medicaid UtilizationFiscal Year
2003
Medicaid Liability + 15
Fiscal Year
$ in millions
Medicaid costs have risen at an average rate of 8% since FY 99. At this rate, the program will double every 9 years.
• Medicaid
• Debt Service
• Pensions
• Constitutional Mandates
Mandatory Spending
Debt ServiceTypes of State Debt
• General Obligation: bonds issued are backed by full faith and credit of state. Debt service paid from general funds.
• Revenue: bonds issued for a particular purpose with a dedicated revenue stream.
Debt Service
– General Obligation Bonds $9.6 billion• Anti-Pollution• Capital Development• Coal Development• School Construction
– Pension Obligation Bonds $10.0 billion
– Build Illinois Bonds (Revenue Bond) $2.1 billion
Unused debt service transfers to General Revenue Fund
Debt Service Payments + 15$ in
millions
Fiscal Year
$10 billion in
Pension Obligation Bonds
• Medicaid
• Debt Service
• Pensions
• Constitutional Mandates
Mandatory Spending
The 5 State Pension Systems
• Teachers’ Retirement (not Chicago): 51%• State Employees’ Retirement: 32%• State Universities’ Retirement: 15%• Judges’ Retirement: 1.7%• General Assembly Retirement: 0.3%
Current Unfunded Liability = $35.1 billion
Pension Funding2005 — 2045
Taxpayers will contribute $286.6 billion to the 5 pension systems.
• 40% will cover benefits paid; and
• 60% will make payments on past years’ unfunded liability
Sta
te C
ontr
ibu
tion
s
Fiscal Year
Pensions + 15$ in millions
$2,609
$5,585
• Medicaid
• Debt Service
• Pensions
• Constitutional Mandates
Mandatory Spending
Court System $326 million
Constitutional Officers $253 million
General Assembly $68 million
Constitutional Mandates
Fiscal Year 2005
Types of State Spending
•Mandatory
•Priority
•Discretionary
Priority Spending
• Education
• Criminal Justice
• Human Services
Higher Education vs. Tuition
Fiscal Year
Elementary & Secondary Education
State Spending on Elementary & Secondary Education (Average of Past 5 Years)
Other Grants 5%
Mandated Categoricals
24%
Early Childhood 4%
Administrative 1%
General State Aid 66%
General State Aid and Mandated Categoricals combined make up 90% of state education spending
Percent Change in Illinois K-12 Public Schools 1987—2003
Enrollment State Employment CPI (Inflation) Total Funding Growth
13.1%
157.8%
57%20.4%
2002-2003: Illinois ranked 11th in Nation for average expenditures per student in public K-12 schools. Source: NEA Rankings and Estimates 2004
Percent
Priority Spending
• Education
• Criminal Justice
• Human Services
Corrections Operations vs. Inmates
Fiscal Year
Priority Spending
• Education
• Criminal Justice
• Human Services
• Mental Health, Developmental Disabilities, & Substance Abuse
• Children & Family Services
• Child Care
• Assistance
• Rehabilitation Services
• Aging
• Public Health
• Other
Human Services — Fiscal Year 2005
$2,003.0
$780.9
$562.9
$417.1
$411.5
$308.1
$148.8
$120.9
$ in millions
Total: $4,753.2
Types of State Spending
•Mandatory
•Priority
•Discretionary
Discretionary Spending• Natural Resources
– state parks, conservation areas
• Commerce & Economic Opportunity– economic development, business grants
• Agriculture– food inspection, animal livestock
• Veterans’ Affairs– hospitals, veterans’ benefits
Types of State Spending
•Mandatory
•Priority
•Discretionary
Spending Priorities
13.5%
Discretionary $2.1 billion
58.5%
12.0%
29.5%24.8%
61.8%
Priority $13.9 billion
Mandatory $3.8 billion
Mandatory $7.0 billion
Priority $9.6 billion
Fiscal Year 2005Fiscal Year 1995
Discretionary $2.8 billion
Revenues
State Sources $17,163 $17,892 $18,529
Federal Sources $3,940 $5,189 $4,688
Subtotal Revenues $21,103 $23,081 $23,217
Transfers
Transfers In $1,827 $2,109 $2,385
Pension Obligation Bonds $300 $1,489 $0
Subtotal Transfers $2,127 $3,598 $2,385
Short Term Borrowing $1,675 $0 $0
Total Cash Receipts $24,905 $26,679 $25,602
Appropriations $22,335 $23,483 $23,685
(Less Permanent Lapse) ($442) ($851) ($681)
Plus Transfers Out $2,741 $3,459 $2,598
Plus Rainy Day Transfer $0 $50 $0
Plus Accounts Payable from Previous Year $1,476 $1,266 $593
(Less Accounts Payable at End of Current Year) ($1,266) ($593) ($593)
Total Expenditures $24,844 $26,814 $25,602
Revenues vs. Expenditures $61 ($135) $0
General Fund BalanceE
xpen
dit
ure
sC
ash
Rec
eip
ts
FY 03 Actual
FY 04 Actual
FY 05 Est
A L KAheadFiscal Year 2006
Walk-up:
FY 2006
Budget Hole
Exp
end
itu
res
Cas
h R
ecei
pts
Revenues
State Sources $18,529
Federal Sources $4,688
Subtotal Revenues $23,217
Transfers
Transfers In $2,385
Pension Obligation Bonds $0
Subtotal Transfers $2,385
Short Term Borrowing $0
Total Cash Receipts $25,602
Appropriations $23,685
(Less Permanent Lapse) ($681)
Plus Transfers Out $2,598
Plus Rainy Day Transfer $0
Plus Accounts Payable from Previous Year $593
(Less Accounts Payable at End of Current Year) ($593)
Total Expenditures $25,602
Increase (Decrease) in End-of-Year Balance $0
FY 05 Estimated
Revenues
State Sources $18,529
Corporate Tax Amnesty ($100)
Adjustment to Cigarette Tax ($50)
Federal Sources $4,688
Extra Federal Match ($25)
Subtotal Revenues $23,042
Transfers
Transfers In $2,385
Fund Transfers ($260)
Administrative Chargeback Change ($50)
Sale of Assets ($25)
Transfer Holiday ($10)
Subtotal Transfers $2,040
Short Term Borrowing $0
Total Cash Receipts $25,082
Appropriations $23,685
Medicaid $1,000
Pension Contributions $486
Annualize Nursing Home Rate $30
AFSCME Contract $28
(Less Permanent Lapse) ($681)
Plus Transfers Out $2,598
Plus Rainy Day Transfer $50
Plus Accounts Payable from Previous Year $593
(Less Accounts Payable at End of Current Year) ($593)
Total Expenditures $27,196
Increase (Decrease) in End-of-Year Balance ($2,114)
Walk-up:FY 2006 Budget Hole
ExpendituresCash Receipts
FY 06 Adjusted
Questions?