Illinois

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Illinois
Budget
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Illinois Budget Facts

• State fiscal year July 1 June 30
• Appropriation A legislatively-determined
  spending cap for a particular purpose

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What is a Balanced Budget?

• Revenues

Expenditures
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What has Caused the States Financial Crisis?

• Spending Growth Has
• Outpaced Revenues

Higher Level of Accountability
Rates of Increase
General Revenues 11.2

• No pension holidays
• No debt deferrals into
• future years

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K-12 Education 18.5
Debt Service 34.4
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Medicaid Liability 46.3
Pensions 52.3
Inflationary growth rate is 13.4
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What Makes Up IllinoisBudget?

• General Funds
• Special State Funds
• Federal Trust Funds

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How the States Budget Has Changed Over the Last
10 Years
Fiscal Year 1995
9.9
General Funds 15.5 billion
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Special State Funds 14.8 billion
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Federal Trust Funds 3.3 billion
TOTAL 33.7 billion
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How the States Budget Has Changed Over the Last
10 Years
Fiscal Year 2005
8.5
General Funds 23.6 billion
35.8
Special State Funds 36.8 billion
55.7
Federal Trust Funds 5.7 billion
TOTAL 66.1 billion
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RevenueS
RevenueS
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General Funds
Fiscal Year 2005
General Taxes and Fees Discretionary Negotiated
Spending
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35.8
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23.7 billion
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Individual Income Tax Corporate Income Tax
Sales Tax Public Utility Taxes Gaming Sources
Other Taxes Other Transfers Federal Sources
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Individual Income Tax Corporate Income Tax
Sales Tax Public Utility Taxes Gaming Sources
Other Taxes Other Transfers Federal Sources
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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

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Individual Income Tax
in millions
Steep rise late 1990s
Recession 2002 and 2003
Fiscal Year
15
Individual Income Tax Corporate Income Tax
Sales Tax Public Utility Taxes Gaming Sources
Other Taxes Other Transfers Federal Sources
5
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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

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Corporate IncomeTax
in millions
Change to single sales factor
Decoupled from federal accelerated depreciation
Fiscal Year
18
Individual Income Tax Corporate Income Tax Sales
Tax Public Utility Taxes Gaming Sources Other
Taxes Other Transfers Federal Sources
24
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Sales Tax
Goods 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
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Sales Tax
in millions
Fiscal Year
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Individual Income Tax Corporate Income Tax Sales
Tax Public Utility Taxes Gaming Sources Other
Taxes Other Transfers Federal Sources
4
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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

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Public Utility Taxes
in millions
Drop in land line phone use
Fiscal Year
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Individual Income Tax Corporate Income Tax
Sales Tax Public Utility Taxes Gaming Sources
Other Taxes Other Transfers Federal Sources
5
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Gaming Sources
Lottery

• 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

• 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)

Riverboats
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Gaming Sources
in millions
Lottery
Tax rate increase
Tax rate increase and dockside gaming
Riverboats
Fiscal Year
27
Individual Income Tax Corporate Income Tax Sales
Tax Public Utility Taxes Gaming Sources Other
Taxes Other Transfers Federal Sources
5
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Other Taxes
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
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Other Taxes
in millions
Cigarette
Estate
Insurance
Corporate Franchise
Liquor
Fiscal Year
30
Individual Income Tax Corporate Income Tax Sales
Tax Public Utility Taxes Gaming Sources Other
Taxes Other Transfers Federal Sources
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Other Transfers

• Governors Initiatives
• Administrative chargebacks
• Fee transfers
• Fund transfers
• Intergovernmental Transfers
• Cook County Local aid for Medicaid costs
• U of I Aid for hospital services

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Other Transfers
in millions
Beginning of Governor Blagojevichs
administrative chargebacks, fund transfers, and
fee increases
Fiscal Year
33
Individual Income Tax Corporate Income Tax Sales
Tax Public Utility Taxes Gaming Sources Other
Taxes Other Transfers Federal Sources
16
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Federal Sources

• Reimbursements for state Medicaid spending
• Food stamp assistance
• Miscellaneous human services reimbursements

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Federal Sources
in millions
Temporary increase in federal reimbursement rate
from 50 to 52.95
Fiscal Year
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10-Year General Funds Total
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Expenditures
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Types of State Spending

• Mandatory
• Priority
• Discretionary

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Mandatory Spending

• Medicaid
• Debt Service
• Pensions
• Constitutional Mandates

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Medicaid

• Principle 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

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Medicaid

• The 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

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Medicaid

• Illinois provides and covers optional
• services and populations

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.
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Note FPL for a family of 3 is only 15,670 a
year.
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Medicaid Utilization
Fiscal Year 2003
Children, Pregnant Women, and Parents
30
68
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Blind and Disabled
15
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Elderly
11
3
SeniorCare
Persons Served
Payments
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Medicaid Liability 15
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.
Fiscal Year
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Mandatory Spending

• Medicaid
• Debt Service
• Pensions
• Constitutional Mandates

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Debt Service

• Types 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.

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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
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Debt Service Payments 15
in millions
10 billion in Pension Obligation Bonds
Fiscal Year
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Mandatory Spending

• Medicaid
• Debt Service
• Pensions
• Constitutional Mandates

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The 5 State Pension Systems
Current Unfunded Liability 35.1 billion

• Teachers Retirement (not Chicago) 51
• State Employees Retirement 32
• State Universities Retirement 15
• Judges Retirement
  1.7
• General Assembly Retirement 0.3

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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

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Pensions 15
in millions
5,585
State Contributions
2,609
Fiscal Year
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Mandatory Spending

• Medicaid
• Debt Service
• Pensions
• Constitutional Mandates

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Constitutional Mandates
Fiscal Year 2005

• Court System 326 million
• Constitutional Officers 253 million
• General Assembly 68 million

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Types of State Spending

• Mandatory
• Priority
• Discretionary

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Priority Spending

• Education
• Criminal Justice
• Human Services

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Higher Education vs. Tuition
Fiscal Year
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Elementary Secondary Education
Early Childhood 4
Administrative 1
Other Grants 5
General State Aid 66
Mandated Categoricals 24
General State Aid and Mandated Categoricals
combined make up 90 of state education spending
State Spending on Elementary Secondary
Education (Average of Past 5 Years)
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Percent Change in Illinois K-12 Public Schools
19872003
Enrollment State Employment CPI
(Inflation) Total Funding Growth
Percent
157.8
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20.4
13.1
2002-2003 Illinois ranked 11th in Nation for
average expenditures per student in public K-12
schools. Source NEA Rankings and
Estimates 2004
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Priority Spending

• Education
• Criminal Justice
• Human Services

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Corrections Operations vs. Inmates
Fiscal Year
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Priority Spending

• Education
• Criminal Justice
• Human Services

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Human Services Fiscal Year 2005
in millions

• Mental Health, Developmental Disabilities,
  Substance Abuse
• Children Family Services
• Child Care
• Assistance
• Rehabilitation Services
• Aging
• Public Health
• Other

• 2,003.0
• 780.9
• 562.9
• 417.1
• 411.5
• 308.1
• 148.8
• 120.9

Total 4,753.2
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Types of State Spending

• Mandatory
• Priority
• Discretionary

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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

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Types of State Spending

• Mandatory
• Priority
• Discretionary

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Spending Priorities
Discretionary 2.1 billion
Discretionary 2.8 billion
Mandatory 3.8 billion
Mandatory 7.0 billion
13.5
12.0
24.8
29.5
58.5
61.8
Priority 9.6 billion
Priority 13.9 billion
Fiscal Year 2005
Fiscal Year 1995
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General Fund Balance
FY 03 Actual
FY 04 Actual
FY 05 Est
Cash Receipts
Expenditures

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A L K
Ahead
Fiscal Year 2006
70
Walk-up FY 2006 Budget Hole
FY 05 Estimated
Cash Receipts
Expenditures
71
Walk-upFY 2006 Budget Hole
FY 06 Adjusted
Expenditures
Cash Receipts
72

• Questions?