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Legislative update: Quinn proposes budget cuts, U.S. Congress approves FY2013 spending plan

April 23, 2012
Lori Clark

Lori Clark

In Springfield …

Last week, Gov. Pat Quinn released his plan for cutting the FY2013 Illinois Medicaid program by approximately $2.7 billion, the level of reductions he believes are needed to stabilize the Medicaid system in Illinois and prevent its collapse.

There are three components to the governor’s plan: $2 billion (75 percent) reductions, a $1 per-pack cigarette tax and taking advantage of federal matching dollars.

The Medicaid Working Group appointed by the governor last week indicated that they had only been able to identify approximately $1.4 billion in reductions. We can anticipate that there will be ongoing dialogue between the working group, the governor’s office and legislative leaders on this issue as they work toward finalizing a state budget for FY2013.

Quinn did announce that if the General Assembly was unable to enact a viable plan that would result in the cost savings needed to stabilize the Medicaid system, he would call them back to deal with this issue over the summer.

Last week, Gov. Quinn also released his plan to stabilize the five state-funded pension systems. The governor indicated that his plan would provide for 100 percent funding for pension systems by the year 2042 and would result in the following changes to the current plan:

  • Increase employee contributions by 3 percent
  • Reduce cost-of-living adjustment (COLA) to lesser of 3 percent or 1/2 of CPI, simple interest
  • Delay COLA to earlier of age 67 or five years after retirement
  • Increase retirement age to 67 (to be phased in over several years)
  • Establish 30-year closed Actuarially Required Contribution (ARC) funding schedule
  • Public sector pensions limited to public sector employment

In consideration for the changes described above, employee pay increases will continue to be counted in the calculation of their pension and employees will receive a subsidy for their health care in retirement. The governor’s plan also calls for phasing-in the responsibility for paying normal costs of pensions to each employer, including school districts, community colleges and universities.

The Working Group on Pensions appointed by the governor was to have released their report with recommendations on how to stabilize the state pension systems April 17. However, they have not yet released their report, and they continue to work with stakeholder groups to try to achieve a consensus on the various elements of a pension stabilization plan, including the transfer of normal costs to local school districts, community colleges and universities.

Again, we can anticipate that there will be ongoing dialogue between the working group, the governor’s office and legislative leadership on the issue of pension stabilization throughout the remaining six weeks of the legislative session. We are monitoring this situation at the highest level, and we will be reporting on issues as they develop on our NIU State Pension and Budget Update website. It is important to note that nothing has been finalized on pension stabilization at this point – these are ideas that are being circulated.

HB 4996, introduced by Rep. Daniel Biss and restricting the ability of public universities to reemploy annuitants, has moved to the Senate. Rep. Biss is working with Sen. Heather Steans, the Senate sponsor, on some technical changes to the bill that would be offered through an amendment. One of the issues currently being discussed involves extending the effective date of this bill from July 2012 until July 2013, thus giving the public universities more time to handle the transition.

There are several bills pending in the Senate dealing with the elimination of General Assembly scholarships (SB 2914, SB 2932 and HB 3810). These bills have all been assigned to the Senate Executive Subcommittee on Education. Although they were posted to be heard before the Senate Executive Committee last week, they were not called. Minority Leader Christine Radogno expressed her frustration with the delay in dealing with this issue.

HB 3810, introduced by Rep. Fred Crespo, passed out of the House on March 21 by a vote of 79-25-2.

In Washington, D.C. …

Congressman Paul Ryan

Congressman Paul Ryan

House Congressional Resolution 112 recently was approved by the U.S. House of Representatives. This is the Paul Ryan budget plan for FY2013.

It would reduce discretionary spending significantly, mostly in the area of non-defense spending. It would fall below the discretionary spending caps agreed to last summer in the Budget Control Act and even below those spending levels achieved through the automatic across-the-board cuts currently scheduled to take place in September 2013.

There is a good deal of concern by President Obama and other Congressional leaders on the impact of this level of cuts on funding to support the federal research enterprise.

The House Resolutions are only overall blueprints that set aggregate spending levels within broad budget categories. The House Appropriations Subcommittees hold the responsibility for determining actual funding levels before being considered by the full House. Several of these Subcommittees are in the process of marking up the FY2013 appropriations bills.

As details emerge, we will report on the potential impacts.

Under an analysis conducted by the American Association for the Advancement of Science (AAAS) of potential budget implications of HR112, the House budget would reduce R&D in eight budget functions by $4.3 billion, or 3 percent, below the president’s budget request. This would also amount to a 3 percent reduction from FY2012 funding levels.

However, most of these cuts would be felt by non-defense R&D, which would receive an 8 percent reduction from the president’s request and 5 percent from FY2012 levels. Defense R&D would receive a slight increase above the president’s request, and a slight decrease from FY2012.

For comparative purposes, the president’s budget would reduce defense R&D spending by 2 percent below FY2012 levels while granting non-defense R&D a 5 percent increase. Within the non-defense budget, health, veterans and agriculture would be held virtually flat in the president’s request, while energy, natural resources, transportation and general science would receive moderate-to-large increases.

The Voices section of NIU Today features opinions and perspectives from across campus. Lori Clark is director of State and Federal Relations for NIU.