Illinois Public Media News
Getting more revenue for the state was the main goal of Governor Pat Quinn's previous budget addresses. But this year, with a new income tax hike in effect, Quinn on Wednesday made no such pitch. The Governor mentioned a few new initiatives ... such as efforts to attract start-up companies to Illinois, and to double the state's exports. But the governor says the main focus of his proposed spending plan is exercising spending restraint. As Illinois Public Radio's Amanda Vinicky reports ... for some, the cuts Quinn has proposed don't go far enough. Others call them devastating.
(Photo courtesy of Chris Eaves)
Gov. Pat Quinn presented lawmakers with a budget proposal Wednesday that would increase state spending overall while skimping on human services and borrowing billions of dollars to pay old bills.
Among the spending cuts -- just a month after Quinn approved a major income tax increase -- are programs helping the elderly buy medicine, payments for medical services to the poor and money to hire new state troopers.
The Chicago Democrat described his plan as a frugal, even painful, step toward getting Illinois out of its cavernous budget hole.
"Our commitment to taxpayers is simple: We will only use tax dollars to provide necessary services. All unnecessary state spending will be eliminated," Quinn said in a speech to the General Assembly.
Republicans immediately said Quinn wasn't living up to that promise. They noted the key measure of state spending would increase by $1.7 billion, to about $35.4 billion.
"We got into this mess because we spent money we didn't have and it's just a continuation. It's the same old song," said House Minority Leader Tom Cross, R-Oswego.
Even Quinn's fellow Democrats questioned his budget math, suggesting that he proposes paying some upcoming expenses with money that isn't available or should be used to pay bills that are past due.
His plan also came under fire from groups that count on state money to provide services to the poor and sick.
Hospital and nursing home groups criticized Quinn's proposal to cut Medicaid rates by $552 million, or about 5 percent. Bob Hedges, president of the Illinois Health Care Association, called it "a terrible blow to our seniors, employees, families and communities."
Quinn spared education from dramatic cuts, but Voices for Illinois Children said his plan appears to slash after-school and mental health programs that keep children out of trouble.
"When the school bell rings, kids still have needs," said the group's policy director, Sean Noble.
The tax increase Quinn approved should generate about $6.8 billion in the budget year that begins July 1, but that's not nearly enough to put state government back in the black.
Quinn's aides say the increased spending in his proposal is a result of using the new income tax to cover the rising cost of services or pay for items neglected in past budgets. They said the spending plan includes more than $1 billion in cuts.
Even with the tax increase, Illinois has $9 billion or $10 billion in overdue bills that must be paid, Quinn's budget director David Vaught said. The governor's plan to pay those bills could be the most contentious part of budget negotiations.
Quinn and Democratic legislative leaders want to borrow $8.7 billion to pay off overdue bills. Instead of informally borrowing money simply by not paying its bills, the state would sell bonds and pay the debt over 14 years.
The governor maintains that this step, which technically would take place in the current budget year, would be fair to the state's vendors and good for the economy.
"We have the opportunity to jump-start our economy by paying our vendors today -- an immediate injection of billions into our economy," Quinn said in his 27-minute speech, during which he wore a sash known as a kente cloth to mark Black History Month.
Republicans called for more spending cuts before any borrowing.
"I don't think the public understands after the single biggest tax increase that we've had in the state of Illinois, that now you want to go borrow over $8 billion," Republican Comptroller Judy Baar Topinka said. "We have to clean up our act and get the budget into compliance first."
Democrats also questioned parts of Quinn's proposal. House Speaker Michael Madigan said the proposal appears to include $720 million from two technical tax changes that have not been approved, violating new policies meant to control spending.
"I'm confident that we will work our way through these differences, but my commitment in Illinois budget-making this year is to live within those spending controls," Madigan, D-Chicago, said in an interview with the public television show "Illinois Lawmakers."
And Senate President John Cullerton said Quinn seems to be using borrowed money to pay for upcoming expenses, instead of devoting it solely to overdue bills.
Still, Cullerton, D-Chicago, saved his sharpest remarks for the GOP officials who oppose borrowing to pay what Illinois owes to businesses, community groups and charities.
"If Republicans are willing to have a conversation that doesn't start with 'No,' I'm ready to listen," Cullerton said in a statement.
Quinn also called for consolidating some of the state's 868 school districts and said he wants a commission to study the always-contentious issue. He predicted taxpayers could save $100 million by merging small districts.
He proposed a major cut in state support for local schools' bus costs and he called for eliminating regional offices of education for a savings of $14 million.
(Additional reporting from the Associated Press)
Bookseller Borders, which helped pioneer superstores that put countless mom-and-pop bookshops out of business, filed for bankruptcy protection Wednesday, sunk by crushing debt and sluggishness in adapting to a rapidly changing industry.
The 40-year-old company plans to close about 200 of its 642 stores over the next few weeks. In Illinois, more than 15 stores are closing at locations across the state, including Matteson, Chicago, and Normal. There are also stores closing in Indiana at branches in Evansville, Indianapolis, and West Lafayette.
All of the stores closed will be superstores, Borders spokeswoman Mary Davis said. She doesn't expect those stores to be closed any later than the end of April, but it depends on when the stores sell out of books.
The company also operates smaller Waldenbooks and Borders Express stores.
Clearance sales could begin as early as this weekend, according to documents filed with the U.S. Bankruptcy Court in New York. Borders said it is losing about $2 million a day at the stores it plans to close.
Cautious consumer spending, negotiations with vendors and a lack of liquidity made it clear Borders "does not have the capital resources it needs to be a viable competitor," Borders Group Inc. President Mike Edwards said in a written statement.
Borders plans to operate normally and honor gift cards and its loyalty program as it reorganizes.
The company will receive $505 million in debtor-in-possession financing from GE Capital and others to help it reorganize.
According to the Chapter 11 filing, Borders had $1.28 billion in assets and $1.29 billion in debts as of Dec. 25.
It owes tens of millions of dollars to publishers, including $41.1 million to Penguin Putnam, $36.9 million to Hachette Book Group, $33.8 million to Simon & Schuster and $33.5 million to Random House.
It's significant that Borders could not reach an agreement with creditors and file a "prepackaged bankruptcy." Said Nejat Seyhun, a bankruptcy expert at the University of Michigan.
It could be a sign that creditors do not believe Borders will be a "viable operation going forward," Seyhun said.
Activist investor William Ackman, whose Pershing Square Management Co. has a nearly 15 percent stake in the company, also stands to be a big loser. Shareholders are often wiped out in a reorganization.
He offered to finance a $16-per-share Borders-led takeover bid for rival Barnes & Noble in December, but nothing materialized.
The filing was expected, but it is far from clear if it will be enough to save the company.
"They are going to have to be an entirely different company than the one that went into bankruptcy protection if they want to emerge successfully," said Jim McTevia, managing partner of turnaround firm McTevia & Associates in Bingham Farms, Mich.
It has been a long fall for the Ann Arbor, Mich., company, which 15 years ago appeared to be the future of bookselling.
Big-box bookstores have struggled as competition has become increasingly tough as books become available in more locations, from Costco to Walmart, online sales grow and electronic books gain in popularity.
Borders also suffered from a series of errors: failing to catch onto the growing importance of the Web and electronic books, not reacting quickly enough to declining music and DVD sales, and hiring four CEOs in 5 years without book-selling experience.
"Books and content just became so available at so many other locations, online and offline, the 'grow, rinse, repeat' mindset just wouldn't work anymore," said Michael Norris, senior trade analyst at Simba Information.
In addition, Americans are simply buying fewer books. Sales fell nearly 5 percent in 2010 to 717.8 million from 751.7 million last year, according to Nielsen, which tracks about 70 percent of book sales but doesn't include Walmart stores.
For book lovers who like to shop in stores, the news was worrisome.
"It's just really sad to hear that happening," said Monika Barera, 50, shopping Wednesday at a Borders store in its hometown of Ann Arbor, Mich. The downtown store she was shopping at isn't closing, but four others in Michigan are. "I just hope they can find a way through."
At its peak in 2003, Borders operated 1,249 Borders and Waldenbooks stores. Now it operates barely half that. Its annual revenue has fallen by about $1 billion since 2006, the last year it reported a profit.
Borders' rival Barnes & Noble, which has 29.8 percent of the book market compared with Borders' 14.3 percent according to IBIS World, has done better by adapting to e-commerce and electronic books more quickly and keeping management stable.
Tom and Louis Borders opened their first store in 1971, selling used books in Ann Arbor, Mich. At the time the brothers were mostly interested in offering other bookstores a system they'd developed for managing inventory.
But in 1973, the store moved to a larger location and starting selling new books. The brothers decided to focus on opening more bookstores.
The birth of the superstore was still a decade away. The Waldenbooks and B. Dalton mall chains, with small, 2,000-square-foot stores and 20,000 to 50,000 titles, were growing rapidly.
Against this backdrop, Borders opened its second location in 1986. From there, the company opened one or two bookstores a year; the pace eventually increased to 40 a year.
The new superstores, in contrast to mall chains, ran 10,000 to 15,000 square feet and offered between 100,000 and 200,000 titles and enticements to linger like comfortable chairs and attractive lighting.
Kmart Corp. saw the potential and acquired Borders in 1992, forming a book unit with Waldenbooks. It then spun the bookstores off as a separate company in 1995, the same year a company called Amazon.com started selling books online.
Analysts say a key error for Borders came in 2001, when it contracted out its e-commerce business to Amazon.com.
"Termites don't team with Orkin," said Simba Information's Norris. "Amazon had no incentive whatsoever to promote Borders. ... It really marked the beginning of the end."
That relationship lasted until 2006. By then, Borders lagged far behind Barnes & Noble, which had been selling books online since 1997.
By the time Borders' current CEO, financier Bennett LeBow, came aboard in May 2010 after investing $25 million into the company, the ship was listing badly.
Fordham University marking professor Al Greco said Borders can operate with fewer stores, but the same challenges remain, Greco said.
"This is not a good day for book retailers, book readers and book publishers," Greco said. "It's a serious problem that a major chain that did a nice job for many years could not survive."
(Photo courtesy of Ildar Sagdejev)
Just weeks after signing a major tax increase into law, Gov. Pat Quinn gets the privilege of telling Illinois lawmakers and taxpayers that the state's budget is still a mess.
Even with higher income taxes, Illinois won't have enough money to pay all its expenses for the coming year, let alone cover the billions in old bills that have been allowed to pile up.
When Quinn delivers his budget proposal Wednesday, he's likely to call for significant spending cuts in some areas. He will undoubtedly renew his call for borrowing $8.7 billion to pay old bills. And a document from his budget office indicates he wants to take another try at raising cigarette taxes.
Quinn has largely stayed out of sight in the run-up to his budget address, but in an appearance Friday the Chicago Democrat talked about the importance of money for education, health care and public safety. At the same time, he warned Illinois must be "very, very frugal."
State budget director David Vaught said Quinn will make it clear that raising taxes by two-thirds did not solve Illinois' budget problems.
"The General Assembly and the public will see the spending pressures," Vaught said in an interview with The Associated Press last week. "They'll see where we plan to spend and where we don't. We'll make clear not just that we're saying no but why we're saying no."
The Quinn administration has been studying possible cuts to human services - cuts that advocates for the poor describe as draconian.
"We're terrified," said Maria Whelan, president of Illinois Action for Children. "Our hope is the pain will be shared and the most vulnerable people in our state do not bear the brunt."
State employees and retirees may also be targeted, if not by Quinn then by the Legislature.
House Speaker Michael Madigan, D-Chicago, recently warned lawmakers of tough decisions that lie ahead and even suggested cutting pension benefits for current state employees, a move generally considered unconstitutional.
"If you come here and you don't want to cast a difficult vote, well, you ought to go back home and give the job to somebody else," Madigan said.
It's not clear just how big a deficit Illinois faces in the budget year that starts July 1. The Quinn administration has avoided direct answers to that question.
A three-year budget outline from Quinn's office shows he's counting on some revenue measures that haven't been approved yet, notably a $330 million increase in cigarette taxes.
A review of the document suggests a gap of more than $3 billion between income and expenses in the coming year. On top of that, the state owes about $8.7 billion to groups that provide services on government's behalf, to corporations waiting for tax refunds and to the program that provides medical care for government employees.
So the total deficit could top $12 billion. That's one-third of state government's total spending from general funds.
Quinn and Democratic legislative leaders want to borrow money to pay the overdue bills quickly. They argue it's more responsible for government to take on the debt directly rather than borrowing it unofficially by simply not paying what it owes.
Republicans generally oppose the idea, but Quinn has been trying to build public support. He has set up a website promoting the plan - which he calls debt restructuring instead of borrowing - and is urging vendors to demand their money.
The budget outline also counts on federal aid remaining steady even though the economic stimulus program that has propped up state budgets is ending. It's not clear how Quinn expects to avoid a drop-off that would further add to the deficit.
Vaught made the task of balancing the budget sound like playing a Whac-a-Mole game. Officials reduce employee costs but pension expenses jump. They cut drug-addiction treatment yet medical costs keep climbing.
"If you push it down over here, it pops up over there," Vaught said.
An Illinois lawmaker is pushing to raise the state's minimum wage to more than $10 an hour -- higher than anywhere else in the United States.
The Chicago Sun-Times reports that Democratic Sen. Kimberly Lightford of Maywood has introduced legislation to raise the minimum wage by 50 cents plus the rate of inflation every year until it reaches the point where it's equivalent to what $1.60 an hour was in 1968. Today, that would mean an hourly wage of $10.03.
Lightford said she wants to make sure the working poor aren't ignored or forgotten.
But opponents say the proposal could cause businesses to move to other states -- especially if it comes after a recent corporate income tax increase.
The U.S. Department of Agriculture is reporting that reserves of corn have hit their lowest level in over 15 years.
The high demand for corn could put upward pressure on food prices in 2011.
Demand for corn in the ethanol industry is up 50 million bushels after record-high production in December and January, according to the USDA.
That has left the United States with the lowest surplus of corn since 1996.
Scott Gerlt, a crop analyst with the University of Missouri, said high corn prices could increase the cost on everything from ethanol to food and feed.
"The corn market is definitely a changing market," Gerlt said. "With ethanol policy we have a lot more demand and so we are going to have a lot more pressure on prices. Because even though we have a lot of supply there's just so much demand a lot of that supply is getting used up and we're just not left with much at the end of the day."
Corn prices have already doubled in the last six months, rising from $3.50 a bushel to more than $7 a bushel.
(Photo courtesy of Artotem/Flickr)
Mattoon, Ill. is getting a boost from the United States Department of Agriculture.
Ag Secretary Tom Vilsack said his department is giving the Coles-Moultrie Electric Cooperative in Mattoon a $740,000 loan and a $100,000 grant to provide financing that will be used to renovate and modernize the Sarah Bush Lincoln Health Center.
"Strengthening the hospital will make it easier for economic development officials in Illinois to be able to attract business and industry to that area because they know that workers who may get injured or family members who need hospital care will be able to get hospital care," Vilsack said.
Vilsack said it is important to prevent residents from having to travel long distances to get the care they need. He added that the Mattoon project will create 17 new jobs and retain more than 1,600 by preventing hospital closure.
Vilsack said a nationwide package supporting sixteen rural development projects in ten states will leverage 15 private dollars for every public dollar spent.
Employers posted fewer job openings in December, the second straight month of declines. That's a sign hiring is still weak even as the economy is gaining strength.
The Labor Department said Tuesday that employers advertised nearly 3.1 million jobs that month, a drop of almost 140,000 from November. That's the lowest total since September.
Openings have risen by more than 700,000 since they bottomed out in July 2009, one month after the recession ended. That's an increase of 31 percent.
But they are still far below the 4.4 million available jobs that were advertised in December 2007, when the recession began.
The figures follow a mixed jobs report released last week, which showed the unemployment rate fell sharply to 9 percent in January from 9.4 percent the previous month. But it also found that employers added a net total of only 36,000 jobs, far below what's needed to consistently reduce unemployment.
There are far more unemployed people than there are job openings. Nearly 14.5 million people were out of work in December. As a result, on average there were 4.7 people competing for each available job. That's below the ratio of 6.3, reached in November 2009, the highest since the department began tracking job openings in 2000.
But in a healthy economy, the ratio would fall to roughly 2, economists say.
The department's report, known as the Job Openings and Labor Turnover survey, or JOLTS, counts number of jobs advertised on the last business day of the month. The figures are for December, but economists say the report provides an indication of future hiring patterns because it can take several months to fill many jobs.
Job openings dropped sharply in professional and business services, a category that includes temporary help agencies. They also fell in construction, manufacturing, and in education and health services.
Job openings rose in trade, transportation and utilities, and in retail.
A bill meant to get more tax revenue from online retailers is on Governor Pat Quinn's desk. As Illinois Public Media's Jim Meadows reports, it's a measure the governor probably would not be considering if people paid more attention to paying the state use tax.
(Photo courtesy of Maximum PC)
Mitsubishi Motors North America said Friday that it will begin production of a new SUV crossover at its plant in Normal, Illinois next year, promising to keep the facility open less than a month after its 1,100 union employees agreed to wage concessions.
The state of Illinois said it will give the company $29 million in tax incentives as it begins production of the new Outlander Sport.
The new vehicles, which Mitsubishi started making late last year, will replace four existing models now made at the Normal plant that will be phased out, Mitsubishi Motors North America President Shinichi Kurihara said Friday at the plant.
"Mitsubishi Motors remains fully committed to producing vehicles in Normal," he said. "We will build vehicles here not just for the United States, but for many nations around the world."
Mitsubishi has said the new model is part of its worldwide efforts to rejuvenate sales. It plans to produce the vehicle for North America as well as emerging markets such as Brazil and India.
Gov. Pat Quinn, who was with Kurihara at a news conference, said the state agreed to the incentives to help keep the plant - one of the largest employers in the Bloomington-Normal area - open.
"Mitsubishi's decision to produce a new generation of automobile here in Illinois is a strong testament to the strength of our work force and the state's appealing business climate," Quinn said.
The facility's union workers recently agreed to cut their pay by $1.67 an hour, a concession Mitsubishi said it needed to keep the plant open. In all the plant employs 1,300 people, about half of whom commute from surrounding communities and as far away as Peoria and Champaign, the company has said.
The plant now makes the Galant, Eclipse and Spyder and the Endeavor sport utility vehicle. All four will be phased out over the next few years.
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