From AP - News Headlines -

Ill. Faces Tight Budget Despite Tax Increase

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.