Hynes budget presentation

8/14/2019 Hynes budget presentation

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Leading Illinois Forward:

The Hynes Plan for Tax

Fairness & Fiscal Prosperity

Leading Illinois Forward:

The Hynes Plan for Tax

Fairness & Fiscal Prosperity


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Table of Contents

How We Got Here.page 3

If Hynes Were Governor.page 4

The Hynes Record...page 6

Hynes Budget Principles..page 8

The Hynes Plan to Balance the Budget:

Step One: Reduce the Short-Term Deficit.page 9

Step Two: Address Structural Revenue Problem.....page 15

Step Three: A Balanced Budget & Investment......page 17

Conclusion..page 19


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How We Got Here

Inept leadership and management has left Illinois in a nearly $4 billion hole at theclose of FY 2009, an anticipated $4.6 billion hole at the end of FY 2010 and anestimated $10.5 billion hole at the close of FY 2011. Now, we have a budget thatpapers-over this huge gap with a patch-work approach that doesnt solve the long-term

problem and, in fact, in some ways makes it worse.

In order to artificially hold down the FY10 deficit, several one-time quick fixeswere implemented. These actions did very little to address the underlying structuraldeficit. They include:

One-time federal stimulus payments.

Issuing approximately $3.5 billion in pension bonds this fall paying thisyears pension obligations by borrowing from futureyears.

Instituting a debt restructuring to reduce debt service payments on state

bonds this fiscal year

Undertaking some fund sweeps

And the situation is even worse than advertised, because the state still isnt reallycounting all of its bills: Under whats called Section 25 authority, state governmentsimply refuses to pay all of the state group health insurance and Medicaid bills. Ifanyone else did that, theyd be called a deadbeat. The unpaid bills which arentcounted as part of the official deficit because theyre simply rolled over to the nextyear were estimated to be $1.5 billion, and will result in continuing payment delays tohealth care providers. These delays are already exceeding six-months, and are growingwith no end in sight. The Governor initiated more short-term borrowing to help reduce

the backlog minimally. However, this will be insufficient to bring payment delays down toany sort of reasonable level and will only hinder solutions to the fundamental problem.

The bottom line: a $4.6 billion budget deficit for FY10 that the current budget issimply dumping on top of nextyears budget.


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If Dan Hynes Were Governor Today, the Budget Would Be Under Control

Unlike any other candidate for Governor, we already know where we would be ifDan Hynes were in charge.

While others stood by silently, in 2003, Comptroller Dan Hynes warned then-

Governor Rod Blagojevich of long-term fiscal problems if the state did not act andproposed a comprehensive series of fiscal reforms. Those reforms included:

The elimination of excess deferred Medicaid liabilities carried over intosucceeding fiscal years.Budgetary growth limited to matching more accurate and consensusestimates of expected revenues.A percentage of new economic revenues allocated to budgetary reservefunds.

If the Hynes reforms had been adopted, the State would have experiencedbalanced budgets thru FY 09 permitting some program growth for education and health

care within the confines of available revenues. Mandating that 1% of annual revenueswhen growth exceeds 4% be deposited into the Budget Stabilization or Rainy Day Fundwould have generated an additional $530 million into that fund, allowing payment cyclesto become more predictable and minimizing seasonal delays. Short-term borrowingswould have been reduced and with them their associated interest costs. With nearly$800 million in the Rainy Day Fund and a balanced structural budget, Illinois would havesuffered in the current recession like every other state but a whole lot less: The netFY09-10 combined deficit would have totaled $2.4 billion, with the receipt of federalstimulus monies of $3.6 billion. As a result, service cuts and revenue increases wouldhave been temporary and comparatively small. This is in contrast to the $4.6 billiondeficit and draconian cuts under the current enacted FY10 budget.

Unfortunately, Dan Hynes proposed reforms were either ignored or watereddown by the Blagojevich Administration and never implemented as intended.

In short, well start the next budget, for FY11, in a nearly $4.6 billion hole. And becausethe underlying structural problem has gone unaddressed as Comptroller Hynes hasspoken out on for nearly a decade these problems will only come back with avengeance:

The budget didnt address the long-term pension problem, simply borrowingall the money to make this years payment, thus Illinois will have to return tomaking its annual pension payments of at least $3.5 billion.

And then the state will alsohave to start paying off the $3.5 billion in newpension bonds borrowed to come up with this years paymentthats close toan additional $800 million a year for the next five years.

And since the budget relies on federal stimulus money to plug the rest of thehole, the state will be losing an estimated $1.3 billion in FY10 stimuluspayments that wont be repeated in FY11.


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Finally, because the budget does not address the chronic long-term problemsin our ability to pay our healthcare and service providers, the problem willonly grow worse.

Together, that is an additional$5.9 billion in budget shortfall in Fiscal Year 2011 added on to the $4.6 billion shortfall that is simply being rolledover from FY09 and

FY10.

In short, unless we act now, Illinois will be faced with at least a $10.5 billionGeneral Funds budget deficit for FY11 leaving the state basically back where we werelastspring. And lets be clear: The State is still left with a structural, recurring deficit that,with inflation and natural growth, will leave the state over $10 billion short and counting

every single year until we change tactics and change leadership. Illinois simply cannotafford four more years of the same approach and the same outcomes.

Pat Quinn says he has a plan: Whether youre a family making $50,000 or $5million, Quinn wants to hike the income tax on everyone in Illinois by 50%. Thats just abad idea. It is unfair to middleclass Illinois taxpayers and it is not the right way to solve

our problems. Its time to try something better.

Dan Hynes is the state leader who warned about this problem from the beginningand proposed a way to avoid it. Now, he has fresh new ideas about how we get outof it.Its time to put the Hynes Plan to work.


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The Hynes Record

Dan Hynes has been a consistent, outspoken advocate for fiscal responsibilityand budget reform throughout his tenure as Comptroller, but you need to look no furtherthan the management of his own office to know that he leads by example. Since takingover as Comptroller in 1999, Dan has been doing more with less as his current operating

budget is well below 2001 levels. Dans own office budget reflects more than a 20percent reduction in headcount from 1999, which is the lowest in the offices history. Hehas achieved these efficiencies in his office by instituting common sense approaches tosave taxpayer dollars:

Continuing the management personnel wage freeze and furlough programinitiated in FY 2009.Reducing the number of contracts.Deferring or reducing training-related expenditures including both in-houseand external programs.Freezing new equipment acquisitions except for emergency purposes.Decreasing allocations for automotive expenditures including a selloff

/reduction in the number of current agency vehicles.Eliminating all out-of-state travel expenditures and reducing in-state travelcosts.Reducing commodities costs through inventory consolidations andeconomies.Decreasing telecommunications and software expenditures by postponingnon -critical purchases and eliminating non-essential goods and services.

Hynes has taken the same approach to saving taxpayer dollars across stategovernment. He has been forceful in his crusade to stop wasteful spending, innovativein using technology to save money and dogged in his pursuit of efficient government.Some of Dans actions saving dollars across state government include:

Freezing state payments on state contracts with corporations that were usingforeign tax havens to avoid paying their fair share.Refused to pay for flu vaccines that Illinois never received when RodBlagojevich tried to circumvent the federal Food & Drug Administration-savingthe state over $2 million.Increased debt collection efforts in the Comptrollers Office by aggressivelyusing the offset system generating an additional $278 millionFreezing payments on George Ryans pork projects like a Jack Bennystatue, stained glass in a parking garage, and a lily pond in Lincoln Park.Enhanced electronic transactions within the office saving the state $16 million

since 1999.Instituted a ban on giving state business to deadbeat contractors.

Hynes hasnt just worked for fiscal responsibility he has also fought for fairnessfor working Illinois families. Hynes has been widely recognized as a progressive leaderin creating worker protections, a prudent manager in a complex work environment, awise fiscal advocate for state pensions systems, and someone who brings a commonsense approach to labor issues. Dans fight for working men and women includes:


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Leading the charge to protect overtime pay for thousands of Illinoisworkers. In conjunction with then State Senator Barack Obama, Dansuccessfully championed legislation that decoupled Illinois from disastrousBush administration rules that would have eliminated overtime pay for thosewho provide critical services in Illinois. Under those rules, an estimated375,000 employees (including nurses, EMTs, lab techs, military vets, and

police and fire personnel) could have been denied overtime protections.

Signing an Executive Order to freeze state payments to state contractorswho are believed to be violating the Prevailing Wage Act and creating aPrevailing Wage Officer position in his office to ensure state contractors arepaying fair wages.

Greatly expanding family leave guidelines in the Comptrollers office toallow more flexibility for workers to take care of their family needs, whichincluded extending benefits to employees engaged in domestic partnerships.

Fighting for short-term borrowing measures during economic downturns

to help offset payment delays to frontline services. These innovativetechniques allowed Illinois to leverage additional federal dollars that permittedbusinesses to stay open and workers to keep their jobs.


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Dan Hynes Budget Principles

If were going to beat our current budget problems, were going to need newleadership and a new approach. Dan Hynes has that approach a detailed plan tobalance the Illinois state budget in a way thats workable and fair. A plan thats based onyears of experience fighting for fiscal responsibility. And a plan thats based on

principlesthe kind of principles wed expect from a serious policymaker instead of justanother politician:

This mess was a long time in the making; its going to require a long-termsolution.

But we also need to immediately stop the hemorrhaging right now, too.

This wont be easy. Theres going to be pain. This is going to requireleadership and telling people the truth.

The burden needs to be shared fairly.

Government needs to make cuts before it asks taxpayers to pay more.Theres plenty of inefficiency and waste with which to start.

Some people in state government will have to go. We should start with thepolitical hacks and cronies brought in by Rod Blagojevich at exorbitantsalaries that Pat Quinn refuses to get rid of.

Illinois has to stop its bad habit of living off of borrowed funds, debt, andpushing bills into the future. We need to use intelligent and innovativefinancial restructurings where possible to leverage savings and/or additionaldollars that will help reduce our long-termobligations.

We cant solve our structural budget problems with one-time gimmicks.However, we canpay one-time bills with one-time revenues.

We will not be able to make ends meet by making cuts alone. Ultimately, thestate needs a new long-term revenue structure to support its operations.

We should look first for non-tax revenue where possible.

Only then can we ask Illinois citizens to pay more. However, any taxchanges must be fair.

That means we must start by closing unfair tax loopholes that let somebusinesses escape taxation while others struggle to pay their fair share, and

that let consumers of some luxury services avoid paying the same taxes thatother consumers pay for ordinary goods and necessities.

And we cannot impose a 50% income tax increase on low and middle-incomefamilies across our state. Instead, we must change our state income taxstructure to make it progressive and fair; so that the vast majority of Illinoisfamilies are held harmless; and so that the wealthy pay their fair share.


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The Hynes Plan to Balance the Budget

Step One: Reduce the Short-Term Budget Short-Fall in FY10

This deficit was not built in a day it will take a series of steps over time, not aone-time stroke like Pat Quinns unfair income tax hike, to overcome it. The Hynes Plan

starts with strategic and workable actions we can and must take nowto reduce thecurrent-year deficit and position us to eliminate the states structural budget deficit at thebeginning of the next Governors term. We need someone to put a workable plan beforethe legislature to start closing the gap. Heres that plan:

1. Cut Government Spending Where We Can

The first thing to do is to cut unnecessary government spending. PatQuinn does not have a plan to do this he has simply ordered blind cuts.Dan Hynes has a plan to target the places in state government wherewe can cut fat without cutting needed services:

Cut management and unneeded bureaucracy, not front-line workersstarting with firing half the high-paid Blagojevich politicalappointees making over $70,000 per year. Pat Quinn has refused toget rid of Rod Blagojevichs management team; however, doing sowould save the taxpayers $100 million per year.

7% cut on spending on discretionary grant programs. Instead ofhaphazard cuts, review each and every grant line to determine wherecuts should be made and to ensure that programs are running asefficiently as possible. While this is an overall 7% reduction in grants,it is, in essence, a significant restoration of the misguided cutsimposed by Governor Quinn. Cutting 7% would save the state $625

million per year.

Cut big fat contracts for legal, advertising, consulting services, ITand other professional services. For example, the FY2010 budgetcontemplates $20 million for lottery and tourism advertising contractsand $10 million for a new timekeeping system for state employees.Additionally, the state should negotiate with all law firms doing workfor the state to accept a 20% reduction in fees. These examples andothers would save the state another $300 million per year.

Cut operations levels back to their 2005 levels. Dan Hynes hasalready done exactly this in the Comptrollers Office. In fact, his

operations are below 2001 levels and he is reducing costs by anadditional 11% this fiscal year.

Governor Quinn should order similar roll-backs state wide. Reducingagency operations under the control of the Governor to 2005 levelsrepresents savings of $600 million per year.


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Of course, setting the target is the easy part finding theinefficiencies and eliminating them is where the rubber meets theroad. While agency directors are in the best position to determine thebest way to make these cuts, Dan Hynes has a pretty good ideawhere to start:

o Consolidate all state civil service commissions. Right now,we have four separate civil service systems under the Governor,Secretary of State, Treasurer and Comptroller. Since thesepersonnel codes are similar, we could have one commission hearall the appeals of Merit Compensation employees. Estimatedsavings from this move would be $300,000.

o Reduce the states cost for durable medical equipment. Durable medical equipment (DME) purchased through theMedicaid and Medicare programs should be purchased through acompetitive bid process, which includes negotiated discounts forvolume. In the same way the pharmaceutical costs can be

negotiated down through aggregating drug purchases across stateprograms, the state can find savings in the way DME ispurchased. Florida, Texas and New York competitively bid outDME purchases. Federal demonstration projects have shown thatoverall savings to the Medicare program ranges from 17% to 22%.In the two demonstration sites of Polk County, Florida and SanAntonio, Texas, the net savings for the Medicare DMEexpenditures totaled $2.7 million. We should be able to saveanother $2 million here in Illinois.

o Close Foreign Trade Offices which arent necessary to the corefunctions of the state during a fiscal crisis saving an estimated $5

million.

o Make appointments to most State boards and commissionsnon-paid. Estimated savings are $12 million.

o Mandate a statewide initiative to reduce telecommunicationcosts in State government. Reviewing all bills to verify accuracyof bills, eliminating unnecessary phones lines and equipment,consolidating telecomm and cell phone purchases Stategovernments in states such as Arkansas, Oklahoma, Louisiana,and Indiana have all realized significant savings in the range of 7-10% of annual communications costs. A conservative estimate

would put such savings at $15 million a year.

o Increase efforts to prevent Medicaid fraud. Studies have foundthat Medicaid fraud ranges from 10% to as much as 40% of allprogram spending. Obviously, there is room in Illinois to improveperformance and save taxpayers money without cutting back onservices to families that truly need it. Technologies now exist todetect potentially fraudulent patterns of billing, allowing for theprevention of payments being made that later would require


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formalized prosecution and collection activities. We would need tofurther reduce only a very small percentage of likely fraud levels inour state just to save $50 million a year.

o Implement aggressive actions to stop tax avoidance. It is nosecret that there is a coordinated effort by some individuals and

corporations to avoid paying state taxes. Other states haveaddressed this issue by using computer programs which canuncover those who avoid paying Illinois taxes. States such asNew York, California, and Massachusetts have recoupedhundreds of millions of dollars from tax scofflaws. Illinois couldexpect to recover at least $50 million a year.

Thats roughly $135 million in specific savings that we could startimplementing right now. In fact, Dan Hynes has instituted similarsavings within his own office, which put it on the path to efficiency. Heknows that if we institute a statewide review to scour state

government for waste and inefficiency, we could save 2-3% offGeneral Fund operations performance reviews have helped reducecosts in states from Texas to Delaware to New Mexico to NorthCarolina to Colorado to West Virginia to California. In fact,performance reviews in other states have been able to identifysavings amounting from 1% to 6% of the General Fund budget.

Collectively, the cuts under the Hynes Plan consisting of firing politicalappointees, reduction in discretionary grants and professional contractsand scaling back operations would result in total spending cuts of $1.625billion for FY 2010.

2. Its Raining: Use Our Savings to Pay Our Bills

As a long-time advocate of fiscal prudence, Comptroller Dan Hynesknows that, in most times, the State needs to be building upits Rainy DayFund. But he also knows that, when a rainy day comes, thats what wevesaved forand, right now in Illinois, its pouring. Hynes would draw downthe Rainy Day Fund now, and draw down the remaining General Fundsbalances of $100 million, to pay help pay current bills that are onlycausing further arrearages. That represents a total one-time infusion of$376 million.

3. Use One-Time Borrowing to Leverage Additional Debt Pay-Down

Normally, Illinois wouldnt need more borrowing at this point. But wecould actually leverage additional federal funds by paying down some ofour outstanding Medicaid bills nowwhile there is a higher federalMedicaid match rate under the federal stimulus program that will sunsetat the end of December 2010. Comptroller Hynes would issue bonds tohelp pay down this backlog, obtain additional federal funds, and reduceour obligations by $1.5 billion.


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4. Pay For This Bond Issue With Increased Cigarette Taxes, andReform How We Pay for Health Care for the Needy

Unlike the pension notes issued this year that did not have a fundingsource attached, Dan Hynes has a plan for how to pay off the notes heproposes to help reduce current outlays: The Hynes Plan, will increase

the states cigarette tax by $1.00 per pack to provide the state with anadditional $300 million in revenues per year. This money will bedeposited into a new Reimbursement Reform Fund and will be used topromptly repay the $1.5 billion in bonds over five years.

After that, as Governor, Hynes will reform the payment system forMedicaid bills by eliminating the ability to keep appropriations artificiallylow and carry over bills unnecessarily into a later year. He would call onthe legislature to amend Section 25 of the State Finance Act to create alapse period of only 4 months to deal with medical assistance bills, so thatIllinois will never again be a deadbeat state government.

Under Hynes plan, once the bonds are paid offthe cigarette tax revenueswould be used to increase Medicaid provider rates to help ensure that allIllinoisans have access to a broad spectrum of health care. Under Hynesplan we will not just address short-term fiscal shortfalls but also addressthe underlying problems, like health care costs and coverage, that driveour long-term financial situation in the wrong direction and limit accessand care to millions of Illinoisans.

5. Close Out Unfair Tax Breaks and Loopholes

Pat Quinn sees the ultimate solution as raising taxes across the board oneveryone. Dan Hynes thinks there is a better way: After we have found

all the savings and expenditure cuts we can, lets start improving therevenue picture by asking those who can best afford to pay more to startby paying their fair share.

The Hynes Plan will immediately close out unnecessary business taxloopholes and extend the sales tax to include non-vital luxury items.

Luxury Service and Sales Tax: Illinois currently taxes the fewestservices (17) of any of our neighboring states including Indiana (24),Missouri (26), Kentucky (28), Wisconsin (76), and Iowa (94). Insteadof raising taxes across the board on middle-class families, we shouldbe targeting any tax increases to luxury items that we just dont need.

Many of these goods and services currently escape taxation whilefamilies purchasing necessities, such as clothing and school supplies,pay the full state sales tax. The Hynes plan would close theseloopholes and extend tax fairness by covering such goods andservices as:

o Tanning parlorso Elective cosmetic surgerieso Interior design services


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o Car and truck rentalso Pet groomingo Marina serviceso Health Clubso Dating serviceso Memberships in private clubso Cultural eventso Scenic and sightseeing transportationo Limousine and car serviceso Unscheduled charter air flightso Marine towing

It is always regrettable to raise taxes regardless of the form. However inthis budget crisis, we need leadership willing to say that we all need toshare the burden fairly for nonessentialswhether thats for your yachtservices or your spray tan. That is a lot fairer than raising taxes on thethings that people really need or boosting every familys income taxes by50%. The luxury service and sales tax would bring in $360 million per

year.

Corporate Tax Loophole Closure. In the early 90s, Illinois adoptedall sorts of tax breaks for big businesses. These tax giveaways likethe single sales factor and the high impact business exemptiondontseem to be doing much to help our economy at the moment, and wesimply cant afford them any longer. The Hynes Plan will take awaythese special breaks for special interests before raising taxes onworking Illinoisans, bringing in an additional $125 million per year.

Sales Tax Expenditures Reduction. The Hynes Plan would makeseveral technical fixes in how we currently collect sales tax to correct

what basically amount to unnecessary costs to taxpayers. Primaryamong these is eliminating the Retailers Discount; this allowsretailers to retain a portion of the sales tax themselves, ostensibly tocompensate them for the expense of maintaining sales tax records.This might have made sense in the days before computers andimmediate telephone link-ups with credit cards and banks to collectand record these transactions, but it does not make sense any more.This and similar changes would help the state retain $125 million peryear.

Restore Adequate Gaming Taxation. We must return tax rates oncasinos to 70%. Unfortunately, they were rolled back to only 50%.

There is no reason why working families should pay more whencasinos can afford to do so, instead. The Hynes Plan would restorethe higher rates on riverboat gaming, bringing in an additional $200million per year.

Maximize Dormant Gaming Positions. Illinois currently allows1,200 gaming positions at the nine active casino sites across thestate. However, roughly 200 of these positions are inactive. The


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Hynes Plan calls for a Tax and Trade system which would allowcasinos to lease their inactive positions to another casino that hasincreased demand. The state would receive a portion of the leaseproceeds and increased gaming revenues when the positions areactivated. This action could generate $40 million per year.

Together, these tax changes represent total new revenues of $850 million/yearmeaning the State could net an additional $425 million in revenues in FY10 by enactingthese measures by January 1.

The Net Effect

These actions wont totally eliminate the FY10 budget shortfall but they willcome a lot closer. Most importantly, they will position the state to move into budgetbalance within about one year by dramatically shrinking the structuralbudget problemsthat Illinois has been ignoring or making worse.

The Hynes Plan cuts the FY10 budget deficit by more than half from $4.563

billion to only $2.212 billion. It permanently cuts about $3 billion per year out of thestructural budget deficit, and it puts us within striking distance of permanently solving ourfinancial problems.


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Step Two: Address the States Structural Revenue Problems in FY11

If Illinois state government acts on Dan Hynes plan for FY 2010, we could cutbillions of dollars from the states bottom line this fiscal year and position the state toreach balance. However, further actions will be needed to eliminate the budget gaponce and for all. To accomplish that, Comptroller Hynes recommends that the state

government take the following actions in FY 2011:

1. Conduct Additional Fund Sweeps

Unneeded allocations build up every year in various funds across stategovernment. Sweeping those funds again in 2011 will garner anadditional $300 million in excess balances we can apply to paying downthe budget deficit.

2. Continue Pursuing More Efficiencies

The state must make a concerted effort to continue finding ways to make

government work more efficiently. To that end, Dan Hynes believes thatthere are ways to consolidate government offices to maximizeperformance and save taxpayer dollars. Specifically, Hynes proposes tomerge the Comptrollers Office and the Treasurers Office. Additionally,eliminate the Office of Lieutenant Governor, leaving the Attorney Generalas the successor to the Governor. Together, these initiatives could savethe state at least $4 million a year.

3. Issue Additional Casino Licenses

Dan Hynes believes that we need to look for every possible revenuesource before resorting to increasing the income tax, as Pat Quinn would

do. By issuing licenses for an additional 2-3 casinos, Illinois could reapone-time revenues of $600 million. This would be used in FY11 to offsetthe one-time drop in the revenue picture due to the projected ending offederal stimulus monies

4. Ask the States Voters to Modernize our Tax Structure with aGraduated Income Tax Starting on January 1, 2011.

Comptroller Hynes recognizes that only a bold change in the states fiscalstructure will ultimately solve the fiscal problem Illinois faces. We can cutwaste, close loopholes, find additional sources of money, but, ultimately,a fundamental restructuring of the tax system is the only way we will end,

once and for all, Illinois massive structural budget deficit. But Hynesdisagrees with Pat Quinn that an across-the-board increase in everyonesincome taxes is the way to achieve that let alone one as large as 50% -because it is already a regressive structure. Under Illinois current taxstructure, the bottom 20 percent of Illinois households paid 12.8 percentof their income in state and local taxes, while the top 1 percent paid only4.6 percent. This may be the reason why Illinois is one of only 7 states tohave a flat tax structure. Instead, Hynes believes that those most able to


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pay increased taxes should be the ones to do so and that its time tofinally make Illinois income tax structure progressive.

The Hynes plan therefore calls for an income tax increase ranging from0.5 up to a maximum of 4.5 percentage points, onlyon people makingover $200,000 per year. The top rate of 7.5% would be paid only by

those making more than $1 million. This means that 97% of Illinoistaxpayers would see no change in their taxes.

This would produce new annual revenues of $5.5 billion eliminating thestructural deficit. The revenue would also provide much neededresources to many of our local governments. Additionally, this wouldprovide half-year revenues in FY11 of $2.75 billion that would allow us toclose Pat Quinns budget deficit by roughly 80%. This would position usto eliminate deficits for good in FY12.

Enacting a progressive income tax will require an amendment to the stateconstitution. That means the legislature must approve the measure by a

three-fifths vote this spring. Voters could approve this change at theNovember 2010 general election, so it could take effect in 2011. DanHynes will advocate for this realistic, common-sense and fair solution toour budget challenges.

By implementing a half-year of the progressive income tax, additionalcasino licenses, fund sweeps and modest natural revenue growth, theHynes Plan allows the state to put a halt to the runaway budget deficit. Itholds the deficit steady with a $2.3 billion deficit in FY11, until the full-yearof the progressive income tax is phased-in. Additionally, the Plan calls forthe state to make full pension payments in FY11 and allows for a $150million increase in education spending.


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Step 3: A Balanced Budget in FY12 and a Return to Investing in IllinoisFuture

Closing record budget deficits will not be easy but the Hynes Planaccomplishes that goal within 2 years. The first full year of the progressive income taxwill eliminate the structural deficit permanently. Hynes plan will eliminate Illinois

deadbeat payer status. By staying true to our commitment to making pensionpayments, we will begin to moderate the states pension obligations going forward andreturn them to a fiscally sustainable level; and, provide permanent and stable funding tobegin making serious investments in education, healthcare and other programs thatassist our most vulnerable citizens.

Instituting Real Budgetary Reforms

But the Hynes Plan does not stop there. From a decade of service as Comptroller, DanHynes knows our states entire budget and fiscal process needs to be reformed so thatwe never get into this position again. Dan Hynes will be the kind of Governor who leads

the fight in Springfield for such reforms.

The Hynes Plan for reforming the state budget process includes the following:

1. Controlled Growth in State Spending: Hynes will allow for reasonablenatural budget growth to counter inflation and to provide for the new initiativeswe will need to move Illinois forward in the 21st Century. However, he willinsist that the state hold spending to 99% of independently-certified estimatedrevenues, so that we can set aside 1% every year for the Rainy Day Fund.

2. Strengthen the Rainy Day Fund. Hynes plan establishes a permanentfunding stream for the Rainy Day Fund equal to 1% of estimated revenues.

Hynes will then cap the funds growth when it reaches 4% of estimatedrevenues and divert the excess to retiring outstanding state debt. Hynes willalso press to establish set rules for use of the Rainy Day Fund during fiscaldifficulties so that future politicians cannot simply raid the fund for otherpurposes.

3. Paying Down Our Debts. Hynes plan provides a mechanism for payingdown state debt by diverting monies from the Rainy Day Fund, when itreaches an ideal level, to an Early Debt Retirement Fund. Hynes will use thisfund to pay off deferred liabilities such as the current backlog of Medicaidbills; the State retirement systems unfunded liabilities; and, when costeffective, some of the States bonded indebtedness.

4. Truth-in-Budgeting. Hynes will require Truth in Revenue by creating anindependent Revenue Estimating Council to certify revenue levels for budgetpurposes, with which the governor and legislature must comply, and Truth inSpending under which the State will pay its bills as they come in ratherthan pushing them into future years. Finally, Hynes will require quarterlybudget check-ups to make sure we make spending adjustments quicklywhenever revenues drop, so that we reduce the risk of future deficitspending.


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5. Pension Reform. To truly return to fiscal solvency, the state must come toterms with its unmanageable pension obligation. This means scrutinizingretirement benefits, ending early retirement initiatives, addressing spiralingretirement healthcare costs associated with retirees benefits, and ending theabuses of the golden parachute pension sweeteners. Hynes will put teeth in

the laws that will dictate the states annual contribution to the pension systemand put an end to pension holidays.

6. Medicaid Reform. The states Medicaid obligations are causing astranglehold on the states budget and it must be brought under control.Hynes reforms will include ending the loopholes that allow the state to under-budget its obligations. However, there must be reforms on the benefit side,as well. Hynes will work with other Governors to lobby the Obamaadministration to make the current 60% reimbursement rate for Medicaidpermanent. Hynes also supports the initiative to expand Managed Care, butis also in favor of reforming the Primary Care Case Management system tomake it work as it was intended.

7. Restore Our Bond Ratings. Due to the transgressions of the previousGovernor, the devolving budget deficit and lack of a clear budget plan hascaused Illinois bond ratings to plummet. As a result, Illinois costs associatedwith managing our debt service are increasing. The Hynes Plan will allow thestate to return to a solid bond rating and help save the state millions ofdollars.


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Conclusion

Dan Hynes has a plan to reduce the state deficit that is real, workable, and fair.

Hynes plan cuts the deficit contained in Pat Quinns FY10 budget in half andeliminates it completely and permanently after FY 2011. It looks first to finding spending

cuts, savings and efficiencies not tax increases.

Hynes is also a leader willing to confront the hard truths. His plan admits thatpart of the solution must come from finding new revenues. But any new revenue mustbe fair, so the Hynes Plan first closes unfair tax loopholes and places a fairer share ofthe tax burden on luxuries instead of necessities and the hard-earned incomes of middleclass families. The Hynes Plan helps take some of the tax burden off these samefamilies by obtaining a fairer share of gambling revenues for the taxpayers. It obtainsthe rest of what we need by raising taxes only on the wealthiest 3% of Illinoisans.

The Hynes Plan also puts us on-track to better health care and educationsystems in our state. It reforms Illinois shoddy fiscal practices ending carry-over of bill

non-payments, shortening vendor non-payment times to end the states reputation as adead-beat state, and starts to stabilize our pension system. It shares the burden, itsfair, and it works unlike Pat Quinns proposed 50% income tax hike on everyone.

The Hynes Plan represents a complete solution and the onlyreal solution.

Paid for by Friends of Dan Hynes


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Conclusion

Dan Hynes has a plan to reduce the state deficit that is real, workable, and fair.

Hynes plan cuts the deficit contained in Pat Quinns FY10 budget in half andeliminates it completely and permanently after FY 2011. It looks first to finding spending

cuts, savings and efficiencies not tax increases.

Hynes is also a leader willing to confront the hard truths. His plan admits thatpart of the solution must come from finding new revenues. But any new revenue mustbe fair, so the Hynes Plan first closes unfair tax loopholes and places a fairer share ofthe tax burden on luxuries instead of necessities and the hard-earned incomes of middleclass families. The Hynes Plan helps take some of the tax burden off these samefamilies by obtaining a fairer share of gambling revenues for the taxpayers. It obtainsthe rest of what we need by raising taxes only on the wealthiest 3% of Illinoisans.

The Hynes Plan also puts us on-track to better health care and educationsystems in our state. It reforms Illinois shoddy fiscal practices ending carry-over of bill

non-payments, shortening vendor non-payment times to end the states reputation as adead-beat state, and starts to stabilize our pension system. It shares the burden, itsfair, and it works unlike Pat Quinns proposed 50% income tax hike on everyone.

The Hynes Plan represents a complete solution and the onlyreal solution.

Paid for by Friends of Dan Hynes

Hynes budget presentation

Documents

Transcript of Hynes budget presentation