SPRINGFIELD – Governor Rod R. Blagojevich today delivered his fiscal year 2009 Budget Address, which focused on boosting Illinois’ economy through a comprehensive stimulus package that offers relief for families and businesses, invests in the state’s deteriorating infrastructure, and puts people to work.
“We’ve made a lot of progress for people. But make no mistake about it – these are tough times,” said Gov. Blagojevich. “And when times are tough, I believe the best way to fight for families and fight for people is to focus on strengthening the economy.”
Highlights of the Governor’s fiscal year 09 budget include:
- Illinois Works – a $25 billion capital plan that will support more than 700,000 jobs and fix the state’s deteriorating roads and bridges, build and repair schools across the state, and provide resources for statewide economic development;
- Illinois Child Tax Credit – a refundable state tax credit that will double the child portion of the recently passed federal economic stimulus plan. This will be a one-time, tax credit of $300 per child for all Illinois taxpayers who qualify for the federal plan. Approximately 1.3 million families (3 million children) will benefit;
- Illinois Business Tax Cut – a 20 percent break for businesses that paid corporate income tax in Illinois for 2007. To be eligible, employers must maintain their employment levels. This $300 million tax cut will create business investment and development, and provide job security for employees;
- Pension funding reform by refinancing high-interest pension debt into low-interest pension obligation bonds, to immediately add $16 billion in assets to the state pension funds and save the state $55 billion over the next 36 years. The pension reform will also immediately increase the funded ratio from 63 percent to 75 percent.
- Across-the-board spending reductions in all areas outside of healthcare, education and public safety.
- Continued funding for schools and healthcare, with the goal of passing Illinois Covered and providing affordable healthcare for all state residents. Schools will receive an additional $300 million, while the state will continue to fund healthcare expansions such as the FamilyCare expansion, All Kids Bridge and free breast and cervical cancer screenings and treatment for all uninsured women.
“The economy is about interest rates, inflation rates, the velocity of money and sub-prime mortgages. It’s about the balance of trade and taxes, fiscal and monetary policy, the unemployment rate and more. But, what it really comes down to is families and their economy. Today, as we focus on what I believe we must do to strengthen the economy, we must never lose sight of the fact that it is all about families and our ability to help them build a better, more secure life,” the Governor said.
Governor Blagojevich called his fiscal year 09 budget a “comprehensive approach to the economy” that focuses on three goals:
- Investing in infrastructure
- Relief for families
- Tax cuts for businesses
“If we make the tough choices elsewhere in our $58 billion budget, we can do these things and strengthen our economy, and we should do it now,” Gov. Blagojevich said to the joint session of the General Assembly.
This $25 billion capital program provides access to capital in communities throughout the state to stimulate job growth and the Illinois economy. The fiscal year 09 budget includes funding for a capital construction plan to build critically needed schools, build and improve roads, repair bridges, improve public transit and airports, protect natural resources, and provide access to capital for economic development, affordable housing and community health centers throughout the state.
This plan will support more than 700,000 jobs and strengthen the economy.
“I like the idea of a capital bill of the size and scope I am proposing because first and foremost, it means that we will put more than 700,000 people to work,” Gov. Blagojevich said. “There are bridges across Illinois that desperately need to be fixed. There are bridges that need to be built. There are roads in each of your districts that need to be repaired. And there are too many of our school children trying to learn their lessons in classrooms that are overcrowded or going to school in buildings that are old and crumbling, and not good places to learn. Let's build them good places to learn”
The Governor’s capital plan includes:
- $14.4 billion for road and bridge programs
- $3.8 billion for school construction
- $2.7 billion for public transit
- $1.1 billion for higher education
- $1.1 billion for environment, energy and technology
- $1.0 billion for economic development, including housing
- $600 million for improved and expanded state facilities
- $500 million for airports and rail
Illinois Works would be funded primarily through partial concession of the Lottery. While most capital programs are funded by issuance of debt, Illinois Works funds nearly 65 percent of its projects from pay-as-you-go sources. Only 35 percent of the program is bond funded. In fiscal year 07 and fiscal year 08, Illinois reduced bonded debt by $1 billion, the first time since 1997 that outstanding debt has been reduced for two consecutive years.
Illinois Child Tax Credit
This refundable tax credit will double the child portion of the recently passed federal economic stimulus plan. It will be a one-time, refundable tax credit of $300 per child for all Illinois taxpayers who qualify for the federal plan. To be eligible, you must:
- Have a dependent under age 18 at the end of this year.
- Earn at least $3,000 a year through earned income, unemployment or social security.
- Have income less than $75,000 annually for an individual, $150,000 for joint filers.
“Doubling the tax credit would give parents a little more money to pay for the things their kids need now, and, maybe have a little left over to invest in their kids’ future,” Gov. Blagojevich said.
Illinois Business Tax Cut
This 20 percent tax cut is for Illinois businesses that paid or owe corporate income tax for 2007. To qualify, businesses must:
- Pay Illinois corporate income tax for 2007.
- Maintain their employment levels.
“When times are tough, it’s hard for businesses to keep people on their payroll,” the Governor said. “Cutting taxes on those businesses will allow them to invest more, stimulate the economy, keep people working and put more people to work.”
The state would use a securitization as a one-time revenue source to fund the economic stimulus package. The securitization would allow the state to issue bonds backed by state revenue sources like tobacco settlement payments. Securitization will transfer the risk of a revenue decline to another party. The state would receive cash up front, rather than an annuity spread over several years.
Currently, 18 states have completed securitizations. The state of Ohio will use the $5.1 billion it received in October from securitization on school construction and a property tax cut. California is using $1.25 billion netted from securitization on schools construction and infrastructure projects.
To give families more of their money back, Gov. Blagojevich proposed across-the-board cuts in state government, with the exception of healthcare, education and public safety activities.
“By cutting spending and eliminating pork, we can afford to give the people more of their money back and afford to cut taxes on businesses. If we manage our budget in tough but clear-eyed ways, we can move, and move quickly, on strengthening our economy. And by strengthening our economy, we also strengthen our State Budget,” the Governor said.
The Governor will also consolidate more administrative functions, reduce leased space, offer a new early retirement program, and close unnecessary facilities. He also proposed to restructure the state’s pension system with a plan that will immediately add assets to the pension funds.
With the recent cuts in the Federal interest rate, the state can take advantage of favorable interest rates to refinance the high-interest pension debt into low-interest pension obligation bonds. The state took advantage of record-low rates in 2003 has already saved the state $33 billion.
Today’s interest rates are comparable to those in 2003. Refinancing the debt now will immediately add $16 billion in assets to the state pension funds and save the state $55 billion over the next 36 years. It will also increase the funded ratio to 75 percent from 63 percent and resolve the problem of pension under-funding.
Gov. Blagojevich urged the General Assembly to act quickly on the budget.
“The economy needs our attention,” he said. “Time marches on, and unless we act, a recession will deepen, the hurt will spread and real people will pay the price. It is time to strengthen our economy.”
For more information on Governor Blagojevich’s Fiscal Year 2009 Budget Proposal,