Illinois’

2. Illinois’ Budget

3. Illinois Budget Facts State fiscal year:July 1 — June 30 Appropriation: A legislatively-determined spending cap for a particular purpose  

4. What is a Balanced Budget? Revenues Expenditures

5. What has Caused the State’s Financial Crisis? Higher Level of Accountability Spending Growth Has Outpaced Revenues Rates of Increase General Revenues11.2% • No pension holidays • No debt deferrals into • future years  K-12 Education 18.5% Debt Service 34.4%  Medicaid Liability 46.3% Pensions 52.3% Inflationary growth rate is 13.4%

6. What Makes Up Illinois’Budget? • General Funds • Special State Funds • Federal Trust Funds

7. How the State’s Budget Has Changed Over theLast 10 Years Fiscal Year 1995 9.9% General Funds $15.5 billion 46% Special State Funds $14.8 billion 44% Federal Trust Funds $3.3 billion TOTAL: $33.7 billion

8. How the State’s Budget Has Changed Over theLast 10 Years Fiscal Year 2005 8.5% General Funds $23.6 billion 35.8% Special State Funds $36.8 billion 55.7% Federal Trust Funds $5.7 billion TOTAL: $66.1 billion

9. RevenueS RevenueS

10. General Funds Fiscal Year 2005 General Taxes and Fees Discretionary Negotiated Spending  35.8%   $23.7 billion

11. Individual Income Tax Corporate Income Tax Sales Tax Public Utility Taxes Gaming Sources Other Taxes Other Transfers Federal Sources

12. Individual Income Tax Corporate Income Tax Sales Tax Public Utility Taxes Gaming Sources Other Taxes Other Transfers Federal Sources 32%

13. IndividualIncome Tax • Flat tax rate: 3% • First imposed: 1969 at 2.5% • Permanently changed to 3% in 1989 • 10% of collections goes toward income tax refunds • Of the remainder, 10% goes to local governments     

14. Individual Income Tax $ inmillions Steep rise: late 1990s Recession: 2002 and 2003 Fiscal Year

15. Individual Income Tax Corporate Income Tax Sales Tax Public Utility Taxes Gaming Sources Other Taxes Other Transfers Federal Sources 5%

16. CorporateIncome Tax • Flat tax rate: 4.8% • First imposed: 1969 at 4% • Permanently changed to 4.8% in 1989 • 24% of collections goes toward income tax refunds Of the remainder, 10% goes to local governments     

17. CorporateIncomeTax $ inmillions Change to single sales factor Decoupled from federal accelerated depreciation Fiscal Year

18. Individual Income Tax Corporate Income Tax Sales Tax Public Utility Taxes Gaming Sources Other Taxes Other Transfers Federal Sources 24%

19. SalesTax Goods taxed at 6.25%: 5% to state and 1.25% to local governments (services not taxed in Illinois) Food & Drugs taxed at 1%: All goes to local governments (value of this exemption is $1.12 billion) First enacted: 1933 at rate of 2% Increased several times: 6.25% reached in 1990 After distributions: 72% of total collections are considered general revenues     

20. Sales Tax $ inmillions Fiscal Year

21. Individual Income Tax Corporate Income Tax Sales Tax Public Utility Taxes Gaming Sources Other Taxes Other Transfers Federal Sources 4%

22. Public UtilityTaxes • Electric Excise • Residential: up to 1/3¢ per kilowatt • Non-residential: 5.1% • Telecommunications Excise • Tax rate: 7% • 1% for school construction • Natural Gas Revenue • Tax rate: 5%

23. Public Utility Taxes $ inmillions Drop in land line phone use Fiscal Year

24. Individual Income Tax Corporate Income Tax Sales Tax Public Utility Taxes Gaming Sources Other Taxes Other Transfers Federal Sources 5%

25. Gaming Sources Lottery • First authorized: 1974 • 1/3 of sales goes to state general revenues (Education Assistance Fund) • 38 other states have lotteries; Illinois ranks 8th in net receipts • First enacted: 1990 at flat rate of 20% of gross receipts • Graduated tax rates since 1997. Current range: 15% to 70% • Law allows 10 riverboat licenses. All 10 operational between 1991 and 1994 (1 closed in 1997 and remains inactive) • 95% of collections are considered general revenues (Education Assistance Fund) Riverboats

26. Gaming Sources $ inmillions Lottery Tax rate increase Tax rate increase and dockside gaming Riverboats Fiscal Year

27. Individual Income Tax Corporate Income Tax Sales Tax Public Utility Taxes Gaming Sources Other Taxes Other Transfers Federal Sources 5%

28. OtherTaxes Cigarette Tax: 98¢ per pack Estate Tax: Imposed on an estate in excess of $1.5 million before distribution to heirs Insurance Tax: Vary by type of insurance sold Franchise Taxes: Based on paid-in capital Liquor Taxes: Per gallon basis; varies on type of liquor     

29. Other Taxes $ inmillions Cigarette Estate Insurance Corporate Franchise Liquor Fiscal Year

30. Individual Income Tax Corporate Income Tax Sales Tax Public Utility Taxes Gaming Sources Other Taxes Other Transfers Federal Sources 9%

31. Other Transfers Governor’s Initiatives • Administrative chargebacks • Fee transfers • Fund transfers Intergovernmental Transfers • Cook County: Local aid for Medicaid costs • U of I: Aid for hospital services  

32. Other Transfers $ inmillions Beginning of Governor Blagojevich’s administrative chargebacks, fund transfers, and fee increases Fiscal Year

33. Individual Income Tax Corporate Income Tax Sales Tax Public Utility Taxes Gaming Sources Other Taxes Other Transfers Federal Sources 16%

34. Federal Sources • Reimbursements for state Medicaid spending • Food stamp assistance • Miscellaneous human services reimbursements   

35. Federal Sources $ inmillions Temporary increase in federal reimbursement rate from 50% to 52.95% Fiscal Year

36. 10-Year General Funds Total

37. Expenditures

38. Types ofState Spending • Mandatory • Priority • Discretionary

39. Mandatory Spending • Medicaid • Debt Service • Pensions • Constitutional Mandates    

40. Medicaid Principle factors driving Medicaid spending include: • Rate: amount paid for services provided (rates set by the state) • Population: number of people eligible for and enrolled in program • Utilization: amount of services used by enrollees

41. Medicaid The federal government mandates that all states provide basic healthcare for the following low-income individuals:  Elderly over age 65 Blind and Disabled  Children up to age 18  Pregnant Women

42. Medicaid Illinois provides and covers optional services and populations: • KidCare: offers healthcare coverage to children up to age 18 whose families make up to 185% of the Federal Poverty Level (FPL). • FamilyCare: offers healthcare coverage to parents of children enrolled in KidCare up to 133% of the FPL. • Dentistry, podiatry, and chiropractic services. • Prescription drug coverage: fastest growing portion of Medicaid budget.     Note: FPL for a family of 3 is only $15,670 a year.

43. Medicaid Utilization Fiscal Year 2003 Children, Pregnant Women, and Parents 30% 68% 43% Blind and Disabled 15% 6% 24% Elderly 11% 3% SeniorCare Persons Served Payments

44. Medicaid Liability + 15 $ in millions Medicaid costs have risen at an average rate of 8% since FY 99. At this rate, the program will double every 9 years. Fiscal Year

45. Mandatory Spending • Medicaid • Debt Service • Pensions • Constitutional Mandates    

46. Debt Service Types of State Debt • General Obligation: bonds issued are backed by full faith and credit of state. Debt service paid from general funds. • Revenue: bonds issued for a particular purpose with a dedicated revenue stream.

47. Debt Service • General Obligation Bonds$9.6 billion • Anti-Pollution • Capital Development • Coal Development • School Construction • Pension Obligation Bonds$10.0 billion • Build Illinois Bonds (Revenue Bond)$2.1 billion • Unused debt service transfers to General Revenue Fund

48. Debt Service Payments+15 $ in millions $10 billion in Pension Obligation Bonds Fiscal Year

49. Mandatory Spending • Medicaid • Debt Service • Pensions • Constitutional Mandates    

50. The5State Pension Systems Current Unfunded Liability = $35.1 billion • Teachers’ Retirement(not Chicago):51% • State Employees’ Retirement:32% • State Universities’ Retirement:15% • Judges’ Retirement:1.7% • General Assembly Retirement:0.3%