Just weeks after raising income taxes to stabilise the state’s troubled finances, Illinois Governor Pat Quinn’s unveiled a budget plan yesterday that would increase overall state spending, while cutting services and borrowing billions to pay overdue bills.The $52.7 billion budget proposal, which relies heavily on borrowing $8.7 billion to pay off state vendors, faces strong criticism from lawmakers, editorial boards and civic organisations across the state.
Republican lawmakers said the budget plan is DOA, noting that overall state spending would increase by about $1.7 billion. Chicago’s Civic Federation, a budget watchdog group, said the borrowing would cost Illinois about $3.4 billion in additional interest. Even Democrats in the state legislature said were not satisfied with the plan and promised to look for additional places to cut spending.
Quinn also came under fire from human service agencies who say his budget plan would unfairly hurt the poor, sick and elderly. Quinn’s proposal includes $1 billion in spending cuts, including a $552 million reduction in the state’s Medicaid reimbursement rate.
Meanwhile, reactions in the municipal bond investors have been relatively subdued, according to the Wall Street Journal. The state postponed a $3.7 billion bond issue this week to give potential investors time to examine Quinn’s budget.
“We suspect on the margin there will be some disappointment with this speech, in terms of addressing the spending side of the budget problem,” said Michael Pietronico, chief executive of Miller Tabak Asset Management in New York. “We would look at this proposal as an ‘opening shot’ in what will most certainly be a highly contested budget debate.”
The bond offering, now scheduled for next week, will help the state to pay its annual contribution to the state’s public pension plans, which are more than 50% underfunded. Notably, Quinn’s budget plan doesn’t address the state’s pension problem, which is one of the worst in the nation.
NOW WATCH: Briefing videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.