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posted: 5/6/2010 12:01 AM

Budget at a standstill -- unless you count 'death spiral' as movement

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and Timothy Magaw

SPRINGFIELD - Lawmakers have shown little interest in raising taxes to balance the budget, little interest in dramatic cuts and now appear uninterested in borrowing.

The result could be the state skipping nearly $4 billion in pension payments as part of a fiscal Band-Aid intended to keep the state running for the coming months.

"I don't know what else we can do. We'll go back to the drawing board," said state Rep. Barbara Flynn Currie, a Chicago Democrat, after a key test vote in the House on a proposal to borrow money to pay the pension debt. After years of shirking payments, the state owes the pension systems nearly $78 billion.

That vote showed there are not enough votes to get the borrowing plan out of the House and onto the Senate. It needed 71 votes but fell well short, getting only 61. Democrats control 70 votes and were looking for Republican help on the deal but had Democrats such as Marengo's Jack Franks oppose the plan.

"This is a death spiral," Franks said.

Currie indicated the deal might not be dead just yet.

"We thought maybe there might be some Republican votes and maybe that will change," Currie said. "Stay tuned, we'll let you know what we're up to next."

Resolving the payments to the state pension systems is a critical part of putting together a state budget plan. Lawmakers are racing to try to meet their planned May 7 adjournment, though few expect the final budget deal to actually balance a $13 billion deficit.

While proposals remained fluid Wednesday, key lawmakers discussed the outlines of a deal. Lawmakers would give Gov. Pat Quinn wide authority to borrow billions from existing state bank accounts, sell off part of a massive legal settlement with cigarette companies, delay payments to those doing business with Illinois, urge tax cheats to pay up now and possibly raise cigarette taxes to help bridge a $13 billion deficit, avert education cuts and push the budget crunch off until after the November elections.

A $1 cigarette tax increase - 50 cents over two years - would bring in $200 million the initial year, which would be used to secure federal health care funding matches of another $120 million. The combined $320 million would go to health care but free up state money elsewhere in the budget.

State Sen. Donne Trotter, a Chicago Democrat and budget pointman, said there's an estimated $6 billion sitting in special state bank accounts. Lawmakers are considering giving the governor the authority to borrow from those accounts as needed, though it would have to be paid back within 18 months with 1 percent interest.

Selling off the rights to future payments resulting from a settlement with cigarette makers could get the state nearly $1.2 billion upfront, Trotter said. And an amnesty program to erase penalties for people who pay up back state taxes could yield more than $250 million.

"Is it going to wipe out our deficit? No," Trotter said, saying Quinn would have to manage spending through cuts or other maneuvers.

To appeal to the public, lawmakers are considering a tax-free, back-to-school shopping spree for parents.

"I think that's something we can really do to help our economy in Illinois, to help our stores and help our consumers," Quinn told reporters, following a speech to business leaders.

But his Republican opponent - Bloomington state Sen. Bill Brady - criticized the programs and said he'd do better as governor.

Brady called the governor's sales tax holiday proposal "typical populist Pat Quinn rhetoric." He said a single holiday doesn't make >nearly as much sense an as overall sales tax reduction. He also opposes the cigarette tax increase and the tax amnesty idea.

"I'm not in favor of it at this point in time," Brady said. "I think people should pay their taxes."