State budget crashing; governor looks to feds, lenders, cuts

With an ever-widening budget gap of $2 billion, Gov. Rod Blagojevich is seeking sweeping authority to cut state programs, including education.

"Today we have more difficult decisions to make," Blagojevich said Tuesday in releasing his latest budget proposal a day before lawmakers return to Springfield.

The push for more cutting power amid a rapidly growing budget shortfall comes after a summer of infighting over $1.4 billion in cuts that saw drug treatment programs and state facilities shuttered.

Meanwhile, the state is buried under a massive backlog of more than $4 billion in unpaid bills to health care and other state service providers.

The governor's office has given no clear idea of how future budget cuts might impact state services, including prisons, schools and transportation. He wants lawmakers to grant him the ability to slice 8 percent out of the general budget, about $2.2 billion in all.

Blagojevich and state budget watchers blame the new hole, estimated now at $2 billion, on a projected dive in tax revenue thanks to the national economic crisis.

Cash from income, corporate and sales taxes is expected to fall more than $800 million short by June, the end of the state's fiscal year, Blagojevich budget director Ginger Ostro said Tuesday. Investment losses, a pre-existing budget deficit and a decline in casino revenues brings the total shortfall to at least $2 billion.

But it could get worse, predicts Dan Long, director of the Legislature's bipartisan budget forecasting commission.

"We think it could be larger," Long said. "We are entering the worst period right now."

Long said the gap could widen to $2.8 billion or more.

To balance the budget, Blagojevich wants a reticent Legislature to grant him broad authority to cut deep into even the sacred cows of state pension funding and education spending.

At the same time, Blagojevich is looking at short-term borrowing so the state could pay off a $4 billion bill backlog, a problem Comptroller Dan Hynes has called "potentially catastrophic" as unpaid contractors threaten to walk off the job.

Blagojevich also penned a letter to congressional leaders asking for a $3 billion cash infusion over three years in transportation, health care and welfare funding.

State lawmakers reacted with skepticism Tuesday, but said they are open to negotiating. It remained unclear if legislative leaders planned to take up the matter this week.

"There is no question that our plight is real and earnest," said House Majority Leader Barbara Flynn Currie, who expressed doubts federal lawmakers will come to the rescue.

The Chicago Democrat said much of the belt tightening can be done without lawmaker approval and that they will be hesitant to grant additional authority "without a lot of specificity on where those cuts are going to go."

State Sen. Jeff Schoenberg, an Evanston Democrat and co-chair of the Legislature's budget forecasting arm, said he doesn't foresee lawmakers giving up oversight on cuts.

"But this could serve as the starting point for substantive discussion," he said.