Economy, elections could mean rough 2012 for Ill.

SPRINGFIELD — The good news for Illinois in 2012 is that the state budget is in better shape than it was a year ago. The bad news is, well, pretty much everything else.

Pension costs are still climbing dramatically. Unemployment remains stubbornly high. Schools and universities are struggling to make do with less state money. And the Capitol remains a place where conflict outweighs cooperation, something that's not likely to change in an election year.

Experts on business, education and human services see a long “to do” list for Illinois in 2012. They want more progress on balancing the budget, payment of billions of dollars in overdue bills, better teaching methods and a solution to the growing cost of government pensions.

Most of all, they want a clear, long-term plan for bringing stability to a state that often seems to lurch from crisis to crisis.

“Our state has been beaten down for a long time,” said Doug Whitley, president of the Illinois Chamber of Commerce. “We've got to send positive signals that we know where we're going, and we're going to work at it.”

Gov. Pat Quinn, in an interview with The Associated Press, said reaching an agreement to control government pension costs will be a major focus in 2012. But his top priority is job creation — by increasing the state's exports, helping returning veterans find work and emphasizing workforce training at high schools and community colleges.

“We can't have folks dropping out. We can't have folks who are laid off giving up,” Quinn said.

That should be welcome news to Illinois business leaders. They won't be so thrilled with the Democratic governor's goal of paying for those initiatives by ending various corporate tax breaks, an idea he floated briefly in November but shelved when lawmakers balked.

Quinn and the legislature's Democratic majority — sometimes joined by Republicans and sometimes on their own — have tried to address some of the state's most stubborn problems over the past year or two.

They raised income taxes and cut spending to help balance the budget. State government is still in a deep hole, but at least it's not digging deeper.

State officials reduced retirement benefits for new government employees, but not current employees, to begin reining in long-term pension costs. Quinn also canceled raises guaranteed in state contracts and tried unsuccessfully to break a no-layoff promise.

Officials lowered the costs of unemployment insurance and workers' compensation for Illinois businesses and, in response to complaints about higher taxes, approved a variety of tax credits. They approved a major public works program to create jobs while improving Illinois infrastructure and also tried to make Chicago's McCormick Place more affordable to major conventions.

Whitley, from the Chamber of Commerce, called such steps positive but “incremental.” Making Illinois an attractive place for business, he said, will require a truly sound state budget, further reductions in pension costs, more cuts in workers' compensation and more.

The trick will be finding any agreement on where Illinois should go in a year when lawmakers face the uncertainty of running in districts that were redrawn after the 2010 census. Change tends to make lawmakers cautious about any votes that could be used against them in a primary challenge or in the fall elections. Compromise can anger people who vote based on ideology.

Springfield is likely to be quiet until after the March 20 primary, and political concerns could harden differences all year.

“Especially during election season, we'll have negative ads and finger-pointing,” said Glenn “Max” McGee, president of the Illinois Math and Science Academy and former state education superintendent.

Take taxes, for instance.

House Minority Leader Tom Cross of Oswego, along with many of his fellow Republicans, wants to roll back the increase in corporate income taxes that Democrats approved a year ago. They blame the tax, and its Democratic supporters, for driving up the unemployment rate. Whether they're right or wrong, the proposal to resume a year-old fight and potentially blow a $900 million hole in the budget shows how far apart the two parties are.

Now imagine the two sides trying to negotiate the issue of reducing retirement benefits for employees, a move that many Democrats believe is unconstitutional and which would be bitterly opposed by unions.

“None of these guys are going to get into a real, meaningful discussion of pensions this year with elections coming up. They're not,” said Peoria Mayor Jim Ardis, a Republican.

Next year, the state is supposed to come up with $6.9 billion for pensions, up from $5.7 billion this year, according to the Civic Federation. Without a change, either in the benefits promised or the state's timetable for providing the money, the cost will continue to leap from year to year, leaving little money for other government services.

Quinn said the problem can be solved, despite the fierce differences of opinion on cutting benefits to people already enrolled in government retirement systems. He said his administration will bring interest groups and lawmakers together to hash out a plan.

Despite Quinn's optimism, others fear Illinois will mostly spin its wheels in 2012 instead of moving forward. Partisan differences, a weak economy and a tight budget don't exactly encourage movement, they say.

Judith Gethner, executive director of Illinois Partners for Human Services, hopes the grim outlook could work to her advantage on one issue: the billions of dollars Illinois owes to the charities and businesses who provide services for state government.

Until recently, hospitals and other Medicaid providers were partly shielded by federal rules requiring the state to pay them first. Now those rules are gone, and she expects hospitals to share more of the pain and push loudly for state officials to take action. That might renew efforts to have the state borrow money and pay providers who often wait months for what's owed to them.

That would shore up the human services “safety net” and avoid further job cuts, but Gethner — like others — said solving larger problems will require a clear vision for 2012 and beyond.

“When you're in the mode of just trying to survive and nobody's watching the future,” she said, “I find it difficult to see a way that anything will be different.”