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Illinois State Budget

Governor Pat Quinn

Fiscal Year 2011 July 1, 2010 – June 30, 2011

www.state.il.us/budget

Printed/Created by Authority of the State of Illinois

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The Government Finance Officers Association of the United States and Canada (GFOA) presented a Distinguished Budget Presentation Award to the State of Illinois, for its annual budget for the fiscal year beginning July 1, 2009 (fiscal year 2010). According to GFOA, this award “reflects the highest form of recognition in governmental budgeting.” In order to receive this award, a governmental unit must satisfy nationally recognized guidelines for effective budget presentation. These guidelines are designed to assess how well the entity’s budget serves as a policy document, as an operations guide, as a financial plan, and as a communications device. The Government Finance Officers Association’s Distinguished Budget Presentation Awards Program, established in 1984, recognizes exemplary budget documentation by state, provincial and local governments, as well as public universities and colleges. Entities participating in the program submit copies of their operating budgets for review. Each budget document is evaluated using a comprehensive evaluation checklist and those judged proficient receive the award. We are very pleased to have received this national recognition. We believe our current budget continues to conform to program requirements, and we are submitting it to GFOA to determine its eligibility for another award.

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Table of Contents

State of Illinois Chapter-Page The Governor’s Letter of Transmittal READER’S GUIDE.........................................................................................................................................................Chapter 1 Budget Documents ........................................................................................................... 1-1 Budget Document Organization........................................................................................ 1-1 State of Illinois Organization Chart ................................................................................... 1-2 Basis of Accounting.......................................................................................................... 1-3 Guide to Understanding Agency Budget Submissions........................................................ 1-3 Agency Budget Tables ...................................................................................................... 1-4 Description of Funds ........................................................................................................ 1-8 BUDGET SUMMARY....................................................................................................................................................Chapter 2 Fiscal Overview................................................................................................................. 2-1 Summary Tables I-A Operating Appropriations by Agency – All Funds ................................................... 2-17 I-B Supplementals to Complete Fiscal Year 2010 ......................................................... 2-27 II-A Revenues by Source – All Appropriated Funds ....................................................... 2-28 II-B Revenues by Source – General Funds ..................................................................... 2-29 II-C Budgeted Funds Revenues – Generally Accepted Accounting Principles (GAAP) Basis 2-30 II-D Budgeted Funds Expenditures – Generally Accepted Accounting Principles (GAAP) Basis 2-30 III-A Road Fund ........................................................................................................... 2-31 III-B Motor Fuel Tax – State Funds ............................................................................... 2-32 IV-A Appropriated Operating Funds by Fund Group for Fiscal Year 2011 ..................... 2-33 IV-B Appropriated Operating Funds by Fund for Fiscal Year 2011 ................................ 2-34 PUBLIC RETIREMENT SYSTEMS............................................................................................................................Chapter 3 ECONOMIC OUTLOOK AND REVENUE FORECAST......................................................................................Chapter 4 EDUCATION...................................................................................................................................................................Chapter 5 Elementary and Secondary Education Illinois State Board of Education.................................................................................. 5-1 Teachers’ Retirement System...................................................................................... 5-8 Higher Education.............................................................................................................. 5-9 Illinois Board of Higher Education ............................................................................... 5-14 Public Universities Chicago State University........................................................................................ 5-16 Eastern Illinois University ...................................................................................... 5-18 Governors State University .................................................................................... 5-20 Illinois State University.......................................................................................... 5-22 Northeastern Illinois University ............................................................................. 5-24 Northern Illinois University.................................................................................... 5-26 Southern Illinois University.................................................................................... 5-28 University of Illinois .............................................................................................. 5-30 Western Illinois University ..................................................................................... 5-33 Illinois Community College Board ............................................................................... 5-35 Illinois Student Assistance Commission ...................................................................... 5-37 Illinois Mathematics and Science Academy .................................................................. 5-39 State Universities Retirement System .......................................................................... 5-40 State Universities Civil Service System......................................................................... 5-41

Table of Contents

State of Illinois HUMAN SERVICES.......................................................................................................................................................Chapter 6 Aging, Department on...................................................................................................... 6-1 Children and Family Services, Department of .................................................................... 6-7 Comprehensive Health Insurance Plan .............................................................................. 6-14 Healthcare and Family Services, Department of................................................................. 6-16 Human Services, Department of........................................................................................ 6-23 Illinois Deaf and Hard of Hearing Commission.................................................................. 6-36 Illinois Council on Developmental Disabilities ................................................................... 6-39 Illinois Guardianship and Advocacy Commission............................................................... 6-42 Illinois Violence Prevention Authority................................................................................ 6-45 Public Health, Department of............................................................................................ 6-48 Veterans’ Affairs, Department of ...................................................................................... 6-59 PUBLIC SAFETY............................................................................................................................................................Chapter 7 Corrections, Department of .............................................................................................. 7-1 Illinois Criminal Justice Information Authority................................................................... 7-7 Illinois Emergency Management Agency ........................................................................... 7-11 Law Enforcement Training Standards Board ...................................................................... 7-17 Military Affairs, Department of ......................................................................................... 7-20 Prisoner Review Board ...................................................................................................... 7-24 State Fire Marshal, Office of the........................................................................................ 7-27 State Police, Department of .............................................................................................. 7-31 State Police Merit Board.................................................................................................... 7-37 ENVIRONMENT AND BUSINESS REGULATIONS ............................................................................................Chapter 8 Drycleaner Environmental Response Trust Fund Council ................................................... 8-1 Environmental Protection Agency ..................................................................................... 8-3 Financial and Professional Regulation, Department of....................................................... 8-10 Human Rights, Department of .......................................................................................... 8-15 Human Rights Commission............................................................................................... 8-18 Illinois Commerce Commission......................................................................................... 8-20 Illinois Workers’ Compensation Commission .................................................................... 8-24 Insurance, Department of ................................................................................................. 8-27 Natural Resources, Department of .................................................................................... 8-30 ECONOMIC DEVELOPMENT AND INFRASTRUCTURE ................................................................................Chapter 9 Agriculture, Department of............................................................................................... 9-1 Commerce and Economic Opportunity, Department of ..................................................... 9-8 Illinois Power Agency........................................................................................................ 9-17 East St. Louis Financial Advisory Authority........................................................................ 9-19 Employment Security, Department of................................................................................ 9-20 Illinois Arts Council .......................................................................................................... 9-25 Illinois Finance Authority .................................................................................................. 9-28 Illinois Historic Preservation Agency ................................................................................. 9-30 Illinois Sports Facilities Authority...................................................................................... 9-34 Labor, Department of ....................................................................................................... 9-35 Metropolitan Pier and Exposition Authority....................................................................... 9-39 Southwestern Illinois Development Authority.................................................................... 9-40 Transportation, Department of ......................................................................................... 9-41 Illinois State Toll Highway Authority ................................................................................. 9-50 Upper Illinois River Valley Development Authority............................................................. 9-53

Table of Contents

State of Illinois GOVERNMENT SERVICES ........................................................................................................................................Chapter 10 Elected Officials: Governor, Office of the ........................................................................................... 10-1 Lieutenant Governor, Office of the .............................................................................. 10-4 Attorney General, Office of the ................................................................................... 10-5 Secretary of State, Office of the .................................................................................. 10-8 State Comptroller, Office of the .................................................................................. 10-13 State Officers’ Salaries .......................................................................................... 10-16 State Treasurer, Office of the ...................................................................................... 10-20 Judicial Agencies: Judges’ Retirement System ......................................................................................... 10-23 Judicial Inquiry Board .................................................................................................. 10-24 State Appellate Defender, Office of the ....................................................................... 10-26 State’s Attorneys Appellate Prosecutor, Office of the .................................................. 10-29 Supreme Court & Illinois Court System........................................................................ 10-32 Supreme Court Historical Preservation Commission .................................................... 10-34 General Assembly and Legislative Agencies: Auditor General, Office of the ..................................................................................... 10-35 General Assembly ....................................................................................................... 10-37 General Assembly Retirement System ......................................................................... 10-39 Government Forecasting and Accountability, Commission on...................................... 10-40 Joint Committee on Administrative Rules .................................................................... 10-40 Legislative Audit Commission ..................................................................................... 10-40 Legislative Ethics Commission .................................................................................... 10-41 Legislative Information System ................................................................................... 10-41 Legislative Printing Unit .............................................................................................. 10-42 Legislative Reference Bureau....................................................................................... 10-42 Legislative Research Unit ............................................................................................ 10-43 Architect of the Capitol, Office of the.......................................................................... 10-43 Other Boards and Commissions: Civil Service Commission ............................................................................................ 10-44 Court of Claims .......................................................................................................... 10-46 Elections, State Board of ............................................................................................. 10-52 Executive Ethics Commission ...................................................................................... 10-56 Illinois Labor Relations Board...................................................................................... 10-58 Illinois Educational Labor Relations Board ................................................................... 10-61 Procurement Policy Board ........................................................................................... 10-63 Property Tax Appeal Board ......................................................................................... 10-65 Executive Inspector General, Office of .............................................................................. 10-67 Governor’s Office of Management and Budget .................................................................. 10-70 Capital Development Board .............................................................................................. 10-73 Central Management Services, Department of................................................................... 10-76 Revenue, Department of ................................................................................................... 10-82 Illinois Gaming Board ....................................................................................................... 10-89 Illinois Racing Board ......................................................................................................... 10-92 State Employees Retirement System.................................................................................. 10-95 DEBT MANAGEMENT.................................................................................................................................................Chapter 11

DEMOGRAPHIC INFORMATION............................................................................................................................Chapter 12

GLOSSARY......................................................................................................................................................................Chapter 13

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Office of the Governor 207 State Capitol, Springfield, Illinois 62706

March 10, 2010 To the Honorable Members of the General Assembly and the People of the State of Illinois: I respectfully submit to you the Fiscal Year 2011 Operating Budget, a $24.8 billion general funds plan that is based on the very real conditions we all face here in our great state. With this budget, we are FIGHTING FOR ILLINOIS: fighting for jobs to revive our economy, fighting to cut costs while meeting our obligations, and fighting for our families’ futures. This budget is the result of difficult but responsible decisions we must make during this unprecedented time in Illinois history. The national recession is the longest and deepest since the Great Depression. This, along with poor fiscal discipline by previous administrations, has left us in a dire financial situation. In Illinois, we are facing a record $13 billion deficit for fiscal years 2010 and 2011. We need immediate, decisive and comprehensive action to solve this structural deficit. A combination of spending reductions, federal assistance, strategic borrowing, revenue generation and job growth is imperative to balancing our budget and imposing fiscal discipline. Responsibility is critical in times like these. We must tighten our belts in areas throughout state government. This budget makes major reforms by reducing spending and takes serious action on issues that have been neglected for far too long, such as our pension system. While tough decisions have been made, we will continue to maintain our commitment to our most vulnerable citizens and the essential services upon which they rely. I stand for and am committed to honesty, openness and transparency in the people’s government. For the first time in our state’s history, Illinois residents have the chance to actively participate in shaping our budget priorities through the Governor’s Office of Management and Budget Web site, www.budget.illinois.gov. The overwhelming response demonstrates that people want to and will become engaged in the budget process when given the opportunity. Thousands of residents provided smart, sound and common sense solutions to solving our current budget crisis. We thank all of you who responded. I am the Building Governor and I know this state will recover from this fiscal crisis by putting people back to work. At 11.3 percent, our unemployment rate is unacceptable. The $31 billion capital plan – Illinois Jobs Now! – is a job-generating, capital improvement program that is reviving the state’s ailing economy by creating and retaining more than 439,000 Illinois jobs. At the same time, this plan is building schools; fixing aging roads and bridges; improving mass transit; and investing in energy, the environment and our future. Together, we can, must and will move forward to the promising days ahead. The future will be built on a more dynamic economy driven by a shared focus on the great, hard-working people of Illinois. The task before us will not be easy, but I am confident we have the right plan to meet the challenges ahead. Let us work together and make this Land of Lincoln proud and prosperous once again. Sincerely,

Pat Quinn Governor, State of Illinois

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The State of Illinois fiscal year 2011 budget book can be accessed online at

www.state.il.us/budget or

www.budget.illinois.gov

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READER’S GUIDE

www.state.il.us/budget

CHAPTER 1State of Illinois

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Readers Guide

State of Illinois

www.state.il.us/budget 108 State House

Springfield, IL 62706 217.782.4520

A READER’S GUIDE TO THE FISCAL YEAR 2011 ILLINOIS STATE BUDGET INTRODUCTION

The Illinois budget process is driven by state constitutional and statutory requirements, a wide array of general guidelines and technical considerations. This Reader’s Guide is designed to help readers understand the structure and content of the operating budget. It includes the following sections: • A description of the budget documents. • An explanation of how the fiscal year 2011

budget document is organized. • An organization chart of state government. • An explanation of the basis of budgeting. • A guide to reading and understanding

agency budget submissions including narratives and budget tables.

• A description of the various fund types in the Illinois accounting system.

BUDGET OPERATIONS

This document presents the Fiscal Year 2011 Illinois State Budget. It sets forth the governor’s operating budget recommendations for the period July 1, 2010,through June 30, 2011. The state’s operating and capital budgets are subject to the same procedures. However, the Fiscal Year 2011 State of Illinois Capital Budget is presented in a separate document for the reader’s convenience. Both documents are available at www.state.il.us/budget or budget.illinois.gov. BUDGET DOCUMENT ORGANIZATION The Fiscal Year 2011 Illinois State Budget is organized as follows: • The Governor’s Letter of Transmittal to

the General Assembly and the residents of Illinois.

• Table of Contents. • Chapter 1: The Reader’s Guide. • Chapter 2: The Budget Summary of the

state’s current fiscal plan. This chapter presents the governor’s budget priorities and key recommendations. It also

highlights key financial issues, and includes several tables that summarize appropriations, expenditures, revenues and funds. Chapter 2 concludes with the following Summary Tables: o Table 1-A: Appropriations by Agency. o Table 1-B: Supplemental Appropriations

for Fiscal Year 2010. o Table II-A: Appropriated Revenues by

source. o Table II-B: General Funds Revenue by

Source. o Table II-C: General Funds Revenue -

Modified Accrual Basis. o Table II-D: General Funds Expenditures -

Modified Accrual Basis. o Table III-A: Road Fund. o Table III-B: Motor Fuel Tax Fund - State

Funds. o Table IV-A: Appropriated Operating

Funds by Fund Group for Fiscal Year 2011. This is a presentation of the projected operating cash flow for each fund group.

o Table IV-B: Appropriated Operating Funds by Fund for Fiscal Year 2011. This table presents the fund balance for each fund in the Illinois accounting system. The end of year cash balance is equal to the beginning of year cash balance, plus receipts, minus disbursements.

• Chapter 3 A report on the state’s Public Retirement Systems.

• Chapter 4 Illinois’ Economic Outlook and Revenue Forecast. This chapter describes Illinois’ economy within the context of the national economy. Details are also provided on revenue sources and revenue forecasting methodology used by the state.

• Chapters 5 through 10 cover the budget recommendations for each agency and for other branches of government including elected officials. The agencies are grouped by service area of state government, with a chapter dedicated to each group. The service areas are: o Education o Human Services o Public Safety o Environmental and Business Regulations

Executive Budget for Fiscal Year 2011 Chapter 1 - 1

Readers Guide

State of Illinois

www.state.il.us/budget 108 State House

Springfield, IL 62706 217.782.4520

o Economic Development and Infrastructure

o Government Services (including elected officials, legislative agencies and judicial agencies.

• Chapter 11: The Debt Management report

describes the state’s debt affordability

model, borrowing activities and financing schedule.

• Chapter 12: Demographic Information on the Illinois population

• Chapter 13: A Glossary of special terms.

__________________________ Adapted from the Fiscal Year 2003 Illinois Comptroller Comprehensive Annual Financial Report – modified March 2010

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Executive Budget for Fiscal Year 2011 Chapter 1 - 2

Readers Guide

State of Illinois

www.state.il.us/budget 108 State House

Springfield, IL 62706 217.782.4520

BASIS OF BUDGETING The Illinois Constitution requires the governor to prepare and submit a state budget to the General Assembly for the upcoming fiscal year. The budget sets forth the estimated balance of funds available for appropriation at the beginning of the fiscal year, the estimated receipts, and a plan for expenditures during the fiscal year. The Illinois Constitution requires the governor to submit a balanced budget. PA 90-479, enacted in 1999, amended the Civil Administrative Code (State Budget Law) to provide guidance to the governor as he proposes the budget, and to the General Assembly as it makes appropriations, regarding a balanced budget requirement. PA 90-479 applies only to six funds, which it defines as “budgeted funds”: General Revenue, Common School, Education Assistance, Road, Motor Fuel Tax and Agricultural Premium. For the budgeted funds, revenue estimates include the beginning fund balance, plus revenues to be received during the budgeted year, plus revenues due to the state as of June 30 of the budgeted fiscal year that are expected to be collected in the two-month lapse period following the budgeted year. PA 90-479 also requires the use of the “modified accrual” basis of budgeting: revenues are accounted for in the year they are due – not when they are received. However, the amounts due to the state in one fiscal year but actually received in the following fiscal year are typically small and consistent over time, and are due to the normal payment cycles set forth in law. For instance, final monthly sales tax payments are due the state on the 20th day of the month following the sale. Consequently, final sales tax payments for June sales are received in July, the first month of the ensuing fiscal year. Likewise, revenue estimates include only those revenues due to the state during the fiscal year, July 1 through June 30. They do not include revenues collected in the lapse period of the budgeted fiscal year (through August 31), which were due to the state as of June 30 of that year. Revenue estimates also include federal reimbursements associated with the recognition

of liabilities paid pursuant to Section 25 of the State Finance Act. The main Section 25 programs are Medicaid and employee health insurance. Expenditure estimates for budgeted funds take into account the costs to be incurred in the budgeted fiscal year, including those to be paid from future fiscal year appropriations pursuant to Section 25 of the State Finance Act. Expenditure estimates in Table II-D do not include costs paid in the budgeted fiscal year that were incurred in the prior fiscal year. Of the budgeted funds, only the General Revenue Fund has expenditures pursuant to Section 25 of the State Finance Act. Thus, expenditure estimates for the other funds are unaffected by PA 90-479. Revenue and expenditure estimates also include transfers between funds that are based on revenues received or costs incurred during the budgeted year. All other funds must be balanced so that proposed expenditures and appropriations do not exceed funds estimated to be available. A GUIDE TO UNDERSTANDING AGENCY BUDGET SUBMISSIONS The budget recommendations of the Fiscal Year 2011 Illinois State Budget include a narrative of each agency’s operations and summary tables of its budget. AGENCY NARRATIVE The narrative for each agency includes the following sections: • Strategic Initiatives and Priorities: A brief

description of items included in the fiscal year 2011 budget recommendation that help to achieve the agency’s goals and objectives.

• Achievements and Accountability: A brief description of recent agency programming and/or operational achievements.

• About the Agency: Provides a link to the agency web page.

• Agency Mission: A statement reflecting the core objective of the agency.

Executive Budget for Fiscal Year 2011 Chapter 1 - 3

Readers Guide

State of Illinois

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• Summary of Agency Operations: A brief description of agency duties and responsibilities.

• Agency Resources Employed: A table summarizing funding sources, recommended appropriations and two-year history of actual appropriations. Also included is a three-year headcount trend.

• Programs: A summary table of resources allocated to each program within the agency.

• Performance Measures: A table that captures the agency’s progress in key areas that relate to its strategic priorities and core mission. Emphasis is placed on outcomes, that is, results that impact the public.

AGENCY BUDGET TABLES The budget tables provide summary detail on each agency’s budget. The budget tables list each agency’s appropriations and expenditures by major fund group, by fund and by division, as well as the agency’s headcount by division. Personnel detail forms, which list the agency’s staff by division and position title, are available in a separate volume. Appropriations by Major Fund Group • The appropriations recommendations

requiring General Assembly action are shown by type of expenditure for each of three major fund groups: general funds, other state funds and federal funds.

• Within each fund group, the appropriations

and expenditures are further subdivided into major categories such as personal services and fringe benefits, contractual services, other operations and refunds, designated purposes, and grants. Each appropriation for designated purposes and grants is listed individually.

Appropriations by Fund • The agency’s resources are shown in total

for each fund requiring appropriations by the General Assembly.

Appropriations by Division • The agency’s new appropriations and

reappropriations requiring General Assembly

action are shown by division as classified by the comptroller.

Headcount by Division • The agency’s headcount by division is

presented, showing actual headcount at the end of fiscal year 2009, estimated headcount for fiscal year 2010 and recommended headcount for fiscal year 2011.

Column Descriptions • The fiscal year 2009 appropriations column

reports all original and supplemental appropriations and reappropriations enacted by the General Assembly and signed into law by the governor for fiscal year 2009. The amounts also reflect approved two percent transfers and executive orders issued by the governor.

• Fiscal year 2009 expenditures include those

incurred from July 1, 2008 through June 30, 2009, and during the two-month lapse period ending August 31, 2009. During the lapse period, outstanding fiscal year 2009 remaining state obligations were liquidated.

• Fiscal year 2010 appropriations reflect all

original and supplemental appropriations for fiscal year 2010 enacted by the General Assembly and signed by the governor through January 31, 2010. This column also reports changes due to approved two percent transfers and executive orders issued by the governor.

• Fiscal year 2010 estimated expenditures

reflect the expenditures projected to be incurred through the fiscal year, including the lapse period, and also account for anticipated two percent transfers, but do not include the requested fiscal year 2010 supplemental appropriations shown in Table I-B.

• Fiscal year 2011 appropriations show the

recommended, or in the case of other elected officials or legislative/judicial branches of government, requested budget.

An example of the Budget Table follows.

Executive Budget for Fiscal Year 2011 Chapter 1 - 4

Readers Guide

State of Illinois

www.state.il.us/budget 108 State House

Springfield, IL 62706 217.782.4520

Actual Maximum Spending Authority

Estimated Current Year Spending (including lapse period spending)

Appropriation recommended by the governor

Prior year Actual Spending (including lapse period spending)

Executive Budget for Fiscal Year 2011 Chapter 1 - 5

Readers Guide

State of Illinois

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Springfield, IL 62706 217.782.4520

Actual Maximum Spending Authority

Estimated Current Year Spending (including lapse period spending)

Appropriation recommended by the governor

Prior year Actual Spending (including lapse period spending)

Executive Budget for Fiscal Year 2011 Chapter 1 - 6

Readers Guide

State of Illinois

www.state.il.us/budget 108 State House

Springfield, IL 62706 217.782.4520

Actual Maximum Spending Authority

Estimated Current Year Spending (including lapse period spending)

Appropriation recommended by the governor

Prior year Actual Spending (including lapse period spending)

Executive Budget for Fiscal Year 2011 Chapter 1 - 7

Reader’s Guide

State of Illinois

DESCRIPTION OF FUNDS • The funds in the Illinois accounting system

are classified into two broad categories: Appropriated and Non-Appropriated Funds.

• Appropriated Funds are further classified into eight fund groups: General, Highway, Special State, Bond Financed, Debt Service, Federal Trust, Revolving and State Trust Funds.

• Non-Appropriated Funds are composed primarily of Federal and State Trust Funds, and include a few Special State Funds.

The following chart describes the major appropriated fund types, as well as the sources and uses of those funds:

STATE OF ILLINOIS MAJOR FUND GROUP

Fund Group

Sources Purposes/Uses

General Funds State income taxes, sales taxes, other taxes and fees

Support the regular operating and administrative expenses of most state agencies. Include General Revenue Fund, Education Assistance Fund, Common School Fund and General Revenue-Common School Special Account Fund.

Highway Funds

Motor fuel taxes, vehicle registrations, licenses and fees

Receive and distribute special assessments related to transportation. Support transportation-related activities at the state and local levels.

Special State Funds

Taxes and fees Represent a segregation of accounts restricted to the revenues and expenditures of a specific source. Support such diverse activities as medical assistance, children’s services, environmental cleanup, financial regulation and health insurance. They are designated in Section 5 of the State Finance Act (30 ILCS 105/5) as special funds in the State Treasury and not elsewhere classified.

Bond Financed Funds

Build Illinois and General Obligation (GO) bonds

Receive and administer the proceeds of various state bond issues. Pay for capital improvements to local schools, state facilities, higher education facilities, development of coal-burning power plants, local water and wastewater treatment facilities, public transportation, airports, environmental programs and economic development projects.

Debt Service Funds

Transfers in from other funds

Account for the resources obtained and accumulated to pay interest and principal on debt obligations. Provide for debt service payments on state bonds.

Federal Trust Funds

Federal grants Support grants and contracts between state agencies and the federal government. Administered for specific purposes established by terms of grants and contracts. Support a variety of programs including education, healthcare, human services, community development, transportation and energy.

Revolving Funds Repayments on project loans

Finance the operations of state agencies that render services to other state agencies on a cost reimbursement basis; support local capital projects. Appropriation of these funds depends upon intra-governmental service requirements and appropriation of other state agencies.

State Trust Funds Various Hold funds on behalf of other entities or individuals (such as pensions). Established by statute or under statutory authority for specific purposes.

Executive Budget for Fiscal Year 2011 Chapter 1 - 8

BUDGET SUMMARY

www.state.il.us/budget

CHAPTER 2State of Illinois

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FY2011: Fiscal Overview & Budget Summary

State of Illinois

www.state.il.us/budget 108 State House

Springfield, IL 62706 217.782.4520

THE STATE’S GREAT CHALLENGE Structural Deficit & Great Recession Illinois faces a fiscal crisis. The worldwide Great Recession and the state’s structural deficit have combined to create unprecedented obstacles for our elected officials and citizens. In fiscal year 2010, many attempts to address problems— such as pension and tax reform—fell short, increasing the severity of the structural deficit and delaying tough decisions that will affect our state for decades. For fiscal year 2011, we must do better. Around the globe, the Great Recession has taken a toll on even the most robust economies. This recession is unlike those previously seen, and its end has yet to be written. Every state in our country is still reeling from the foreclosure crisis and de-leveraging of the banking industry. Though big business profits improved in calendar year 2009, success on corporate balance sheets was not paired with success in citizens’ pocketbooks. As our nation wades through this jobless recovery, the Illinois unemployment rate, 11.3 percent as of January 31, 2010, exceeds the national average and is nearly three percentage points

higher than the previous year. While national and state economic development programs are creating jobs and opportunities, recovery is slow and currently not sufficient to create the number of jobs our nation demands. The Revenue Problem Meeting the Great Recession is Illinois’ structural deficit—a situation wherein the state’s expenditures consistently exceed revenues. With historically high unemployment, the state’s revenues have suffered. Individual income tax revenue is down 4 percent from the previous year, as of February 28, 2010; sales tax is down 5 percent. In the past two fiscal years, the big three tax categories (individual income, corporate income and sales) have declined 14 percent. These significant revenue declines come at a time when state resources are being squeezed by increasing costs, with pensions, human services, health care, and education expenditures leading the way and accounting for about 90 percent of the annual budget. Pension reform and difficult choices regarding human service programs, healthcare eligibility and the P-12 and higher educational systems are required to reign in these expenditures.

GENERAL FUND REVENUES FY2008 - FY2011

(in $ millions)

$29,659 $29,144

$27,995

$27,444

$26,000

$26,500

$27,000

$27,500

$28,000

$28,500

$29,000

$29,500

$30,000

FY2008 FY2009 FY2010 (Est.) FY11 (Budget)

THE REVENUE PROBLEM

FY2011 Revenues are forecasted to be over $2 billion less than FY2008,

despite almost a half billion in Federal Stimulus dollars in FY2011

Source: Governor's Office of Management & Budget

Executive Budget for Fiscal Year 2011 Chapter 2 - 1

FY2011: Fiscal Overview & Budget Summary

State of Illinois

www.state.il.us/budget 108 State House

Springfield, IL 62706 217.782.4520

The Pension Problem While revenues have declined approximately $2 billion in the last three years, pension costs have increased over $2 billion. Without stabilization, the problem will only compound in years to come. The Governor’s proposal to stabilize the state- funded public retirement systems would provide public employees with a fair and secure

retirement, while moderating the fiscal burden on the state by reducing longer-term pension obligations by more than $100 billion through 2045. Such stabilization, which calls for changes that would affect newly-hired, mostly young employees, would alleviate current and future burdens of a system that has been underfunded for decades.

GENERAL FUND PENSION CONTRIBUTIONS GROWTH *

FY2000-FY2011 (in $millions)

$1,131 $1,238 $1,339

$1,470

$2,111 $1,939

$1,230

$1,614

$2,249

$2,924

$4,052

$4,357 $4,624

$-

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

$4,500

$5,000

FY2000 FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 ** FY2011 FY2011 (Stabilzation)

* FY2003-FY2011 includes debt service on FY2003 Pension Obligation Bonds ** FY2010 General Fund Pension Contribution was largely financed by issuance of $3,466 million in Pension Obligation Notes

THE PENSION PROBLEM

Required Pension contributions have increased by over 300%

since FY2000

Source: Governor's Office of Management & Budget

Executive Budget for Fiscal Year 2011 Chapter 2 - 2

FY2011: Fiscal Overview & Budget Summary

State of Illinois

www.state.il.us/budget 108 State House

Springfield, IL 62706 217.782.4520

THE FIVE PILLARS OF FISCAL RECOVERY Given the revenue and pension problems, and the obligations the state has to provide for its citizens, Illinois cannot cut its way out of this deficit. Rather, a multi-faceted fiscal strategy must be pursued. The Five Pillars of Fiscal Recovery, utilized together, can provide much- needed fiscal relief now, while protecting myriad important programs and services. The Five Pillars can also set Illinois on a path of fiscal and economic recovery and long-term sustainability. Request continued FEDERAL ASSISTANCE through the recession The federal government’s stimulus plan brought billions of dollars to Illinois and funded vital services like education and health care. As federal stimulus dollars are exhausted over the next fiscal year, decreased federal assistance will have serious consequences in Illinois. Reduced federal funds will result in fewer teachers and overcrowded classrooms. Children’s health care coverage and prescription drug coverage for seniors will be jeopardized, and businesses throughout Illinois may be forced to close down. Governor Quinn is committed to working with the President and members of Illinois’ Congressional delegation in support of continued federal assistance. Use short-, intermediate- and long-term BORROWING The budget presented herein contains an increase in structured borrowing. Balancing the budget on the backs of our providers—many of which are small businesses, vital to the future of our economy—is one form of borrowing, and for

some elected officials, has been the easy way out. But it is a form of borrowing that requires little action. It is passive borrowing. And at 1 percent per month, it is also expensive borrowing. Elected officials must explore other means of financing our state’s obligations, until such time as new and growing revenue can match leaner spending. Some combination of short-, intermediate- and long-term borrowing—including borrowing from a rainy-day fund of the state’s own money— would provide the state with the flexibility to address many current needs while maintaining a long-term focus. But until Illinois addresses its structural deficit—and takes on the fundamental challenges threatening the budget and the state—its bond ratings will continue to suffer. Future ratings downgrades could be quite costly, and are likely if no corrective actions are taken. Continue to CUT SPENDING In Fiscal Year 2010, Governor Quinn oversaw reductions in leased office space, declines in travel reimbursements, cuts to select programs across many agencies, and decreases in the government’s workforce, with headcount down over 1,000 since he took office. For fiscal year 2011, the belt-tightening will continue, and the cuts will be deep. Such decisions do not come without bold conviction and fierce resolve, but they will be necessary to return our state’s finances to a firm footing. Nearly every area of government and our state will be affected by fiscal year 2011 cuts, including:

• Education • Local governments • Human services • Health care • State police • Government operations

Adopt REVENUE ENHANCEMENTS Even with continued federal assistance, borrowing and reduced spending, the state is still faced with a shortfall of several billion dollars. Illinois’ current tax structure can no

Department of Central Management Services Bureau of Property Management

Lease Consolidation Savings Time

Period through 3/4/10

Number of Lease

Terminations

Lease Cost Savings

Square Footage Savings

FY10 52 $11,466,061 661,106

<1/29/09* 59 $12,997,090 742,239

*The date Governor Quinn took office

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longer finance the state’s fundamental needs. Illinois’ income tax rate is the lowest (among those with an income tax) of any state in the country, and it relies heavily on taxing working families. Revenue enhancements would enable the state to continue investing in education, healthcare, human services and public safety. Promote JOB GROWTH The future success of Illinois depends on a strong fiscal footing and a robust economy. Last spring, the General Assembly passed and the Governor signed Illinois Jobs Now!, a $31 billion capital program which finances projects in communities throughout the state to stimulate job growth and the Illinois economy. It will support nearly 439,000 jobs. Economic development cannot stop there. Illinois must welcome new companies the state, promote growth in economically-depressed regions, encourage small business owners, and continue to expand exports and foreign direct investments. To spur economic growth, strategic tax credits must be offered. In January, the governor and Ford Motor Company announced 1,200 new jobs would come to Illinois as Ford will manufacture its next-generation Explorer in Chicago. Illinois’ Economic Development for a Growing Economy (EDGE) tax credit allows the auto industry to retain employee income tax withholdings and reinvest those funds into operations to generate greater employment. INITIATIVES Job Creation Tax Credit To promote job growth in Illinois, for one year, beginning this April, small businesses would receive a $2,500 credit for each permanent full- time job they create. A total of $50 million would be available throughout the state on a first-come-first-serve basis. For-profit and non- profit business with fewer than 50 employees are eligible for the credit. Performance Metrics In response to PA 96-0045, the Public Accountability and Performance System Act, the

Governor’s Office is working closely with agencies to create and improve metrics that will promote quality management, accountability, and performance. More robust performance metrics will allow agencies to better evaluate their programs’ success, as well as provide valuable information to citizens about the use of their tax dollars. Illinois Health Information Exchange Initiative (HIE) The Governor’s Office of Health Information Technology is leading a statewide and multi- agency initiative to facilitate the exchange of health information among Illinois healthcare providers. HIE will enable healthcare providers to securely share and access vital health information electronically, to reduce medical errors and improve patient care coordination. Initial funding for HIE comes from an American Recovery and Reinvestment Act (ARRA) grant. In the short-term, this initiative maximizes available ARRA funding. In the longer-term, the Medicare and Medicaid programs expect to realize significant cost savings by eliminating redundant testing and reducing hospital readmissions and other costs that result from poor care coordination. Integrated Care Delivery System The Department of Healthcare and Family Services (HFS) has taken the first step in significantly reforming the delivery of care to the most vulnerable populations covered by Medicaid. HFS issued a request for proposals seeking managed care organizations to provide adults with disabilities and older adults in the Medicaid program the full spectrum of Medicaid covered services through an integrated care delivery system. The first phase of the program will focus on traditional medical services with later phases coordinating long-term care. The initial phase is expected to save taxpayers close to $200 million in its initial five-year period. UPDATES Both ARRA and Illinois Jobs Now! are crucial to the economic recovery of our state and nation. Many recovery dollars are at work now and

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projects are underway. The result of these economic recovery and development projects will be seen in months and years to come. ARRA Since President Obama signed the American Recovery and Reinvestment Act on February 17, 2009, Illinois has been awarded over $13.5 billion in grants and entitlements. Of awarded funds, Illinois paid out nearly $6 billion to schools, service providers, and companies. Illinois is ranked third in the nation for total dollars expended with 63 percent of available funds spent. Through ARRA, approximately 63,000 Illinois jobs have been created or saved. Highlights of ARRA-financed projects follow: • $1.23 billion to bring high-speed

passenger rail service to Illinois by 2014. Illinois is one of only three states to receive over $1billion for high-speed passenger rail. The network is designed to connect Midwest cities to Chicago with reliable high-speed and conventional intercity rail service.

• Nearly $1 billion in energy investments.

Energy funding in Illinois will weatherize an estimated 27,000 homes, provide rebates to upgrade to energy efficient appliances, support renewable energy and upgrade local and state transportation resources to lower emissions vehicles.

• $1.3 billion for transportation.

Illinois has committed to completing 1,011 miles of road repair (reconstruction, patching and resurfacing) and 62 bridge repair/replacements on the state and local Highway system. Ten Illinois airports received ARRA funds to rehabilitate runways and taxiways. Infrastructure funds are being expended quickly, 496 ARRA contracts have been awarded and 175 have been completed.

Capital program and Illinois Jobs Now! Last spring Governor Quinn and the General Assembly enacted Illinois Jobs Now!, the state’s first new capital program in more than 10 years. Illinois Jobs Now will utilize $15 billion in state funds, $13.2 billion in federal funds and $2.7 billion from local sources. Over six years, it is

expected to spur economic growth and create nearly 440,000 jobs in Illinois. The construction plan will provide funding to build critically needed schools, improve roads, repair bridges, protect natural resources, improve public transit, make investments in energy and the environment, and provide access to capital for economic development, affordable housing and community health centers throughout the state. Through March, $1.637 billion of bonds have been sold for Illinois Jobs Now!, and an additional $1.056 billion is scheduled to be sold through the end of fiscal year 2010.

Agency FY 2011

Total Appropriations

Board Of Higher Education 341,638,368 Capital Development Board 1,925,611,248 Chicago State University 61,557,794 Department Of Agriculture 39,648,881 Department Of Central Management Services 181,541,897 Department Of Children And Family Services 27,587,874 Department Of Commerce And Economic Opportunity 2,125,950,445 Department Of Corrections 419,155,579 Department Of Human Services 138,022,097 Department Of Military Affairs 70,430,215 Department Of Natural Resources 927,124,523 Department Of Public Health 170,153,465 Department Of Revenue 156,595,064 Department Of State Police 81,277,455 Department Of Transportation 19,055,232,318 Department Of Veterans' Affairs 115,985,907 Eastern Illinois University 21,769,302 Governors State University 28,908,052 Illinois Commerce Commission 46,123 Illinois Community College Board 637,147,143 Illinois Emergency Management Agency 25,000,000 Illinois Environmental Protection Agency 1,892,523,208 Illinois Finance Authority 13,010,142 Illinois Historic Preservation Agency 28,795,568 Illinois Mathematics And Science Academy 10,360,151 Illinois Medical District Commission 3,864,045 Illinois State University 90,577,388 Northeastern Illinois University 91,009,635 Northern Illinois University 67,591,820 Office Of The Architect Of The Capitol 107,462,587 Office Of The Attorney General 2,135,040 Office Of The Secretary Of State 349,999,790 Southern Illinois University 211,435,701 State Board Of Education 430,000,000 Supreme Court 17,319,426 University Of Illinois 456,796,728 Western Illinois University 147,882,073 Total Capital Appropriations 30,471,147,052

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($ whole)

User Agency and Location Project Description 1

2012 2013 2014 2015 2016 Total 3

State Facilities

Department of Agriculture

Centralia Diagnostic Lab Replace Roof $13,437 $6,748 $6,748 $6,748 $6,748 $40,430 Illinois State Fairgrounds Replace HVAC - Administration Building Chillers $42,798 $38,798 $38,798 $38,798 $38,798 $197,989 Illinois State Fairgrounds Replace Roof $83,646 $42,008 $42,008 $42,008 $42,008 $251,679

Office of the Architect of the Capitol

Capital Complex HVAC Renovation & Upgrade $36,028 $36,028 $36,028 $36,028 $36,028 $180,139

Central Management Services

James R. Thompson Center HVAC Renovation and Upgrade $26,864 $26,864 $26,864 $26,864 $26,864 $134,319 Elgin Regional Office Building Upgrade HVAC System $33,127 $28,127 $28,127 $28,127 $28,127 $145,637

Collinsville State Office Building Replace Roof $54,809 $25,378 $25,378 $25,378 $25,378 $156,323

Office of the Attorney General

Attorney General Building Replace Light Ballasts $72,904 $72,904 $72,904 $72,904 $72,904 $364,520

Department of Human Services

Illinois School for Visually Impaired Replace Roof $4,759 $2,390 $2,390 $2,390 $2,390 $14,319

Department of Corrections

Southwestern Correctional Center Replace Roof $7,746 $3,890 $3,890 $3,890 $3,890 $23,308 Logan Correctional Center Replace Roof $7,746 $3,890 $3,890 $3,890 $3,890 $23,308 Vienna Correctional Center Replace Roof $8,316 $4,177 $4,177 $4,177 $4,177 $25,023

Department of Juvenile Justice

Illinois Youth Center-Joliet Replace Roof $1,160 $583 $583 $583 $583 $3,490

Illinois Youth Center-Pere Marquette Replace Roof $2,065 $1,037 $1,037 $1,037 $1,037 $6,214

Illinois Youth Center-St Charles HVAC replacement for residential cottages $19,629 $15,629 $15,629 $15,629 $15,629 $82,145

ANTICIPATED TOTAL OPERATING SAVINGS $415,035 $308,452 $308,452 $308,452 $308,452 $1,648,843

($ whole)

User Agency and Location Project Description 1

2012 2013 2014 2015 2016 Total 3

State Facilities

Illinois Historic Preservation

Springfield Purchase the Tinley Dry Goods Store $43,000 $43,000 $43,000 $43,000 $43,000 $215,000 Illinois State Police

Belleville Construct New Metro-East Forensic Lab $100,000 $100,000 $100,000 $100,000 $100,000 $500,000

$250,000 $250,000 $250,000 $250,000 $250,000 $1,250,000

ANTICIPATED TOTAL OPERATING COSTS $393,000 $393,000 $393,000 $393,000 $393,000 $1,965,000

Footnotes: 1 Projects listed are presented as part of the FY10 Illinois Jobs Now! Capital Plan. Projects are subject to change depending upon such factors as funding

availability and unforeseen emergencies at other state facilities, etc. 2 Project completion estimates are provided by the Capital Development Board. 3 Amounts represented are in present day dollars and not adjusted for inflation.

Appendix A

Select State Facility Projects: Anticipated Impact on Operational Costs Fiscal Year 2

Fiscal Year 2 Select State Facility Maintenance Projects: Anticipated Operational Savings

Chart 1: 5-Year Savings Impact on the Operating Budget ($1.6 million)

Savings on Utilities,

$1,426,774, 87%

Savings on Repair and

Maintenance, $222,069,

13%

Chart 2: 5-Year Cost Impact on the Operating Budget ($2.0 million)

Increase in Personnel Cost, $500,000, 25%

Increase in Utility Cost, $1,465,000,

75%

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FINANCIAL SUMMARY

The proposed level of operating appropriations from all funds in fiscal year 2011 is $51.7 billion, compared to a fiscal year 2010 appropriation of $53.7 billion. This represents a decrease of $2.0 billion from fiscal year 2010. Appropriations are made from individual funds, the names of which are often indicative of either the purpose of the appropriation or the major source of the funds’ receipts. The following table shows appropriations by major fund group.

Operating Appropriations by Fund Group Fiscal Year 2011

General Funds 47.4%

Special State Funds 25.2%

Federal Trust Funds 18.8%

Highway Funds 4.0%

Debt Service Funds 3.9%

State Trust Funds 0.6%

All Funds Total - $51.7 Billion

General funds - The largest fund group, in terms of dollars, are the General Funds. This fund group represents 47.4 percent of total recommended appropriations and consists of the General Revenue Fund, the Common School Fund, the Education Assistance Fund and the General Revenue-Common School Special Account Fund. The General Funds support the largest proportion of state programs as well as the executive, legislative and judicial branches of state government. The General Funds are commonly known as the state’s operating funds.

Special State Funds - The next largest fund group, in terms of dollars, are the Special State Funds. Included within this group are the following major categories:

• Highway Funds – These funds include the state Construction Account Fund (only presented in the capital budget), the Road Fund, the Grade Crossing Protection Fund (only presented in the capital budget) and the Motor Fuel Tax Fund. Appropriations from the highway funds support transportation and highway maintenance- related activities and include a mechanism for diverting a portion of road-related fees to local governments.

• Other Special State Funds – Over 300 funds support such diverse activities as medical assistance, children’s services, environmental cleanup, financial regulation and health insurance.

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Federal Trust Funds – This fund group supports a variety of state programs funded with Federal revenues, including education, health care, human

services, community development, transportation and energy. Nearly 60 percent of these dollars support education and employment related activities.

Appropriations also may be grouped according to purpose. The charts above show appropriations by major purpose, identifying the principal spending activities of state government. The charts show that the major portions of the state’s resources are allocated to education, healthcare and social human programs. Approximately 24.3 percent of the state’s All Funds total operating budget, or $12.6 billion, is

dedicated for educational purposes. The recommended appropriations for Human Services and Healthcare and Family Services - which include Medicaid, other medical assistance, income support, child and community care programs and other health and social services - total $25.7 billion or nearly 49.8 percent of the state’s total operating budget.

Fiscal Year 2011 Operating Appropriations by Major Purpose Percentage of Total

Fiscal Year 2011 Revenues by Source Percentage of Total

Healthcare And Family Services

32.2%

Education 24.3%

Human Services 17.6%

Economic Development And

Infrastructure 10.8%

Government Services

8.8%

Public Safety 4.7%

Environment And Business

Regulation 1.6%

All Funds Total - $51.7 Billion

Education 33.7%

Healthcare And Family Services

32.3%

Human Services 23.1%

Public Safety 5.9%

Government Services

4.0%

Economic Development And

Infrastructure 0.8%

Environment And Business

Regulation 0.2%

General Funds Total - $24.5 Billion

Individual Income Tax

31.6%

Sales Tax 22.9%

Federal Aid 22.0%

Public Utility 4.2%

Corporate Income Tax

5.7%

Lottery & Riverboat Gaming

3.9%

Other Sources 9.7%

General Funds - $27.4 Billion

Income Tax 19.4%

Sales Tax 13.5%

Federal Aid 34.0%

Lottery & Riverboat Gaming

3.1%

Motor Fuel Tax 2.6%

Public Utility Taxes 3.7%

Other Receipts 23.8%

All Appropriated Funds - $52.8 Billion

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The two charts above identify the major revenue sources for all appropriated funds and the

General Funds.

Total state revenues are projected to be $52.8 billion in fiscal year 2011, and General Funds receipts are estimated at $27.4 billion. General Funds revenues are estimated to decrease by 1.9 percent, or $551 million.

A breakdown by major revenue category can be found in Table II-A for total revenues and Table II-B for General Funds revenues. As can be seen in those tables, revenues from the income and sales taxes are the major source of state funds. They account for 33 percent of all receipts and 60.2 percent of General Funds receipts, as illustrated above.

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FY2011: Fiscal Overview & Budget Summary

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The fiscal year 2011 Budget Plan is set to the below. This plan reflects the basis for appropriations and is the same information provided in prior years’ budgets, although utilizing standard business language and “plain English” to reflect

the governor’s commitment to and principle of truth in budgeting. Revenues are estimated on the modified accrual basis of revenues recognition. See the schedule below for a fiscal year 2011 Operating Budget Plan for all appropriated funds.

3/6/2010 F

OPERATING REVENUES PLUS TRANSFERS IN REVENUES

State Sources 20,984$ 19,085$ 19,684$ Federal Sources 6,567$ 6,743$ 6,032$

TOTAL REVENUES 27,551$ 25,828$ 25,716$ STATUTORY TRANSFERS IN

Statutory Transfers In 1,593$ 2,167$ 1,728$ TOTAL TRANSFERS 1,593$ 2,167$ 1,728$

TOTAL OPERATING REVENUES PLUS TRANSFERS IN 29,144$ 27,995$ 27,444$ OPERATING EXPENDITURES AND TRANSFERS OUT

CURRENT YEAR EXPENDITURES

APPROPRIATIONS (Total Budget) 1 27,796$ 26,309$ 1 24,777$ Less: Unspent Appropriations (Unspent Budget plus Uncashed Checks) ($322) ($400) ($496)

NET APPROPRIATIONS BEFORE PENSION CONTRIBUTIONS 27,474$ 25,909$ 24,281$ PENSION CONTRIBUTIONS 2,486$ -$ 1 4,157$

Less: Savings from Pension Stabilization -$ -$ ($267) Equals: CURRENT YEAR EXPENDITURES (Net Appropriations Spent) 29,960$ 25,909$ 28,171$

STATUTORY TRANSFERS OUT Legislatively Required Transfers (Diversions to Other Funds) $1,897 2,002 2,004$ Pension Obligation Bond Debt Service (includes FY10 Pension Funding Bonds) $466 $564 1,611$ Debt Service Transfers for Capital Projects $636 $670 638$ Less: Reduced Transfer to Local Government Distributive Fund $0 -$ ($308)

TOTAL TRANSFERS OUT 2,999$ 3,236$ 3,946$

TOTAL OPERATING EXPENDITURES AND TRANSFERS OUT 32,959$ 29,145$ 32,117$ BUDGET BASIS FINANCIAL RESULTS AND BALANCE BUDGET BASIS OPERATING SURPLUS (DEFICIT) [Receipts less Payments] ($3,815) ($1,150) ($4,672) OTHER FINANCIAL SOURCES (USES)