Hynes Budget Presentation

Leading Forward: Leading Illinois Forward: The Hynes Plan for The for Tax Tax Fairness & Fiscal Prosperity Fairness Prosperity

Table of Contents How We Got Here…………………………………………………………….…page 3

If Hynes Were Governor………………………………………………….……page 4

The Hynes Record………………………………………………………….…..page 6

Hynes’ Budget Principles……………………………………………….…….page 8

The Hynes Plan to Balance the Budget: Step One: Reduce the Short-Term Deficit…………………………….……page 9

Step Two: Address Structural Revenue Problem………………...……..page 15

Step Three: A Balanced Budget & Investment………………………......page 17

Conclusion……………………………………………………………………..page 19

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How We Got Here Inept leadership and management has left Illinois in a nearly $4 billion hole at the close of FY 2009, an anticipated $4.6 billion hole at the end of FY 2010 and an estimated $10.5 billion hole at the close of FY 2011. Now, we have a budget that papers-over this huge gap with a patch-work approach that doesn’t solve the long-term problem – and, in fact, in some ways makes it worse. In order to artificially hold down the FY10 deficit, several one-time quick fixes were implemented. These actions did very little to address the underlying structural deficit. They include: One-time federal stimulus payments. Issuing approximately $3.5 billion in pension bonds this fall – paying this year’s pension obligations by borrowing from future years. Instituting a debt restructuring to reduce debt service payments on state bonds this fiscal year Undertaking some fund sweeps And the situation is even worse than advertised, because the state still isn’t really counting all of its bills: Under what’s called “Section 25” authority, state government simply refuses to pay all of the state group health insurance and Medicaid bills. If anyone else did that, they’d be called a “deadbeat.” The unpaid bills – which aren’t counted as part of the official “deficit” because they’re simply “rolled over” to the next year – were estimated to be $1.5 billion, and will result in continuing payment delays to health care providers. These delays are already exceeding six-months, and are growing with no end in sight. The Governor initiated more short-term borrowing to help reduce the backlog minimally. However, this will be insufficient to bring payment delays down to any sort of reasonable level and will only hinder solutions to the fundamental problem. The bottom line: a $4.6 billion budget deficit for FY10 that the current budget is simply dumping on top of next year’s budget.

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If Dan Hynes Were Governor Today, the Budget Would Be Under Control Unlike any other candidate for Governor, we already know where we would be if Dan Hynes were in charge. While others stood by silently, in 2003, Comptroller Dan Hynes warned thenGovernor Rod Blagojevich of long-term fiscal problems if the state did not act and proposed a comprehensive series of fiscal reforms. Those reforms included: The elimination of excess deferred Medicaid liabilities carried over into succeeding fiscal years. Budgetary growth limited to matching more accurate and consensus estimates of expected revenues. A percentage of new economic revenues allocated to budgetary reserve funds. If the Hynes reforms had been adopted, the State would have experienced balanced budgets thru FY 09 permitting some program growth for education and health care within the confines of available revenues. Mandating that 1% of annual revenues when growth exceeds 4% be deposited into the Budget Stabilization or Rainy Day Fund would have generated an additional $530 million into that fund, allowing payment cycles to become more predictable and minimizing seasonal delays. Short-term borrowings would have been reduced and with them their associated interest costs. With nearly $800 million in the Rainy Day Fund and a balanced structural budget, Illinois would have suffered in the current recession like every other state – but a whole lot less: The net FY09-10 combined deficit would have totaled $2.4 billion, with the receipt of federal stimulus monies of $3.6 billion. As a result, service cuts and revenue increases would have been temporary and comparatively small. This is in contrast to the $4.6 billion deficit and draconian cuts under the current enacted FY10 budget. Unfortunately, Dan Hynes’ proposed reforms were either ignored or watered down by the Blagojevich Administration and never implemented as intended. In short, we’ll start the next budget, for FY11, in a nearly $4.6 billion hole. And because the underlying structural problem has gone unaddressed – as Comptroller Hynes has spoken out on for nearly a decade – these problems will only come back with a vengeance: The budget didn’t address the long-term pension problem, simply borrowing all the money to make this year’s payment, thus Illinois will have to return to making its annual pension payments of at least $3.5 billion. And then the state will also have to start paying off the $3.5 billion in new pension bonds borrowed to come up with this year’s payment – that’s close to an additional $800 million a year for the next five years. And since the budget relies on federal stimulus money to plug the rest of the hole, the state will be losing an estimated $1.3 billion in FY10 stimulus payments that won’t be repeated in FY11.

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Finally, because the budget does not address the chronic long-term problems in our ability to pay our healthcare and service providers, the problem will only grow worse. Together, that is an additional $5.9 billion in budget shortfall in Fiscal Year 2011 – added on to the $4.6 billion shortfall that is simply being “rolled over” from FY09 and FY10. In short, unless we act now, Illinois will be faced with at least a $10.5 billion General Funds budget deficit for FY11 – leaving the state basically back where we were last spring. And let’s be clear: The State is still left with a structural, recurring deficit that, with inflation and natural growth, will leave the state over $10 billion short – and counting – every single year until we change tactics and change leadership. Illinois simply cannot afford four more years of the same approach and the same outcomes. Pat Quinn says he has a plan: Whether you’re a family making $50,000 or $5 million, Quinn wants to hike the income tax on everyone in Illinois by 50%. That’s just a bad idea. It is unfair to middleclass Illinois taxpayers and it is not the right way to solve our problems. It’s time to try something better. Dan Hynes is the state leader who warned about this problem from the beginning and proposed a way to avoid it. Now, he has fresh new ideas about how we get out of it. It’s time to put the Hynes Plan to work.

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The Hynes Record Dan Hynes has been a consistent, outspoken advocate for fiscal responsibility and budget reform throughout his tenure as Comptroller, but you need to look no further than the management of his own office to know that he leads by example. Since taking over as Comptroller in 1999, Dan has been doing more with less as his current operating budget is well below 2001 levels. Dan’s own office budget reflects more than a 20 percent reduction in headcount from 1999, which is the lowest in the office’s history. He has achieved these efficiencies in his office by instituting common sense approaches to save taxpayer dollars: Continuing the management personnel wage freeze and furlough program initiated in FY 2009. Reducing the number of contracts. Deferring or reducing training-related expenditures including both in-house and external programs. Freezing new equipment acquisitions except for emergency purposes. Decreasing allocations for automotive expenditures including a selloff /reduction in the number of current agency vehicles. Eliminating all out-of-state travel expenditures and reducing in-state travel costs. Reducing commodities costs through inventory consolidations and economies. Decreasing telecommunications and software expenditures by postponing non -critical purchases and eliminating non-essential goods and services. Hynes has taken the same approach to saving taxpayer dollars across state government. He has been forceful in his crusade to stop wasteful spending, innovative in using technology to save money and dogged in his pursuit of efficient government. Some of Dan’s actions saving dollars across state government include: Freezing state payments on state contracts with corporations that were using foreign tax havens to avoid paying their fair share. Refused to pay for flu vaccines that Illinois never received when Rod Blagojevich tried to circumvent the federal Food & Drug Administration-saving the state over $2 million. Increased debt collection efforts in the Comptroller’s Office by aggressively using the offset system generating an additional $278 million Freezing payments on George Ryan’s pork projects– like a Jack Benny statue, stained glass in a parking garage, and a lily pond in Lincoln Park. Enhanced electronic transactions within the office saving the state $16 million since 1999. Instituted a ban on giving state business to deadbeat contractors. Hynes hasn’t just worked for fiscal responsibility – he has also fought for fairness for working Illinois families. Hynes has been widely recognized as a progressive leader in creating worker protections, a prudent manager in a complex work environment, a wise fiscal advocate for state pensions systems, and someone who brings a common sense approach to labor issues. Dan’s fight for working men and women includes:

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Leading the charge to protect overtime pay for thousands of Illinois workers. In conjunction with then State Senator Barack Obama, Dan successfully championed legislation that decoupled Illinois from disastrous Bush administration rules that would have eliminated overtime pay for those who provide critical services in Illinois. Under those rules, an estimated 375,000 employees (including nurses, EMTs, lab techs, military vets, and police and fire personnel) could have been denied overtime protections. Signing an Executive Order to freeze state payments to state contractors who are believed to be violating the Prevailing Wage Act and creating a Prevailing Wage Officer position in his office to ensure state contractors are paying fair wages. Greatly expanding family leave guidelines in the Comptroller’s office to allow more flexibility for workers to take care of their family needs, which included extending benefits to employees engaged in domestic partnerships. Fighting for short-term borrowing measures during economic downturns to help offset payment delays to frontline services. These innovative techniques allowed Illinois to leverage additional federal dollars that permitted businesses to stay open and workers to keep their jobs.

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Dan Hynes’ Budget Principles If we’re going to beat our current budget problems, we’re going to need new leadership and a new approach. Dan Hynes has that approach – a detailed plan to balance the Illinois state budget in a way that’s workable and fair. A plan that’s based on years of experience fighting for fiscal responsibility. And a plan that’s based on principles – the kind of principles we’d expect from a serious policymaker instead of just another politician: This mess was a long time in the making; it’s going to require a long-term solution. But we also need to immediately stop the hemorrhaging right now, too. This won’t be easy. There’s going to be pain. This is going to require leadership and telling people the truth. The burden needs to be shared fairly. Government needs to make cuts before it asks taxpayers to pay more. There’s plenty of inefficiency and waste with which to start. Some people in state government will have to go. We should start with the political hacks and cronies brought in by Rod Blagojevich at exorbitant salaries that Pat Quinn refuses to get rid of. Illinois has to stop its bad habit of living off of borrowed funds, debt, and pushing bills into the future. We need to use intelligent and innovative financial restructurings where possible to leverage savings and/or additional dollars that will help reduce our long-term obligations. We can’t solve our structural budget problems with one-time gimmicks. However, we can pay one-time bills with one-time revenues. We will not be able to make ends meet by making cuts alone. Ultimately, the state needs a new long-term revenue structure to support its operations. We should look first for non-tax revenue where possible. Only then can we ask Illinois citizens to pay more. However, any tax changes must be fair. That means we must start by closing unfair tax loopholes that let some businesses escape taxation while others struggle to pay their fair share, and that let consumers of some luxury services avoid paying the same taxes that other consumers pay for ordinary goods and necessities. And we cannot impose a 50% income tax increase on low and middle-income families across our state. Instead, we must change our state income tax structure to make it progressive and fair; so that the vast majority of Illinois families are “held harmless”; and so that the wealthy pay their fair share.

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The Hynes Plan to Balance the Budget Step One: Reduce the Short-Term Budget Short-Fall in FY10 This deficit was not built in a day – it will take a series of steps over time, not a one-time stroke like Pat Quinn’s unfair income tax hike, to overcome it. The Hynes Plan starts with strategic and workable actions we can and must take now to reduce the current-year deficit and position us to eliminate the state’s structural budget deficit at the beginning of the next Governor’s term. We need someone to put a workable plan before the legislature to start closing the gap. Here’s that plan: 1. Cut Government Spending Where We Can The first thing to do is to cut unnecessary government spending. Pat Quinn does not have a plan to do this – he has simply ordered blind cuts. Dan Hynes has a plan – to target the places in state government where we can cut fat without cutting needed services: Cut management and unneeded bureaucracy, not front-line workers – starting with firing half the high-paid Blagojevich political appointees making over $70,000 per year. Pat Quinn has refused to get rid of Rod Blagojevich’s management team; however, doing so would save the taxpayers $100 million per year. 7% cut on spending on discretionary grant programs. Instead of haphazard cuts, review each and every grant line to determine where cuts should be made and to ensure that programs are running as efficiently as possible. While this is an overall 7% reduction in grants, it is, in essence, a significant restoration of the misguided cuts imposed by Governor Quinn. Cutting 7% would save the state $625 million per year. Cut big fat contracts for legal, advertising, consulting services, IT and other professional services. For example, the FY2010 budget contemplates $20 million for lottery and tourism advertising contracts and $10 million for a new timekeeping system for state employees. Additionally, the state should negotiate with all law firms doing work for the state to accept a 20% reduction in fees. These examples and others would save the state another $300 million per year. Cut operations levels back to their 2005 levels. Dan Hynes has already done exactly this in the Comptroller’s Office. In fact, his operations are below 2001 levels and he is reducing costs by an additional 11% this fiscal year. Governor Quinn should order similar roll-backs state wide. Reducing agency operations under the control of the Governor to 2005 levels represents savings of $600 million per year.

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Of course, setting the target is the easy part – finding the inefficiencies and eliminating them is where the rubber meets the road. While agency directors are in the best position to determine the best way to make these cuts, Dan Hynes has a pretty good idea where to start: o

Consolidate all state civil service commissions. Right now, we have four separate civil service systems under the Governor, Secretary of State, Treasurer and Comptroller. Since these personnel codes are similar, we could have one commission hear all the appeals of Merit Compensation employees. Estimated savings from this move would be $300,000.

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Reduce the state’s cost for durable medical equipment. Durable medical equipment (DME) purchased through the Medicaid and Medicare programs should be purchased through a competitive bid process, which includes negotiated discounts for volume. In the same way the pharmaceutical costs can be negotiated down through aggregating drug purchases across state programs, the state can find savings in the way DME is purchased. Florida, Texas and New York competitively bid out DME purchases. Federal demonstration projects have shown that overall savings to the Medicare program ranges from 17% to 22%. In the two demonstration sites of Polk County, Florida and San Antonio, Texas, the net savings for the Medicare DME expenditures totaled $2.7 million. We should be able to save another $2 million here in Illinois.

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Close Foreign Trade Offices which aren’t necessary to the core functions of the state during a fiscal crisis saving an estimated $5 million.

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Make appointments to most State boards and commissions non-paid. Estimated savings are $12 million.

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Mandate a statewide initiative to reduce telecommunication costs in State government. Reviewing all bills to verify accuracy of bills, eliminating unnecessary phones lines and equipment, consolidating telecomm and cell phone purchases – State governments in states such as Arkansas, Oklahoma, Louisiana, and Indiana have all realized significant savings in the range of 710% of annual communications costs. A conservative estimate would put such savings at $15 million a year.

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Increase efforts to prevent Medicaid fraud. Studies have found that Medicaid fraud ranges from 10% to as much as 40% of all program spending. Obviously, there is room in Illinois to improve performance and save taxpayers money without cutting back on services to families that truly need it. Technologies now exist to detect potentially fraudulent patterns of billing, allowing for the prevention of payments being made that later would require

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formalized prosecution and collection activities. We would need to further reduce only a very small percentage of likely fraud levels in our state just to save $50 million a year. o

Implement aggressive actions to stop tax avoidance. It is no secret that there is a coordinated effort by some individuals and corporations to avoid paying state taxes. Other states have addressed this issue by using computer programs which can uncover those who avoid paying Illinois taxes. States such as New York, California, and Massachusetts have recouped hundreds of millions of dollars from tax scofflaws. Illinois could expect to recover at least $50 million a year.

That’s roughly $135 million in specific savings that we could start implementing right now. In fact, Dan Hynes has instituted similar savings within his own office, which put it on the path to efficiency. He knows that if we institute a statewide review to scour state government for waste and inefficiency, we could save 2-3% off General Fund operations – performance reviews have helped reduce costs in states from Texas to Delaware to New Mexico to North Carolina to Colorado to West Virginia to California. In fact, performance reviews in other states have been able to identify savings amounting from 1% to 6% of the General Fund budget. Collectively, the cuts under the Hynes Plan consisting of firing political appointees, reduction in discretionary grants and professional contracts and scaling back operations would result in total spending cuts of $1.625 billion for FY 2010. 2. It’s Raining: Use Our Savings to Pay Our Bills As a long-time advocate of fiscal prudence, Comptroller Dan Hynes knows that, in most times, the State needs to be building up its Rainy Day Fund. But he also knows that, when a rainy day comes, that’s what we’ve saved for – and, right now in Illinois, it’s pouring. Hynes would draw down the Rainy Day Fund now, and draw down the remaining General Funds balances of $100 million, to pay help pay current bills that are only causing further arrearages. That represents a total one-time infusion of $376 million. 3. Use One-Time Borrowing to Leverage Additional Debt Pay-Down Normally, Illinois wouldn’t need more borrowing at this point. But we could actually leverage additional federal funds by paying down some of our outstanding Medicaid bills now while there is a higher federal Medicaid match rate under the federal stimulus program that will sunset at the end of December 2010. Comptroller Hynes would issue bonds to help pay down this backlog, obtain additional federal funds, and reduce our obligations by $1.5 billion.

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4. Pay For This Bond Issue With Increased Cigarette Taxes, and Reform How We Pay for Health Care for the Needy Unlike the pension notes issued this year that did not have a funding source attached, Dan Hynes has a plan for how to pay off the notes he proposes to help reduce current outlays: The Hynes Plan, will increase the state’s cigarette tax by $1.00 per pack to provide the state with an additional $300 million in revenues per year. This money will be deposited into a new Reimbursement Reform Fund and will be used to promptly repay the $1.5 billion in bonds over five years. After that, as Governor, Hynes will reform the payment system for Medicaid bills by eliminating the ability to keep appropriations artificially low and carry over bills unnecessarily into a later year. He would call on the legislature to amend Section 25 of the State Finance Act to create a lapse period of only 4 months to deal with medical assistance bills, so that Illinois will never again be a “deadbeat state government.” Under Hynes’ plan, once the bonds are paid off the cigarette tax revenues would be used to increase Medicaid provider rates to help ensure that all Illinoisans have access to a broad spectrum of health care. Under Hynes’ plan we will not just address short-term fiscal shortfalls but also address the underlying problems, like health care costs and coverage, that drive our long-term financial situation in the wrong direction and limit access and care to millions of Illinoisans. 5. Close Out Unfair Tax Breaks and Loopholes Pat Quinn sees the ultimate solution as raising taxes across the board on everyone. Dan Hynes thinks there is a better way: After we have found all the savings and expenditure cuts we can, let’s start improving the revenue picture by asking those who can best afford to pay more to start by paying their fair share. The Hynes Plan will immediately close out unnecessary business tax loopholes and extend the sales tax to include non-vital luxury items. Luxury Service and Sales Tax: Illinois currently taxes the fewest services (17) of any of our neighboring states – including Indiana (24), Missouri (26), Kentucky (28), Wisconsin (76), and Iowa (94). Instead of raising taxes across the board on middle-class families, we should be targeting any tax increases to luxury items that we just don’t need. Many of these goods and services currently escape taxation while families purchasing necessities, such as clothing and school supplies, pay the full state sales tax. The Hynes plan would close these loopholes and extend tax fairness by covering such goods and services as: o o o

Tanning parlors Elective cosmetic surgeries Interior design services

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o o o o o o o o o o o

Car and truck rentals Pet grooming Marina services Health Clubs Dating services Memberships in private clubs Cultural events Scenic and sightseeing transportation Limousine and car services Unscheduled charter air flights Marine towing

It is always regrettable to raise taxes regardless of the form. However in this budget crisis, we need leadership willing to say that we all need to share the burden fairly for nonessentials – whether that’s for your yacht services or your spray tan. That is a lot fairer than raising taxes on the things that people really need or boosting every family’s income taxes by 50%. The luxury service and sales tax would bring in $360 million per year. Corporate Tax Loophole Closure. In the early 90’s, Illinois adopted all sorts of tax breaks for big businesses. These tax giveaways – like the single sales factor and the high impact business exemption – don’t seem to be doing much to help our economy at the moment, and we simply can’t afford them any longer. The Hynes Plan will take away these special breaks for special interests before raising taxes on working Illinoisans, bringing in an additional $125 million per year. Sales Tax Expenditures Reduction. The Hynes Plan would make several technical fixes in how we currently collect sales tax to correct what basically amount to unnecessary costs to taxpayers. Primary among these is eliminating the Retailer’s Discount; this allows retailers to retain a portion of the sales tax themselves, ostensibly to compensate them for the expense of maintaining sales tax records. This might have made sense in the days before computers and immediate telephone link-ups with credit cards and banks to collect and record these transactions, but it does not make sense any more. This and similar changes would help the state retain $125 million per year. Restore Adequate Gaming Taxation. We must return tax rates on casinos to 70%. Unfortunately, they were rolled back to only 50%. There is no reason why working families should pay more when casinos can afford to do so, instead. The Hynes Plan would restore the higher rates on riverboat gaming, bringing in an additional $200 million per year. Maximize Dormant Gaming Positions. Illinois currently allows 1,200 gaming positions at the nine active casino sites across the state. However, roughly 200 of these positions are inactive. The

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Hynes Plan calls for a “Tax and Trade” system which would allow casinos to lease their inactive positions to another casino that has increased demand. The state would receive a portion of the lease proceeds and increased gaming revenues when the positions are activated. This action could generate $40 million per year. Together, these tax changes represent total new revenues of $850 million/year – meaning the State could net an additional $425 million in revenues in FY10 by enacting these measures by January 1. The Net Effect These actions won’t totally eliminate the FY10 budget shortfall – but they will come a lot closer. Most importantly, they will position the state to move into budget balance within about one year by dramatically shrinking the structural budget problems that Illinois has been ignoring or making worse. The Hynes Plan cuts the FY10 budget deficit by more than half – from $4.563 billion to only $2.212 billion. It permanently cuts about $3 billion per year out of the structural budget deficit, and it puts us within striking distance of permanently solving our financial problems.

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Step Two: Address the State’s Structural Revenue Problems in FY11 If Illinois state government acts on Dan Hynes plan for FY 2010, we could cut billions of dollars from the state’s bottom line this fiscal year and position the state to reach balance. However, further actions will be needed to eliminate the budget gap once and for all. To accomplish that, Comptroller Hynes recommends that the state government take the following actions in FY 2011: 1. Conduct Additional Fund Sweeps Unneeded allocations build up every year in various funds across state government. Sweeping those funds again in 2011 will garner an additional $300 million in excess balances we can apply to paying down the budget deficit. 2. Continue Pursuing More Efficiencies The state must make a concerted effort to continue finding ways to make government work more efficiently. To that end, Dan Hynes believes that there are ways to consolidate government offices to maximize performance and save taxpayer dollars. Specifically, Hynes proposes to merge the Comptroller’s Office and the Treasurer’s Office. Additionally, eliminate the Office of Lieutenant Governor, leaving the Attorney General as the successor to the Governor. Together, these initiatives could save the state at least $4 million a year. 3. Issue Additional Casino Licenses Dan Hynes believes that we need to look for every possible revenue source before resorting to increasing the income tax, as Pat Quinn would do. By issuing licenses for an additional 2-3 casinos, Illinois could reap one-time revenues of $600 million. This would be used in FY11 to offset the one-time drop in the revenue picture due to the projected ending of federal stimulus monies 4. Ask the State’s Voters to Modernize our Tax Structure with a Graduated Income Tax Starting on January 1, 2011. Comptroller Hynes recognizes that only a bold change in the state’s fiscal structure will ultimately solve the fiscal problem Illinois faces. We can cut waste, close loopholes, find additional sources of money, but, ultimately, a fundamental restructuring of the tax system is the only way we will end, once and for all, Illinois’ massive structural budget deficit. But Hynes disagrees with Pat Quinn that an across-the-board increase in everyone’s income taxes is the way to achieve that – let alone one as large as 50% because it is already a regressive structure. Under Illinois’ current tax structure, the bottom 20 percent of Illinois households paid 12.8 percent of their income in state and local taxes, while the top 1 percent paid only 4.6 percent. This may be the reason why Illinois is one of only 7 states to have a flat tax structure. Instead, Hynes believes that those most able to

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pay increased taxes should be the ones to do so – and that it’s time to finally make Illinois’ income tax structure progressive. The Hynes plan therefore calls for an income tax increase ranging from 0.5 up to a maximum of 4.5 percentage points, only on people making over $200,000 per year. The top rate of 7.5% would be paid only by those making more than $1 million. This means that 97% of Illinois taxpayers would see no change in their taxes. This would produce new annual revenues of $5.5 billion – eliminating the structural deficit. The revenue would also provide much needed resources to many of our local governments. Additionally, this would provide half-year revenues in FY11 of $2.75 billion that would allow us to close Pat Quinn’s budget deficit by roughly 80%. This would position us to eliminate deficits for good in FY12. Enacting a progressive income tax will require an amendment to the state constitution. That means the legislature must approve the measure by a three-fifths vote this spring. Voters could approve this change at the November 2010 general election, so it could take effect in 2011. Dan Hynes will advocate for this realistic, common-sense and fair solution to our budget challenges. By implementing a half-year of the progressive income tax, additional casino licenses, fund sweeps and modest natural revenue growth, the Hynes Plan allows the state to put a halt to the runaway budget deficit. It holds the deficit steady with a $2.3 billion deficit in FY11, until the full-year of the progressive income tax is phased-in. Additionally, the Plan calls for the state to make full pension payments in FY11 and allows for a $150 million increase in education spending.

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Step 3: A Balanced Budget in FY12 and a Return to Investing in Illinois’ Future Closing record budget deficits will not be easy – but the Hynes Plan accomplishes that goal within 2 years. The first full year of the progressive income tax will eliminate the structural deficit permanently. Hynes’ plan will eliminate Illinois’ “deadbeat” payer status. By staying true to our commitment to making pension payments, we will begin to moderate the state’s pension obligations going forward and return them to a fiscally sustainable level; and, provide permanent and stable funding to begin making serious investments in education, healthcare and other programs that assist our most vulnerable citizens. Instituting Real Budgetary Reforms But the Hynes Plan does not stop there. From a decade of service as Comptroller, Dan Hynes knows our state’s entire budget and fiscal process needs to be reformed so that we never get into this position again. Dan Hynes will be the kind of Governor who leads the fight in Springfield for such reforms. The Hynes Plan for reforming the state budget process includes the following: 1. Controlled Growth in State Spending: Hynes will allow for reasonable natural budget growth to counter inflation and to provide for the new initiatives we will need to move Illinois forward in the 21st Century. However, he will insist that the state hold spending to 99% of independently-certified estimated revenues, so that we can set aside 1% every year for the Rainy Day Fund. 2. Strengthen the Rainy Day Fund. Hynes’ plan establishes a permanent funding stream for the Rainy Day Fund equal to 1% of estimated revenues. Hynes will then cap the fund’s growth when it reaches 4% of estimated revenues and divert the excess to retiring outstanding state debt. Hynes will also press to establish set rules for use of the Rainy Day Fund during fiscal difficulties – so that future politicians cannot simply “raid” the fund for other purposes. 3. Paying Down Our Debts. Hynes’ plan provides a mechanism for paying down state debt by diverting monies from the Rainy Day Fund, when it reaches an ideal level, to an Early Debt Retirement Fund. Hynes will use this fund to pay off deferred liabilities such as the current backlog of Medicaid bills; the State retirement system’s unfunded liabilities; and, when cost effective, some of the State’s bonded indebtedness. 4. Truth-in-Budgeting. Hynes will require “Truth in Revenue” by creating an independent Revenue Estimating Council to certify revenue levels for budget purposes, with which the governor and legislature must comply, and “Truth in Spending” – under which the State will pay its bills as they come in rather than pushing them into future years. Finally, Hynes will require quarterly budget check-ups to make sure we make spending adjustments quickly whenever revenues drop, so that we reduce the risk of future deficit spending.

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5. Pension Reform. To truly return to fiscal solvency, the state must come to terms with its unmanageable pension obligation. This means scrutinizing retirement benefits, ending early retirement initiatives, addressing spiraling retirement healthcare costs associated with retirees’ benefits, and ending the abuses of the golden parachute pension sweeteners. Hynes will put teeth in the laws that will dictate the state’s annual contribution to the pension system and put an end to pension holidays. 6. Medicaid Reform. The state’s Medicaid obligations are causing a stranglehold on the state’s budget and it must be brought under control. Hynes’ reforms will include ending the loopholes that allow the state to underbudget its obligations. However, there must be reforms on the benefit side, as well. Hynes will work with other Governors to lobby the Obama administration to make the current 60% reimbursement rate for Medicaid permanent. Hynes also supports the initiative to expand Managed Care, but is also in favor of reforming the Primary Care Case Management system to make it work as it was intended. 7. Restore Our Bond Ratings. Due to the transgressions of the previous Governor, the devolving budget deficit and lack of a clear budget plan has caused Illinois’ bond ratings to plummet. As a result, Illinois’ costs associated with managing our debt service are increasing. The Hynes Plan will allow the state to return to a solid bond rating and help save the state millions of dollars.

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Conclusion Dan Hynes has a plan to reduce the state deficit that is real, workable, and fair. Hynes’ plan cuts the deficit contained in Pat Quinn’s FY10 budget in half and eliminates it completely and permanently after FY 2011. It looks first to finding spending cuts, savings and efficiencies – not tax increases. Hynes is also a leader willing to confront the hard truths. His plan admits that part of the solution must come from finding new revenues. But any new revenue must be fair, so the Hynes Plan first closes unfair tax loopholes and places a fairer share of the tax burden on luxuries instead of necessities and the hard-earned incomes of middle class families. The Hynes Plan helps take some of the tax burden off these same families by obtaining a fairer share of gambling revenues for the taxpayers. It obtains the rest of what we need by raising taxes only on the wealthiest 3% of Illinoisans. The Hynes Plan also puts us on-track to better health care and education systems in our state. It reforms Illinois’ shoddy fiscal practices – ending carry-over of bill non-payments, shortening vendor non-payment times to end the state’s reputation as a “dead-beat state,” and starts to stabilize our pension system. It shares the burden, it’s fair, and it works – unlike Pat Quinn’s proposed 50% income tax hike on everyone. The Hynes Plan represents a complete solution – and the only real solution.

Paid for by Friends of Dan Hynes

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Conclusion Dan Hynes has a plan to reduce the state deficit that is real, workable, and fair. Hynes’ plan cuts the deficit contained in Pat Quinn’s FY10 budget in half and eliminates it completely and permanently after FY 2011. It looks first to finding spending cuts, savings and efficiencies – not tax increases. Hynes is also a leader willing to confront the hard truths. His plan admits that part of the solution must come from finding new revenues. But any new revenue must be fair, so the Hynes Plan first closes unfair tax loopholes and places a fairer share of the tax burden on luxuries instead of necessities and the hard-earned incomes of middle class families. The Hynes Plan helps take some of the tax burden off these same families by obtaining a fairer share of gambling revenues for the taxpayers. It obtains the rest of what we need by raising taxes only on the wealthiest 3% of Illinoisans. The Hynes Plan also puts us on-track to better health care and education systems in our state. It reforms Illinois’ shoddy fiscal practices – ending carry-over of bill non-payments, shortening vendor non-payment times to end the state’s reputation as a “dead-beat state,” and starts to stabilize our pension system. It shares the burden, it’s fair, and it works – unlike Pat Quinn’s proposed 50% income tax hike on everyone. The Hynes Plan represents a complete solution – and the only real solution.

Paid for by Friends of Dan Hynes

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