Budget squeeze offers tough options

SPRINGFIELD, Ill. -- Everything points to a call for widespread job cuts when Gov. George Ryan releases his new budget Wednesday.

"Every major corporation in the country is laying people off because they've got too many for the revenues they've been able to generate. State government is no different," the governor said last week.

The problem he faces is simple: State government expenses are climbing faster than revenues. Figuring out how to solve that problem is where it gets sticky.

The state could cut costs by laying off employees, trimming services or negotiating lower medical costs. It could bring in more money by raising cigarette taxes, increasing casino taxes or rescinding tax breaks for big business.

None of those choices is attractive for the officials who must decide how to balance the state budget, and each would anger some powerful interest group or another.

Ryan has about 70,000 employees under his authority, with most of them at the Human Services Department, Corrections Department and Department of Children and Family Services. Widespread layoffs almost certainly would hit those agencies the hardest.

The administration also has warned nursing homes to expect $118 million in cuts to their Medicaid rates, said William Kempiners, executive director of the Illinois Health Care Association.

"That would be disastrous," he said.

Ryan said he has not looked at ways to bring in more money, but he considers the possibilities raised by others to be unrealistic.

"This is an election year. When you talk about tax increases, it's tough to do," said Ryan, who is not running for a second term.

Revenue down

Tax revenues for the current fiscal year are about $750 million below expectations, thanks to a recession exacerbated by the Sept. 11 terrorist attacks. At the same time, state expenses -- particularly health care for state employees and the poor -- have climbed dramatically.

Ryan dealt with the problem by cutting nearly $500 million from the budget and spending all the surplus money it contained. That still left at least $225 million in bills that will have to be paid with next year's revenue.

But next year is not looking much better than this one.

Experts say revenues will rise by $300 million to $500 million -- a fraction of the $1.6 billion they rose from fiscal 1999 to 2000.

Out of that small pot, the state must pay its leftover bills, $175 million in higher pension costs, roughly $150 million in higher salaries and an unknown amount for higher medical costs. Plus, Ryan wants to give 51 percent of the new money to education.

He said, the new money won't cover the new expenses.

Ryan already has cut Medicaid payments to hospitals by roughly $200 million a year, cut medical care for thousands of poor people, closed a prison and ordered state employees to take an unpaid day off.