Gov. Blagojevich looking at higher government fees, reduced Ill

SPRINGFIELD, Ill. -- Raising government fees, cutting back the Illinois FIRST program and keeping the state inheritance tax are all options for Gov. Rod Blagojevich as he tries to balance the budget, his budget director said Monday.

John Filan defended the administration's claim that falling revenue and increasing expenses add up to a budget shortfall of $4.8 billion for this year and next.

But he offered little concrete information on how Blagojevich hopes to fix the problem, aside from repeating the promise not to raise income or sales taxes.

Practically everything else is "on the table," Filan said at a Statehouse news conference.

That includes raising scores of fees that are supposed to pay for specific government services -- for instance, barbers paying a license fee to cover the cost of regulating barbers.

Filan said many of these fees don't generate enough money, so general taxes must help pay for the services. Now that the state is desperately short of money, he said, the fees cannot escape scrutiny.

Filan said the new administration also will scrutinize the projects planned under the Illinois FIRST program that pays for new roads, schools and other infrastructure improvements.

The state borrows the money for those projects by selling long-term bonds, and the main short-term cost is interest on the debt. Bond debt is supposed to climb by $1.8 billion next year -- $800 million of that for Illinois FIRST -- and should cost the state an additional $80 million.

"It's not that they're good or bad projects. It comes down to making tough choices in what's affordable," Filan said.

The administration also is taking a close look at the state inheritance tax. The federal version is being eliminated and, because Illinois taxes are linked to federal taxes, that means the state version will disappear, too -- ultimately costing the state about $400 million a year.

Considering change in law

Blagojevich is considering a change in the law so that the state inheritance tax would not disappear with the federal version, Filan said.

Legislative budget experts generally applauded the options Filan discussed.

Raising fees probably will generate opposition from the groups affected, but the idea is worth exploring, they said. Likewise, the inheritance tax is very unpopular with some people, they said, but it's such a big blow to the budget that it makes sense to consider keeping it.

"I don't know that any of these are easy to sell," cautioned Rep. Gary Hannig of Litchfield, top budget negotiator for House Democrats.

He questioned the idea of cutting Illinois FIRST, noting that low interest rates make this a good time to borrow and government construction programs may help the economy.

Still, he said the budget deficit leaves no choice.

"I'm not sure that it's enough to fill this hole, but the hole is so big that we've got to look at stringing together a number of small solutions."