Ill. budget has new $900 million hole

SPRINGFIELD, Ill. -- Gov. Pat Quinn's office warned Wednesday that state government now faces an additional $900 million budget deficit, largely because rising unemployment has eaten away at income tax revenue.

Quinn budget director David Vaught said the new budget hole increases the pressure for officials to raise taxes early next year. Until then, he said, Quinn will cut spending further and seek legislative permission to borrow money set aside in special government funds.

This year's budget was put together with the assumption that income tax revenue would be about the same as last year, around $10.2 billion. But the latest projections now show revenue falling by $850 million, Vaught said.

"Basically, what happened is unemployment is worse than what the economists were projecting," he said. "We're in the same boat as the rest of the economy."

The statewide unemployment rate for August was 10 percent, compared to 6.7 percent a year earlier.

In addition, revenue from riverboat gambling is now expected to be $50 million lower than projected because a Joliet casino was closed for several months by a fire.

The Democratic governor advocates raising income taxes to reduce the state's stubborn budget problems. Lawmakers, however, refused to go along with that during the spring, despite a deficit that topped $11 billion.

Instead, officials patched together a budget that depended on borrowing money, delaying bills and promising unspecified spending cuts. Critics say it shortchanged many important programs that help the elderly, disabled and needy.

Now Quinn's office says the situation is nearly $1 billion worse than expected.

Vaught said Quinn wants permission to borrow roughly $1 billion from funds set up to pay for specific services, often supported by fees on particular groups. In addition, there are some technical steps that can be taken to save money on bonds, he said.

Although Quinn still wants a tax increase, legislative leaders have made clear they won't consider the idea until February, after the primary election. Vaught said he hopes the latest budget news prompts lawmakers to act quickly when they do consider taxes.