Illinois' new GOP governor wants billions in spending cuts, no new taxes to fix budget mess

SPRINGFIELD, Ill. — Illinois' new Republican governor called Wednesday for deep spending cuts to Medicaid, pensions and other programs to fix the state's budget mess without raising taxes — a pitch met with quick opposition from Democrats who control the Legislature.

Delivering his first budget address since winning office last fall, Gov. Bruce Rauner said his plan would end "the irresponsible and reckless practices of the past." He said lawmakers must be willing to make politically unpopular decisions to close a more than $6 billion budget hole next year.

"This is our last, best chance to get our house in order," Rauner said.

According to budget documents released Wednesday afternoon, Rauner is recommending $1.5 billion in Medicaid cuts, along with other reductions.

Rauner's budget blueprint is among the first concrete tests of whether the Republican first-time officeholder can begin to bring the change he has promised to one of the last Democratic strongholds in the Midwest.

The multimillionaire former private equity investor follows other Republican governors who've taken over states and attempted to make them more business-friendly by shrinking government and taxes.

But Rauner, who was seen as a rock star for winning the governor's office in Barack Obama's home state, faces an even greater challenge in a post-recession state where Democrats have super-majorities in both chambers.

"He's putting lives and livelihoods in jeopardy by treating our state's most vulnerable people like burdens," said state Sen. Mattie Hunter, a Chicago Democrat.

Many Democrats want to raise Illinois' income tax rate, which dropped on Jan. 1 from 5 percent to 3.75 percent, to avoid some spending cuts. House Speaker Michael Madigan, a Chicago Democrat, said he believes the state needs a mix of spending cuts and new revenue. He also renewed a call for an additional tax on incomes over $1 million.

The bleak budget picture has led major credit agencies to give Illinois the worst credit rating of any state in the U.S. It also has the nation's worst-funded public pension system, with a shortfall of $111 billion.

Rauner said Illinois could save more than $2 billion by moving all state workers to a less-generous pension system lawmakers approved in 2010 for employees hired after Jan. 1, 2011. Workers also would have the option of moving to a 401(k)-style plan. He said firefighters and police would be able to keep their current benefits.

Projected savings from any pension changes aren't likely to be realized in the next fiscal year, however. Even if Rauner could get a bill through the Legislature, the state's powerful labor unions — with whom Rauner has clashed repeatedly since taking office — would challenge it in court.

Rauner has called for an "aggressive" review of eligibility for enrollees in the health insurance program for low-income and disabled people and for a 12 percent cut in payments to hospitals and nursing homes.

The governor also proposed increasing spending for K-12 education by about $300 million but cutting funding for higher education. And he proposed cutting state aid to local governments and slashing educational and mental health programs for youth in state or foster care once they turn 18, rather than the current age of 21.