You've probably heard by now that Illinois Governor George Ryan has ordered almost all state agencies under his control to come up with 2-percent budget cuts. The idea is to find $250 million in savings to make up for a drop in state revenues. It's highly doubtful that most agencies will cooperate fully with the governor, however. They had to be strong-armed earlier this year to come up with cuts, but Ryan has only a few months left in his term, which means he has less leverage, and the agencies probably won't want to give his successor any ideas about how to cut into their turf.

But there is worse news out there. According to impeccable sources, the governor's office has identified $250 million to $300 million in additional "spending pressures" in the current budget.

There are always new and unforeseen spending pressures during a budget year. Sometimes, new programs just cost more to implement than expected. Or things such as sharply rising fuel costs or natural disasters can drive a budget out of whack. Recessions are hard on budgets, because more poor people mean higher state expenses. Not all of those newfound "pressures" are real. Sometimes agencies panic, or deliberately deceive their overseers to pry more money out of the central office.

Still, it's more than a little troubling that there could be a $500-million hole in this year's budget, particularly because next year's budget is already at least $2 billion in the red.

Actually, it might be worse than that. The Center for Tax & Budget Accountability (CTBA) believes this fiscal year's budget will run a billion dollars in the red.

• And there's more bad news. A recently released but mostly overlooked report from the state's Economic & Fiscal Commission notes that Illinois is receiving substantially less money from the national tobacco settlement than had been expected.

In Fiscal Year 2000, for instance, the state took in 85 percent of what it expected to receive from the tobacco settlement - a shortfall of more than $60 million. Fiscal Year 2001's tobacco settlement proceeds were 83 percent of expectations - a $54-million shortfall. And last fiscal year's receipts were just 81 percent of what had been expected - a whopping $75-million gap.

The Economic & Fiscal Commission figures the receipts will stay right around where they are, partly because decreased cigarette consumption reduces the amount of cash that tobacco companies have to pay to states.

Illinois had expected to rake in $9.1 billion from the tobacco settlement. But if Illinois' settlement proceeds hover at 81 percent of the original expectations until the program ends in 2025, the state's take will only be $7.4 billion. And it'll be about a billion less than that if the lawyers suing the state to increase their share of the settlement win their case.

• The CTBA has come up with some ideas to free up about a billion dollars for the state.

Not re-filling the Rainy Day Fund at the end of the current fiscal year frees up $226 million.

Decoupling the state from the federal repeal of the estate tax would save the state $197 million next fiscal year alone, and that rises to $450 million soon after. Half of our state "death" tax is paid on average by a little over 120 families.

During the campaign, Blagojevich said he could save $200 million by sweeping out unnecessary middle managers, and the CTBA agrees. Middle-management positions increased by 19 percent between 1995 and 2000, while "front line" staff positions actually declined by 1 percent. Still, this doesn't take into account one-time costs like vacation and sick-leave buyouts, unemployment-insurance increases, etc.

The CTBA claims there's $100 million in unspent member-initiatives money sitting in the bank, which could be used for other priorities.

A tax-amnesty program could, according to the CTBA, generate $68 million in new revenue. Others say it will be less.

Eliminating public subsidies for the horse-racing industry would generate $26 million in savings.

According to the CTBA, repealing the "single sales factor" for corporate income taxes would generate $96 million, even though big business claims the change has been revenue-neutral. Shortening the time for net-operating-loss deductions would bring in about $70 million. And reducing the retailer's discount on the sales tax would generate $69 million - except that the Illinois Retail Merchants Association was a key Blagojevich supporter.

Rich Miller also publishes Capitol Fax, a daily political newsletter. He can be reached at (

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