The state of the State By DIANE ROSS

IT WAS early February when the reporter hand-lettered the sign and thumb-tacked it to the wall of his office as a joke. "The Budget Held Hostage," it read, "Day 1." Robert L. Mandeville, the director of the governor's Bureau of the Budget (BOB), had just briefed the media on Gov. James R. Thompson's strategy for raising taxes. Services would be cut so low under the budget Thompson would unveil, Mandeville said, that the General Assembly would have no choice but to raise taxes — and as high as Thompson had proposed.

By late April, however, when the reporter's sign read "The Budget Held Hostage: Day 71," the joke had become a reality. House Speaker Michael J. Madigan had suddenly turned the tables on Thompson. On April 19, the speaker had suspended the entire appropriations process, ordering the chairmen of the two House appropriations committees, Ted E. Leverenz (D-51, Maywood) and Woods Bowman (D-4, Evanston), to hold all Republican-sponsored budget bills — and all Democratic-sponsored budget amendments — in committee. It was a shrewd move on Madigan's part and one he readily admitted was designed to force Thompson to spell out his priorities for spending the additional revenue generated by raising taxes. It was also an adroit political move, one that seemed to be designed to force Thompson to show Republican support for his tax proposal or drop the idea altogether.

After Thompson had made his tax proposal in his State of the State Address February 8, he spent the rest of February and most of March stumping the state for support. He was in Springfield, however, on March 2 to unveil his fiscal 1984 budget, via his Budget Message to the General Assembly, and he was in town March 16 to unfurl what he called his four-year financial plan based on the tax proposal (see table).

The governor's financial plan provided at least a preliminary answer to legislators' biggest question about his tax proposal: What could they afford to buy their constituents — how much "new money" would be available to spend — if they voted to raise taxes as high as he proposed? The answer in the governor's financial plan was the same as the answer in the speeches he had made during the preceding six weeks: not much. After meeting obligations, there would be $477 million in new money available in fiscal 1984, $533 million in 1985, $423 million in 1986 and $391 million in 1987.

Beyond revealing the amount of new money, this plan appeared to be nothing more than a four-year budget, contrasting fiscal 1983, with the next four years. The plan projected revenue, both at the current tax rates and at the increased rates the governor proposed. The plan also projected spending, and it went on to draw a distinction between spending for programs and services, such as education, public aid and transportation, and spending for what Thompson has come to call "obligations," the bills the state must pay over and above the services it must deliver. (Such obligations include income tax refunds, pension and health insurance benefits for state employees, local governments' share of state income tax revenue, and the interest due on bonds sold and on the federal loan for unemployment insurance.) Apparently future Thompson budgets will be balanced on the basis of such a distinction between obligations and services.

Any trouble Thompson had had in February and March, when he was on the tax hike campaign trail, paled in comparison to the tempest that awaited him in April, when he returned to the Statehouse for the spring legislation session.

Senate Minority Leader J; "Pate" Philip refused to sponsor the bill containing the tax proposal Thompson compromised. The governor was forced to turn his permanent increase in the state income tax into a temporary, four-year surtax, but otherwise his original proposal remained intact. (Under the bill, S.B. 1297, the increased rates for the state income tax would revert to the current levels on July 1, 1987.)

Despite the compromise, not a single Republican would appear with Thompson on April 14, when, within hours of the deadline for the introduction of bills, Thompson held a news conference to announce that his bill finally had a sponsor. A few minutes later Philip called reporters to his office to tell them he had no intention of supporting the bill, even though it would be introduced in his name. Philip said he had agreed to sponsor the bill merely to get the ball rolling.

The mantle of political martyrdom had fallen on Philip, and not on House Minority Leader Lee Daniels, most likely because the Democratic majority in the Senate is smaller than that in the House, and the Senate president, Philip J. Rock, has proven more conciliatory than the House speaker. But the tension within the caustic Republican caucus on April 14 ran far deeper than leadership.

Politically, it was the priorities for spending the additional tax revenue that was at issue in April. The legislature wasn't about to raise taxes until the governor spelled out his spending priorities. Not a single member of the General Assembly wanted to go on record supporting the governor's tax proposal, or any alternative. One-third of the members of the Senate and all of the members of the House must face the voters again in 1984. (Thompson's term runs through 1986).

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Republicans had been bearing the brunt of the opposition to the tax proposal because 'Thompson is a Republican. They fear the blame if taxes are raised, even though the Democrats are the party in control of the General Assembly. Since Thompson obviously counted on the votes of the Republican legislators, they had expected to get more information from him on his tax plan — or at least that he would give it to them sooner. But he had not. There was no hoopla when Thompson unfurled the financial plan March 16. Indeed he had reduced the plan to a single, 8 1/2-by-11 sheet, inserted it in a news release, and handed it to reporters who happened to be covering his speech before the State Chamber of Commerce that day at Springfield's Hilton hotel.

That was it. Legislators waited for more detail, but as the days passed and the April 15 deadline for the introduction of bills drew near, the governor's strategy became obvious: Thompson would provide more information when the General Assembly provided more support. The tax question had stalled. Compounding the legislators' frustration was the closest Chicago mayoral election in decades, which put all political deals on hold until April 12, when Chicago's embattled voters finally elected a new mayor. Despite the pending election, the Democrats in the Senate decided to try to end the stalemate on taxes. By late March, Rock had called for the creation of a 20-member bipartisan task force to demand more information on the governor's financial plan; the Republicans were more than ready to cooperate. "This is not a witch hunt," Rock said March 24, when he introduced the Senate Select Committee on Budget and Finance. "But it is impossible to follow the governor's mathematics" without more information, explained Sen. Dawn Clark Netsch (D-4, Chicago), whom Rock had named to chair the select committee.

Netsch was the logical choice since she chairs both the Senate Revenue Committee and the legislature's Economic and Fiscal Commission (EFC).

Rock also named as co-chairmen, with Netsch, Sens. Kenneth Von Buzbee (D-58, Makanda) and Howard W. Carroll (D-l, Chicago), the chairmen of the Senate's two standing appropriations committees. And Philip had agreed that the members should include the chairmen and minority party spokesmen for the Senate standing committees that had the most at stake in raising taxes: elementary education; higher education; public health, welfare and corrections; transportation; labor; local government; and agriculture.

Netsch got right down to business. She wrote Thompson a letter March 28 demanding detailed answers to some 26 questions — and the presence of Mandeville — by April 7 when the select committee held its first hearing. (Netsch would later schedule subsequent hearings for April 14, 19 and 22, to accommodate testimony from J. Thomas Johnson, the director of the Illinois Department of Revenue, and Marshall Langberg, the executive director of the EFC. But Mandeville would remain the star witness.)

The day before the hearings opened, Thompson replied to Netsch's letter, but failed to answer the main question on detailing his spending priorities. All he said was: "I will announce my recommendations for the allocation of the new tax revenues at a later date."

Netsch didn't ask Mandeville to answer the main question until the second hearing, which focused on fiscal 1984. (For that year under the governor's financial plan, a total of $1,695 billion would be available in additional tax revenue, including $477 million more than the previous year.)

The State of the State

Mandeville had talked for a good two hours before Netsch realized he had accounted for all but $307 million of the $1,695 billion and that he had no intention of going any further. Mandeville had merely repeated, with a little more explanation, what Thompson had already written in his letter.

Of the total $1,695 billion for fiscal 1984, Mandeville said Thompson would spend the biggest chunk, $1,202 billion, to boost the general funds balance and meet five of fiscal 1984's 13 obligations. (The eight remaining obligations would be covered by the $8,383 billion available in base tax revenue.) Apparently, the $1,202 billion would be spent by the governor in the following order:

• $223 million for elementary education;
• $102 million for higher education;
• $334 million for public aid;
• $24 million for mental health;
• $7 million for children and family services; and
• $35 million for all other agencies.

That still leaves the $477 million in "new money" available in fiscal 1984. Mandeville said Thompson knows how he wants to spend $120 million of that $477 million. He would restore $150 million of the $160 million cut in fiscal 1983 under the controversial mid-year Emergency Budget Act, and he would earmark $20 million to slightly expand the circuit breaker program of property tax relief for senior citizens and disabled persons.

Mandeville said Thompson refuses to go into detail about the remaining $307 million, except to say his priorities fall into three broad categories. First, the governor would maintain services at the restored fiscal 1983 level. Next in importance is expanding the services that have suffered the worst cuts, such as education, mental health and economic development, in that order. Last, the governor would add new programs.

Mandeville did, however, provide a list of what Thompson calls "contenders," for the $307 million. The governor's top contenders and their slices of the money appear to be:
• $25 million to maintain the fiscal 1983 level for income assistance grants to recipients of the Illinois Department of Public Aid's (IDPA) programs for General Assistance and Aid to Families with Dependent Children;
• $15 million to maintain the fiscal 1983 level for staff for the Illinois Department of Mental Health and Developmental Disabilities;
• $100 million for elementary education;
• $50 million for higher education;
• $150 million for the restoration of some of the optional medical assistance services (Medicaid), such has dental care, which the IDPA cut in fiscal 1983;
• $60 million for the restoration of some of the reimbursement for doctors, hospitals and nursing homes that provide medical assistance (Medicaid), which the IDPA also cut in fiscal 1983; and
•  $18 million to add more prison beds.

At the third hearing, Netsch asked Mandeville how Thompson would account for any additional tax revenue during the so-called "outyears," fiscal 1985, 1986 and 1987. She got the same answer she had for fiscal 1984: The governor's priorities fall under three broad categories.

By this time Mandeville was joking with reporters that the Senate Select Committee was a lot like the Spanish Inquisition. But Netsch had been right — from the legislative perspective — when she had said it was impossible to follow the math in the governor's financial plan. The legislature wanted a detailed accounting of how the additional tax revenue, including the "new money," would be spent. The governor gave them only the breakdown for spending all revenue, and it wasn't detailed except for the list of obligations. Mandeville had argued that Thompson's approach of total revenue v. total spending was by far better than isolating the revenue and spending from the tax increase. At one point in his testimony, Mandeville boasted that Thompson's four-year plan was the first of its kind in the nation, a model for other states. But he also admitted that the numbers — the revenue and spending projections — could well be wrong.

The select committee had grilled Mandeville on the BOB's revenue projections, but the real challenge came from Langberg. Curiously, the EFC's projections of base revenue (no tax increase) are higher than the BOB's, but its estimates for tax yield are lower. Langberg offered this explanation: The EFC predicts the national economy will make a strong recovery but the state economy will perform rather poorly; the BOB predicts the opposite. At press time, in late April, however, the EFC had not completed its analysis of Thompson's four-year revenue projections.

The select committee didn't really challenge Mandeville on the BOB's projections for spending for obligations as defined by the governor. They were too busy trying to follow his explanation of how the fast growth of obligations spending, coupled with the slow growth of revenue, would inevitably shrink the amount of new money available each year. Democratic Comptroller Roland Burris, however, was expected to take issue with the list and amounts of obligations.

By the day the hearings closed, April 22, the legislature knew little more about the governor's plans for the additional tax revenue than they did the day he made the proposal. Whether Madigan's strategy of holding the budget hostage succeeds where Rock's strategy of a bipartisan task force failed may depend on Thompson's strategy. □

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