The people who want to lead Illinois beginning in 2011 all know the state has severe budget problems. The state's next governor will have to cope with this dilemma. While the candidates for governor are split over the need for new revenues, all of them believe state spending should be reduced.

Day Two: This is the second of a two-day series of stories looking at how the candidates for governor would address the state's budget, and part of a bigger series of stories on the major issues facing state government. GateHouse News Service surveyed the campaigns and will provide their answers in stories that run through the end of the month.

The people who want to lead Illinois beginning in 2011 all know the state has severe budget problems.

But if their assertions alone weren't enough, a major bond rating agency last week reinforced the state's dire financial news.

Moody's Investors Service downgraded the state's general obligation bond rating from A1 to A2. That gives Illinois the second lowest state bond rating in the country. The only state worse is California, which has become a virtual poster boy for disastrous state finances.

The effect of the downgrade is that it will cost Illinois more to borrow money. However, the downgrade also underscores the reality of the state's financial/political situation for the past several months. Moody's said the downgrade reflected Illinois' large structural deficits and the fact the General Assembly isn't acting to fix it. Moody's also raised concerns over growing year-end deficits, cash-flow problems, pension costs and rising retiree health care obligations.

The state's next governor will have to cope with this dilemma. While the candidates for governor are split over the need for new revenues, all of them believe state spending should be reduced. Here's how they responded to budget questions from GateHouse News Service.

Q. How large is the deficit?

It helps to know how large a budget hole exists when trying to figure out how to fix it. The response from Gov. Pat Quinn is that his budget office "is still finalizing projections for next year," but he thinks the deficit will be in double digits in billions.

Some of the Republican candidates, though, complain that Quinn is masking the true figures.

"One of the biggest failures from Gov. Quinn and his budget office is the failure to provide accurate and consistent budget numbers to state lawmakers and other leaders," said Sen. Kirk Dillard, R-Hinsdale. "Very candidly, I do not think that any candidate for office will truly discover the magnitude and scope of the problem until they get into office and are able to see the actual numbers."

"No one really knows how large the hole is," said businessman Adam Andrzejewski, noting that different sources use different numbers.

Comptroller Dan Hynes, a Democrat running for governor, puts the figure at $13 billion over an 18-month period. Sen. Bill Brady, R-Bloomington, said the state's $70 billion pension debt and $20 billion in bond debt also need to be considered.

Q. Should budget cuts be made and where?

To a person, the candidates agreed that state spending must be cut, even Quinn and Hynes, who both say a tax hike is also necessary to balance the budget.

Quinn said his administration has already set in motion more than $2 billion in cuts, including Medicaid case management for the aged, blind and disabled that is expected to save $400 million when fully implemented.

Hynes said his plan involves "cutting state operations back to 2005 levels" along with firing half of the political appointees making more than $70,000 that were hired by former Gov. Rod Blagojevich and slashing what he views as non-essential professional services contracts.

Dillard would put a freeze on new spending programs and conduct forensic audits of state spending. He said employee benefits should be capped at existing levels and the state should only borrow to pay for capital programs.

DuPage County Board Chairman Robert Schillerstrom said the first step in closing the gap is to implement zero-based budgeting, where the state starts its budget from scratch each year rather than merely adding to existing spending. He would also focus on Medicaid reforms like moving to a managed-care system and cracking down on fraud.

Brady set a target of $5.5 billion in cuts, with the focus on Medicaid caseload management to save up to $1.8 billion, hiring more prison guards to cut overtime costs at the Department of Corrections and eliminating the state Board of Education.

Eliminating the Department of Commerce and Economic Opportunity is on Andrzejewski’s cut list, as is a "possible reduction" in state revenue sharing to cities. Andrzejewski also wants all state grants reviewed and the recipients required to show they are effective.

Proft said he has $2 billion of cuts in mind, including up to half of DCEO's budget because "the agency has become little more than a pass-through for corporate welfare and not a particularly responsive one at that." Proft would roll back Medicaid expansions made under Blagojevich, reduce income eligibility for the program and have state workers pay more for their health insurance.

Rolling back state spending to 2006 levels and freezing it there is central to McKenna's plan. He also would eliminate Medicaid expansions from the Blagojevich era and change pension benefits for new state employees while asking current employees to pay more.

Tapping the recommendations of outside experts is a key part of Former Attorney General Jim Ryan's deficit reduction plan. Ryan, a Republican, said he will form an Advisory Council on Efficient Government that will synthesize recommendations from various groups to rein in state expenses. Ryan also said the state can save money by changing pensions, better managing Medicaid, streamlining state purchasing policies and eliminating pork projects.

Q. Should spending increases be statutorily capped and should tax hikes take an extraordinary vote to pass?

Quinn said he is opposed to any legislation "that would handcuff future administrations as they grapple with fiscal issues," whether spending caps or extraordinary votes for tax hikes.

Hynes pushed a plan in which 1 percent of state revenue growth is supposed to go into a rainy day fund if overall revenues increase by 4 percent or more. He does not favor an extraordinary vote to pass take hikes.

Ryan, Dillard, Schillerstrom, Brady, Andrzejewski, Proft and McKenna all support an extraordinary vote for general tax increases. All but Dillard specifically said spending should be capped.

Doug Finke can be reached at (217) 788-1527 or