(bright music) (triumphant music) - Thanks for joining us on "Capitol View."

I'm Fred Martino.

This week, Illinois Governor JB Pritzker warns about the potential for more service cuts if federal funding is withheld.

The governor and others also sound the alarm about possible cuts to federal Medicaid funding.

And some state legislation in Illinois would help first-time homeowners.

Those stories and more with Peter Hancock from Capital News Illinois, and Brendan Moore, statehouse reporter for Lee Enterprises.

Peter, upfront, you wrote a story for Capital News Illinois about the possibility of more cuts if federal funding is withheld from the state.

And of course, this week we all heard from President Donald Trump during his address to Congress about the need for more cuts in the federal government from his view.

What is the latest on this and the possible effect on Illinois?

- Well, according to the governor's office, the Trump administration is withholding just under $2 billion in federal aid that has been appropriated, approved by Congress, that is, they say, is owed to the state of Illinois, some of which has to do with farm programs, which the administration is pushing out there, I think is kind of a counter message to the President's speech Wednesday night, because Trump won big in farm country.

And so Governor Pritzker wants people to remember that, you know, he's withholding farm aid.

So, I mean, this is kind of the big question mark hanging over the entire budget.

In the state's operational budget, we get about $4 billion a year in federal aid.

Right now, the Trump administration is holding on to just a little less than half of that, and it's not entirely clear why, and there are lots of legal battles going on about, you know, whether or not he's required to spend money that's been appropriated by Congress.

So anyway, that's the big if that's hanging over the budget, is what happens if the Trump administration just decides not to send federal money to Illinois or to other states.

- Yeah, and we got a little more insight into the fact that these battles may end up in the courts all the way up to the US Supreme Court, because this week, the US Supreme Court rejected President Trump's emergency request to freeze nearly $2 billion in foreign aid.

We just found out about this Wednesday morning.

The court's saying that a lower court judge should quote, "Clarify what obligations the government must fulfill."

We should say though, that some of these court battles may be very perilous, especially if they make it to the US Supreme Court, because this ruling was as close as it gets.

Chief Justice John Roberts and Justice Amy Coney Barrett joined the three other justices for a five-to-four vote.

So it was very, very close.

So we'll have to watch these cases as they go through the courts determining whether or not money appropriated by Congress has to be spent.

This is not something we've wondered about so much in the past about.

Brendan, Republicans in Washington are working on a new budget, and there are fears, as you know, across the country about possible funding cuts to Medicaid, which provides healthcare for about one in four Illinois residents.

You have been reporting on this, writing about the response from Governor Pritzker and others.

- Yeah, Democrats, including Governor Pritzker, have really been raising the alarm bell on this.

As you said, Fred, Republicans in Washington are working on a budget proposal that would impart give tax cuts, about $4.5 trillion worth in tax cuts, to largely the wealthiest Americans.

And in part to pay for that, they have to search for about $2 trillion in cuts.

And I know DOGE is kind of in style, the Department of Government Efficiency, Elon Musk's effort to cut out waste in government.

But honestly, if you want to cut down on government spending, you really have to look either at social programs or the defense budget, and, you know, Republicans are probably not gonna cut the defense budget.

So really you're looking at some of these social programs, whether it's Social Security or Medicaid or Medicare.

Medicaid has really been the one that's kind of been the focus here, it is the healthcare program for low-income Americans.

About 70 million Americans get their healthcare from Medicaid, including about 3.4 million Illinoisans.

And so, you know, and as Peter said, I mean, the state of Illinois gets a lot of money from the federal government, about 4 billion for the operating budget.

But it gets a lot more for programs like Medicaid.

You know, the governor has said, and he's correct, that the state simply can't make up what it might lose from Medicaid being cut, and, you know, so a lot of people in the state could be at risk of losing their healthcare, particularly those who are covered under Medicaid expansion, under the Affordable Care Act, because that portion of Medicaid is about 90% federal cost share.

So if the federal government decides to lower that cost share, then you know, Illinois has a trigger that basically says, you know, we're cutting that expansion altogether, and that covers about 750,000 or so Illinoisans.

So it really is kind of a perilous thing if you get healthcare through Medicaid, and if you're, you know, trying to budget around this, if you're a state policymaker, and so it'll be very interesting to see how Republicans who have a trifecta in Washington, they have control of Congress, they have obviously President Trump is in the White House, but very narrow majorities.

It'll be interesting to see if they're able to get that across, because as the governor and other Democrats have made the point, a lot of Republicans, a lot of their constituents are on Medicaid.

It's not just a program for, you know, folks in the cities.

A lot of rural folks, a lot of hospitals in rural areas rely on on Medicaid.

So it really could be a politically interesting fight as Republicans go through their budget process.

- Very interesting indeed.

And it will be fascinating to see where Congress lines up on this, because while we often talk about it understandably, and first and foremost as a lifeline for individuals who receive healthcare, some would argue this also is, in a sense, one of the biggest subsidies to American businesses who often have low-wage jobs without benefits, and particularly with the expansion of Medicaid, the government is paying for a large share of folks' insurance rather than the employer doing that, as in Canada, many other countries where there is healthcare for all.

So it's not just an issue for individuals, but also for the way that our healthcare system works, or depending on your view, doesn't work in the United States.

Well, we move on now.

Peter, we are going to return to the state's budget issues and some of those connected to the federal government, some not so much, in a moment, but I wanted to give you a chance to talk about your reporting on legislation that may get a vote here in Illinois.

This would help first-time homeowners in Illinois.

Tell us about that.

- Yeah, State Senator Christina Castro has introduced this.

She has a personal professional background in the real estate industry, and it's basically a program to try and make it easier for first-time home buyers, as well as what they call second-chance buyers, people who may have owned a house in the past, for whatever reason had to sell it, maybe they had financial difficulties, now they wanna get back into the ownership market.

It's a way, it's tax-sheltered savings accounts to save up for a down payment on a house.

And what she pointed out at her news conference was that the average sale price of a single family residence in Illinois is now between 250 to $300,000.

And if you think about, you know, a standard down payment, if you're going, you know, for a conventional loan, some lenders want to see as much as a 20% down payment.

Well, 20% of $300,000 is gonna be $60,000 in cash that you have to have, you know, just to get into a mortgage.

And that's not counting, of course, anybody's ever bought a home, the closing costs, the inspection fees, the mountain of fees that they add on top of that.

So it makes it extremely difficult for a young couple or a young family to get into the housing market.

And so what they want to do is set up a special kind of savings account at financial institutions, banks, credit unions, whatever.

And your deposits into that would be tax exempt or tax deductible from Illinois State income taxes.

So if you think about a 60, if you put $60,000 into a savings account over a period of time, the Illinois tax rate is under 5%.

So you're looking at, you know, close to $3,000 in taxes that you would be able to save on something like that.

It is capped there, you know, you can only take so many, your tax exempts so much, so many deposits per year over a limited number of years.

But it's, they're describing this as one step in trying to nibble away at what has become a real crisis in the housing market, not just in the Illinois, but the United States, but how difficult it is for young families or young single individuals to start, you know, live the American dream and own their own home.

- And more difficult in Illinois than many other states because of course we also have the second highest property tax rate in the country, and it is about double the national average rate.

So when you purchase a home, something to consider in terms of the expense.

So any help certainly would be welcomed.

- Illinois does rely very heavily on local property taxes to fund local governments, cities and counties, as well as public schools.

Schools are the big driver of local property taxes in Illinois.

- Yeah, absolutely.

Brendan, we return now to the state's fiscal situation.

You wrote about the governor's proposed budget and what a headline called his balancing act to speak up on President Trump while handling other responsibilities.

Tell us more about that.

- Right, Fred.

Well obviously the governor gave his budget address and state of state address two weeks ago.

And if you listen to it, I mean the first two thirds, or even three quarters of it was pretty normal, you know, typical budget address, kinda laying out priorities, things of that nature.

But it took a turn towards the end with the governor invoking a lot of imagery, you know, 1930s Nazi Germany to kind of describe the situation we might be in now.

Basically trying to sound the alarm bell on some of the things that at least he is seeing from the early days of the second Trump administration.

And it kind of goes with what he's been doing for the past, you know, year, two years in terms of raising his national profile as a kind of outspoken critic of President Trump.

Obviously he was very outspoken during Trump's first term, and then obviously he was a big backer of President Biden and Vice President Harris.

He was a campaign surrogate for them.

And now he is kind of taking, using his bully pulpit as governor to speak out against some of the early actions, whether it's on immigration or on some of these potential cuts to Medicaid.

And it is kind of a balancing act though, because he still has a day job, he's still the governor of Illinois, and there are some perhaps rough waters ahead.

It's gonna be a very challenging budget cycle.

You know, he proposed a budget that he says is balanced, but it's gonna be tight.

You know, we came into this budget year expecting a budget deficit.

You know, his budget team did some, I don't wanna say behind the napkin math, but they figured out a way to balance it on paper, but it's gonna be a challenge.

And basically his challenge, I guess, is to kind of balance those national ambitions speaking out against Trump, and kind of, you know, using his voice in the way that I think a lot of Democrats have welcomed, because a lot of other Democrats have kind of struggled to find their voice in this second Trump administration.

But Pritzker's been very unequivocal in being an outspoken critic.

But doing that while also balancing the day-to-day tasks of running the state, which it's never an easy job, but it's becoming tougher now that some of the federal covid stimulus funds have dried up and some of that economic activity after Covid has slowed down, meaning that you have less tax revenue coming in to state coffers.

So, and that all goes without saying that he might have another campaign to run in 2026.

He has not said whether or not he's gonna run for reelection as governor to a third term, but he is gonna have to make that decision in the next few months.

But I think a lot of people see where his eyes are, and, you know, you could say maybe he's walking and chewing gum, but clearly, you know, many people believe he's looking at 2028, and he might be a candidate for president in that Democratic primary.

And so over the next few months and the next couple of years, it's gonna be very fascinating to see how he kind of navigates his day job while also, you know, going on the view and talking about, you know, all these national issues and being a critic of President Trump.

- And really one of the most outspoken Democrats right now in the nation.

So it'd be fascinating to see where all that leads.

Peter, you and some of your colleagues at Capital News Illinois wrote about Governor Pritzker's budget proposal, and you found some lawmakers oppose parts of the plan.

Tell us more and where you think all of this is heading.

- Okay, well, probably the most attention-grabbing element of the plan was his decision to stop funding what has been a very controversial program of providing state-funded healthcare to non-citizens regardless of their immigration status.

It's called health benefits for immigrant adults.

These are non-citizens between the ages of, I think, 54 and and 64.

The age group has changed a couple of times.

It's been very controversial.

There was just an audit very recently from the state auditor's office that found this program ended up costing a lot more than was originally anticipated.

It was the enrollment into the program was apparently not managed very well.

People were getting enrolled who were not in the group that it was targeting.

And so he has decided to stop funding this, in a tight budget year.

It has been harshly criticized from the beginning by Republicans as basically state-funded healthcare for illegal immigrants, although, you know, I don't know how accurate that label is necessarily, but, you know, it was certainly open to criticism, and as Brendan was just pointing out, this is a governor who has national ambitions, and that's kind of a difficult thing to sell on the national campaign trail right now.

So that has stirred some consternation within the Latino caucus.

Many people there, they not only didn't want to get rid of that program, they wanted to expand it.

There've been proposals to cover, expand it to cover everybody from age 18 up to 64.

And then there's another program, health benefits for immigrant seniors that covers non-citizens age 65 and over.

These are supposed to be people who could not, who would be eligible for Medicaid, but for their immigration or citizenship status.

And so that's been one of the most controversial things that's in the budget, but also going a little less, a little bit below the radar screen is his education budget.

He proposed the required $350 million increase in K-12 education.

That's part of the evidence-based funding plan that was passed back in 2017.

What he did not propose was increasing other kinds of money that goes to public schools.

These are called mandatory categorical aid, mainly a lot of transportation aid.

And so the fear is that if the state doesn't keep up with the cost of those programs, those line item expenses, then school districts are either going to have to raise local property taxes to pay for them or they're gonna have to cut back on services or cannibalize funding from other kinds of programs in order to keep up with these mandatory costs.

And so I think that's going to be a big part of the discussion in K through 12 education funding, which is about one-fifth of the entire state general fund budget.

- Wow, lot of money, a lot of money.

We have time for one more story.

Got about four minutes left.

Brendan, a follow up now on an issue we have been covering for some time, Chicago area transit operations are approaching what has been called a fiscal cliff, and with the state's other budget problems, there are concerns, this is on the back burner, Capital News Illinois recently published a story on this.

What did you learn?

- Yeah, I mean this has been an issue that I think has been kind of telegraphed for the past couple of years, that, you know, these transit agencies in Chicago, so you're thinking of metro, the commuter rail system, CTA and Chicago, Pace, which is the suburban bus system, that after, you know, their COVID-19 stimulus funds run out, they're gonna go off this cliff, and if they don't get more funding, it's about a $750 million cliff, I believe.

- Yeah, over $700 million.

- It's a lot of money.

- Yeah, I don't think fiscal cliff is overstating it.

- No, no, not at all, and so if you don't get more money, you're probably gonna get significant cuts in service, or, you know, significant rate hikes, you know, and so it is a very pressing issue in the Chicago area, and, you know, needs to state solutions.

So lawmakers have been having hearings on this.

They had some, they had a hearing last week where they brought in the leaders of these agencies, and they're trying to figure out, first of all, what does the governing structure look like for these agencies moving forward?

There's been a criticism that they don't always work very well together.

They're not always in sync.

You know, they kind of all do their own thing.

They have their own, you know, boards, and they have their own budgets, and, you know, they're not always kind of in alignment.

You know, is there a, do they bring 'em all into one agency, or do they, you know, figure out a way to better coordinate?

And that has kind of been a requirement, or lawmakers are kind of view that as a requirement to get more money, because they're probably gonna have to find some type of revenue to support more transit funding.

We will see if it's a tax increase of some kind or, you know, I don't know exactly what that would be yet.

But you're seeing, and it is an interesting conversation.

If you listen to the hearings, all the folks at the agency say, you know, it's not a governing issue, we just need more money.

But legislators have been very clear of like, yeah, it is a governing issue, and we're not gonna give you more money until we solve that first.

So it's gonna be a very difficult lift because, I mean, you're involving like City of Chicago, suburban, you know, there's gonna be issues of, you know, like fiefdoms are being, you know, gone for like, you know, is it gonna be, you know, are these different agencies gonna play nice with each other, and are, you know, they gonna be willing to lose some power in order to create maybe more efficient transit system?

Needless to say, it's very early in the session, and you know, I think, you know, we're still gonna see a lot more in the next few months to see, you know, what kind of comes out of it.

- Absolutely, it will be tough as these things always are and probably more and more tough in the future as inflation continues, so there will be a lot of controversy over raising the cost of public transit for individuals.

We are out of time.

Peter and Brendan, thank you both for being with us.

That is "Capitol View."

For everyone at WSIU, I'm Fred Martino.

Have a great week.

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