www.Tribune.com

Illinois is on the verge of a financial meltdown, and hard choices will be necessary to contain the economic damage, according to a report from a group of prominent businesses executives.

The report, to be released Monday by the Civic Committee of The Commercial Club of Chicago, paints an even darker picture of the state's finances than in late 2006, when the group calculated that the funding shortfall amounted to $106 billion, or $8,800 for each of Illinois' 12 million residents.

Unfunded debts total more than $116 billion, or $10,000 per resident, the group estimates, and the sum could increase by as much as $10 billion annually.

***

According to the report, there is no longer any pretense that the state's budget is balanced. The anticipated revenue shortfall, the increasing pension and retiree health-care costs, unpaid Medicaid bills and failed commitments to aid public schools add up to an annual budget gap of $9.6 billion.

***

Recommendations include:

--Creating a second tier of pension benefits for new state employees and increasing the required amount that all employees contribute to their pensions by at least 1 percentage point.

--Taking a page from the Chicago Transit Authority by not acting as guarantor of retiree health benefits. Rather, the state should make a fixed contribution toward retiree health-care plans, with current and future retirees picking up the rest. The change could amount to a savings of $1.1 billion.

--Restructuring Medicaid programs by shifting all children and most adults into risk-based managed-care programs, requiring "gatekeeper" referrals to specialists and other measures that could save the state $750 million annually.

--Making state purchasing more efficient and further consolidating various human resources departments, a move that could save $400 million a year.

--Capping revenue sharing and grants to local governments, saving up to $300 million annually.

The 2006 report, the group said, largely fell on deaf ears. This time, the group is heartened by initial talks members have had with legislators and the fact that the recession's impact on the state has increased the calls for reforms.

Illinois Senate President John Cullerton had an "insightful" meeting with committee members, who have been invited to participate in a newly formed Senate Committee of Deficit Reduction, a spokeswoman said.

"I heard a receptiveness to this that I haven't heard before," said R. Eden Martin, Civic Committee president. "Whether it translates to anything, we'll see."

Click here for the full story.