Top News

CBS 2's Mike Flannery and the Associated Press contributed to this report.
SPRINGFIELD, Ill. (CBS) ― Some 1.4 million adult Illinoisans lack health insurance, and Gov. Rod Blagojevich announced in his budget and State of the State address that he wants the state to do something about it.

In Springfield Wednesday, he unveiled a record $60.1 billion in spending from education to pensions, financed by unprecedented taxes.

As CBS 2 Political Editor Mike Flannery reports the tax hike would hit almost every business transaction.

There was remarkably little applause for the governor as he entered the joint session. He portrayed what is in some measures the largest tax increases, spending increases and new programs in the history of the state of Illinois as part of his fight for the middle class.

"It's time for new ideas. It's time to act boldly. It's time we seized the moment and did more for the people of Illinois," Blagojevich said.

He is proposing to sell the rights to the Illinois lottery for up to 75 years, to build new schools and roads as part of a massive new capital program. The ambitious agenda includes providing $10 billion more for public schools over the next four years, universal access to health care insurance $26 billion for state pension funds and a business gross receipts tax to help pay for it all.

He has proposed a combination of programs that, together, would help everyone in the state obtain health insurance if they want it. The poorest would be entitled to free coverage. Others would get help paying for insurance options already available to them, such as plans offered through their jobs. Still others could buy low-cost insurance the state would arrange.

Anyone earning four times the federal poverty rate or less could qualify for some kind of assistance. That threshold would be about $40,000 for one person or about $82,000 for a family of four. The amount of assistance would depend on how much money they make, and the lowest-income people would not have to pay at all.

Under the proposal, the state would not actually offer insurance policies, but it would require insurance companies to offer a low-cost policy that would be available to everyone, no matter what their health condition. The state would act as a kind of agent for all the people needing that insurance, negotiating rates with the companies and picking up some of the costs.

The governor's office estimates it would cost about $2.1 billion a year when all parts are up and running in 2010. That's in today's dollars, however. Given rising health care costs, the actual pricetag could be higher.

The money would come largely from businesses. Blagojevich wants to create a new tax on every business transaction in the state. That would generate billions of dollars, and some of the money would be set aside for Illinois Covered. He's also proposing a new payroll tax on businesses that don't provide health insurance for their employees.

Signing up for the program would be voluntary -- at least initially. Blagojevich's aides said they might later consider requiring people to get health insurance.

Blagojevich is also proposing a massive infusion of cash into public schools, but that may not be enough to satisfy the powerful forces clamoring for education funding reform.

They've been demanding more than just additional money. They want to overhaul the way Illinois pays for education, so that schools don't depend so heavily on local property taxes.

One of Blagojevich's most powerful allies, Senate President Emil Jones, has been a vocal advocate of change.

"I think it's a good plan," said Democratic senator Emil Jones. "It's a fairness plan."

Blagojevich promised $1.5 billion more for schools next year alone -- a 23 percent increase. In all, he's promising $10 billion over four years, with the money to come from a new business tax expected to generate $6 billion a year.

More than half of the new education money -- $800 million -- would go into the guaranteed minimum spent on each student in the budget year that begins July 1.

Momentum has been gathering in recent years for a decades-old idea to pay for schools by raising income taxes while lowering local property taxes.

Advocates say that would be a fairer process than the current system and its reliance on local property values. But Blagojevich opposes anything that involves an income tax increase.

Opponents are already outraged.

"It's a terrible plan unless you like to pay taxes," said Rod Gidwitz.

"We've got to defeat this," said Republican senator Bill Brady of Bloomington. "In fact, we've started a Web site – stoprod.org."

Blagojevich also pledged $209 million to increase the rate at which schools are reimbursed for special education teachers and aides -- the first adjustment since 1985. And to completely meet the state's obligation for reimbursing other "categorical" costs such as bus transportation, the governor pledges an additional $150 million.

Doing even one of the things the governor is proposing would be difficult under normal circumstances, and some of them have been on the agenda in Springfield for many years. Blagojevich is now asking the general assembly to get it all done in the next three months.

(© MMVII, CBS Broadcasting Inc. All Rights Reserved.)