The Illinois General Assembly started 2011 in a big way: A landmark increase in both individual and corporate income taxes. The state legislature then passed several more marquee items, including death penalty abolition and the legalization of same sex civil unions, measures signed into law by Gov. Pat Quinn.

But by the end of 2011, lawmakers ran out of steam – preoccupied with a dreary fiscal situation and uncertain what to do about it. Absent a long-term vision, the General Assembly spent the last couple of months gluing together tax breaks that primarily tried to appease the CME Group, Inc. financial exchange and Sears Holding Corp.

So there’s a lot of unfinished business carried over into 2012 – with lawmakers still focused on the lousy economy, $85 billion in unfunded pension liabilities and continued revenue shortfalls in the state’s operating budget, despite the tax increase. “The two biggest things to tackle are pension reforms and the budget,” says Steve Brown, spokesman for Speaker of the House Mike Madigan (D-Chicago).

Lingering items related to the budget include gaming expansion, health clinic funding – and a proposal by House Minority Leader Tom Cross, (R-Plainfield), to roll back some of the corporate income tax increases made at the start of 2011.

The General Assembly, though, is not scheduled to meet until January 31 and will probably convene less than it did in 2011.“It’s going to be a lean and mean legislative session where maybe not much gets passed as usual,” says state Rep. Lou Lang (D-Skokie), sponsor of the gaming expansion bill.

“Policy in an election year will take a back seat to politics,” predicts Kent Redfield, a political science professor at the University of Illinois-Springfield. “Quinn doesn’t have to run for two years so I’m sure he’ll want to be aggressive, but I don’t think the legislature will be very favorable to that.”

Lawmakers and Springfield observers say that the first item of unfinished business from 2011 will be changes to the state’s pension system. Madigan and Tom Cross (R-Plainfield), the House Republican leader, pushed legislation in 2011 that cuts benefits for current employees.

A bill sponsored by Cross stalled in a House committee. Asked what will change in 2012, Cross replies, “I think that’s a great question – People continue to play politics with some of the big ticket items.”

But unions and leading Democrats not named Mike Madigan have substantial gripes. AFSCME Local 31 spokesman Anders Lindall argues pension cuts punish civil servants for the actions of past elected officials – like Rod Blagojevich – who neglected contributions to the pension fund. Also, breaking current pension obligations could violate the state constitution.

“The General Assembly should finally quit scapegoating public employees and work with our unions to develop a constitutional, fair, and lasting solution to the pension funding problem,” Lindall says.

John Patterson, spokesman for Senate President John Cullerton (D-Chicago), says that Cullerton suspects the Cross bill is unconstitutional.

Quinn spokeswoman Annie Thompson says the governor would support pension changes, “fair to current employees” that “fall within the bounds of the constitution.”

The most likely action on pensions, then, might be measures that tackle instances of waste, fraud, and abuse, as opposed to across-the-board benefit cuts. Quinn said this week that he would convene a panel to look at the state pension system, in response to Chicago Tribune stories about pension abuses.

“If everyone is working on cleaning the mechanics of the system then everyone can claim victory,” Redfield says. “You avoid the political and legal fight of the Cross bill.”

The other major issue at the start of 2012 will be writing a new annual budget. Last year, tax increases dominated the budget process, but it looks like 2012 might start with a tax cut proposal: Cross has a bill that lowers the corporate income tax rate from seven percent to six percent. Prior to last year’s increase, the corporate income tax rate was 4.8 percent.

The bill is written in response to threats by CME Group, Sears and other big Illinois companies like Caterpillar to set up shop in a state with a more business friendly tax code. Cullerton, for his part, supports the cut in the corporate income tax – if it means broadening the tax base and reducing myriad handouts to Illinois businesses.

Asked about Cullerton’s idea of broadening the tax base, Cross said Illinois’ focus, “shouldn’t be on how we raise more money, but becoming a place where businesses say, ‘We want to be here and we want to stay here.’”

The new budget must also deal with the fact that Quinn postponed closing seven Illinois facilities, including three mental health centers, until the end of the fiscal year, June 30. The issue is especially pressing because Chicago’s budget calls for shutting down six of the city’s twelve mental health clinics.

In a past interview, Quinn budget spokeswoman Kelly Kraft said that the governor would draft a 30-month plan to deal with the health budget.

One possible source of state revenue that will be implemented next year is gaming expansion. A gambling expansion bill passed the General Assembly last May and Lang says he now is in talks with Quinn, a gambling expansion skeptic, over a new bill. “Sometime in the spring session we hope to have a gaming vote,” Lang says.