Illinois Budgeting

Illinois state legislators are learning how difficult it will be to fit a work-boot full  of this year’s people programs into a petite lady’s slipper of available revenues. They  won’t all fit.  

In the past couple of weeks, the House budget committee on human services has  been struggling to find about a billion dollars in cuts from a $7 billion budget for mental  health, children and the aging, without hurting people. On the chopping block are big  reductions in mental health community services, centers for independent living for  mentally retarded adults, and drug addiction treatment, among others. 

In a testy exchange with lawmakers, human services agency director Michelle  Saddler suggested the Illinois Schools for the Blind and Deaf at Jacksonville might have  to be closed in order to meet the lawmakers’ budget cutting demands.  

The legislators were aghast that such an idea might even be voiced, and they  retorted that $47 million in recent pay raises for agency personnel could be rolled back to  fund programs for the infirm, disabled and unwell—if only the union contract negotiated  several years ago could be re-opened. 

Here is the situation. About $35 billion will be spent this present fiscal year from  general funds (for operating state government; the fiscal year ends June 30), and about $8  billion in bills will be unpaid at the end of the fiscal period. 

But the House estimates there will only be about $33 billion in revenues to spend in the coming year. The Senate thinks there may be $34 billion in revenue. The Governor  wants to spend $35 billion, even though there isn’t that much money. 

Gov. Pat Quinn would like to borrow about $5 billion to pay off old bills and pay  off the borrowing in say 5-8 years. (I use “about” frequently because the figures are  squishy or not known precisely.)  

There is opposition to the borrowing among the minority Republicans, whose  votes are needed for the 3/5ths majorities required to borrow. 

Budgets are an allocation of our values. In Illinois, we place the highest value for  our state dollars on elementary-secondary education; this sector will be hurt least in the  budgeting.  

Spending for Medicaid (health care for the poor and nursing home patients) is a  high priority as well, as the state receives one dollar in federal aid for every dollar of state  spending; thus a dollar of state money cut from Medicaid is actually a two dollar cut. 

Higher education has already taken reductions in recent years, and lawmakers  would like to avoid cutting colleges and universities much further. 

This leaves human services—children, disabled, mentally ill, addicted, aging.  [Every bone in a lawmaker’s body aches to do something for people, not to them,  so cutting people services is, understandably, painful. Yet cuts there must be if the budget  is to be balanced. And lawmakers can’t afford politically not to balance the budget—not  after increasing the individual income tax rate from 3 percent to 5 percent. [By the way, the reason that the tax increase doesn’t provide for additional rather  than reduced spending is that this year we will have spent $8 billion more than we took in. The big excess over revenues will come from multi-billion dollar borrowing, federal  stimulus funds, and selling long-term tobacco settlement money all for use this present  year. The new tax revenue almost covers this $8 billion amount.] 

I see the process unwinding this way: The House will make deep cuts in “little  people’s” programs, that is, those served by the human services agencies. But lawmakers will suggest to aggrieved parties that the Senate, with its higher revenue estimate, will  add back their program funding. Even so, this will be less than the governor wants and  less than is being spent this year. 

Whatever comes out of the legislature budgeting process will involve real cuts in  people programs. There will thus be intense pressure to increase revenue—painlessly.  So expect a strong push by gambling interests to expand gaming to include a  casino in Chicago and others downstate, plus slots at the tracks. This could generate $1  billion plus in license fees this coming year and maybe $500 million a year later in annual  tax revenue. Increasing the cigarette tax by a buck a pack could generate $300 million a  year.  

[And “decoupling” Illinois from a federal “bonus depreciation schedule” for  industry equipment purchases could raise another $600 million. Business, which already  feels the state climate unfriendly, will fight this, as it would come on top of a new 9.5  percent corporate income tax rate.] 

I can see foresee the legislature sending the governor a budget less than he  believes necessary, which could cause him to veto it and send the legislature back into  special session. 

Ultimately, expect some cuts, some borrowing to pay off old bills, and some  revenue increases in a budget that pleases no one.