Rep. Greg Harris • 13th District
Springfield Update • February 16, 2011
Governor’s FY2012 Budget Presentation
Today Governor Quinn formally presented his proposed budget for FY2012 to a joint session of the General Assembly. This is the first step in a long and complicated process which will culminate in the final budget which must be passed by the end of May 31, 2011. As you know we are in a terrible financial situation and there will be no easy or pleasant solutions.
You can see the Governor’s entire proposal and associated information here: http://www2.illinois.gov/budget/Pages/default.aspx
This is the first fiscal year of budgeting under the new Taxpayer Accountability and Budget Stabilization Act, including the Budgeting for Outcomes process. It is also the first full year where we will be collecting money from the increases in the individual and corporate income taxes, reinstatement of the estate tax, and temporary suspension of the net operating loss deduction for business.
There are other factors which will come into play which will have to be considered as we move forward evaluating the Governor’s proposal and developing the final budget:
- Unpaid bills (including accounts payable, corporate refunds due and state group insurance backlog) of $8.2 Billion
- FY12 Structural deficit of $6.2 Billion
- State spending cap for FY12 of $36.8 Billion
- State source revenues increasing by $4.479 Billion, while federal stimulus revenues will decrease by $662 million, and interfund borrowing, statutory transfers etc., will decrease by $498 million
- Inclusion of $1.5 Billion for debt repayment (exclusive of repayment funds generated by debt restructuring)
The debt restructuring would involve borrowing in the market to pay existing state debt and unpaid bills. It should be strongly emphasized that this is NOT new spending, but money already owed to Illinois businesses, healthcare providers, community and social service organizations, etc. Due to increases in procurement costs and late payment penalties, we are paying interest and penalties far in excess of what would be owed in debt service, if bonds were issued to pay vendors. As well, this payment would hopefully allow businesses and community organizations to increase employment and investment, further boosting their local economies.
Without the infusion of cash through borrowing, the unpaid obligations would continue to be a burden on state and local government, Illinois business and local economies for decades before it could be paid off. Some analysts suggest that the state, its businesses and residents could carry this burden for more than 24 years if not dealt with promptly while market interest rates are favorable.
With the proposed borrowing the bonds would be repaid within 14 years. After 4 years the state economy is also projected to be producing sufficient revenue to allow a sunset of a majority of the recent tax increases, as well.
Passing this borrowing is contentious however, and will require a supermajority to pass. It is highly unlikely to pass in its current form. If NO borrowing for debt repayment is approved before the FY2012 budget is enacted, you may expect to see scorched earth reductions which will devastate education, healthcare, human services, youth and aging and public safety as we know them today. Based on the actual level of borrowing and debt service that we approve, the final budget could be affected to a greater or lesser degree.
As mentioned before, this year we will be engaged in ‘budgeting for outcomes’, where funding will be divided by priority and allocated based on measurable performance within those priorities.
Here are the Goals established by the Governor in his budget, and the priorities (“keeps”) that he proposes to fund, and a few categories (“cuts”) which he proposes to eliminate.
I will tell you that from a first reading of the budget documents and summaries the actual “cuts” are far more substantial than these little snippets imply, and the “keeps” actually may indicate General Revenue Fund spending $1.716 Billion greater than FY2011. I find neither of these acceptable. I understand the certain collective bargaining agreements, employee healthcare costs and pension obligations must rise, but as the legislature reviews the budget, I hope we restrict ourselves to a zero-growth, balanced budget and shared sacrifice across all areas.
You can look at the actual budget documents (link in paragraph 2 above), to see the actual dollar amounts added to or subtracted from these areas. I particularly direct your attention to education lines which appear to be increased, and Medicaid and Human Service lines which appear to be substantially decreased (although further analysis of Federal Fund reallocations may mitigate some of these cuts).
Goal #1 Providing quality education and opportunities for growth
Keeps: Early Childhood Education, MAP grants, General State Aid
Cuts: School Transportation Reimbursement, Regional Education offices, Consolidate School Districts
Goal #2 Growing jobs and industry
Keeps: Entrepreneurship and Innovation, Reorganize International Trade Offices, Job Training
Cuts: Soil and Water Conservation District Subsidies, National High School Rodeo
Goal #3 Protection from crime, catastrophe and wrongdoing
Keeps: Operation Ceasefire, Nursing Home Offender Investigations, Lincoln’s Challenge, IDOC Boot Camps
Cuts: Franklin County Meth Program, New State Police officer Training, IDOC shared services
Goal #4 Protecting children, vets, poor, disabled, elderly and sick
Keeps: Childcare, Home Services and CCP, Elder Abuse and Neglect Investigations, Differential Response, DJJ Aftercare
Cuts: Illinois Cares RX, Reduce Medicaid Rates, Circuit Breaker Program, no new DHS field office staff
Goal #5 Maintaining cultural and natural resources
Keeps: Arts in Education, seasonal staffing at State Parks
Cuts: Conservation Police class, Wildlife Prairie Park
Goal #6 Making government more efficient and effective
Keeps: CMS upward mobility program, hardship refunds
Cuts: Fleet modernization, reduce leased office space
Simply by their brevity and lack of specificity these goals and priorities are not particularly informative. I urge you to study those sections of the operating budget which are of special concern or interest to you, and examine the proposed increases, reductions and/or elimination of programs. Please share your comments, suggestions and concerns with me at greg@gregharris.org
As I stated, I am very concerned that the FY2012 budget we pass be balanced and within our means. I am also very concerned by my first read of this proposal which seems to increase overall spending while inflicting disproportionate negative impacts on the most frail and vulnerable of our citizens.
There is no doubt that whatever we do this year will be unpleasant and painful, but I believe that working with both parties in both chambers and the Governor that we can do the best job we can for the people of Illinois. I also seek your help to be sure that what we do is fiscally prudent, strategically sound and progressive public policy.