Rep. Greg Harris • 13th District
Springfield Update • April 29, 2011
House FY12 Budget Update 1.0
By the end of next week, it is expected that the various budget bills will be moved out of the appropriations committees to the House floor. This is the next step in crafting a final FY2012 budget for the State of Illinois. Given the dire nature of the situation and the vast number of competing needs and interests, the work of the appropriation committees has been remarkably forthright and collegial. While there are clearly two political parties with two points of view, coupled with varying needs and priorities for different parts of the state, layered on top of the specific concerns of each of our individual districts, the portions of the decision-making which I have been part of have been remarkable in their professionalism and willingness to compromise when the decisions we are forced to make range from bad to worse.
Under the appropriation bills to be advanced out of committee next week, the House will be proposing major cuts in every area of government. None of these cuts were easy to arrive at and all of them will have consequences, some of which we can easily foresee and some we may not have foreseen. Each of these choices will also represent trade-offs between winners and losers. It will be the task of the full House to review, debate, accept or reject these proposals. Then the budget proposal of the House will have to be reconciled with that of the Senate and eventually either signed or vetoed by the Governor.
As the appropriation bills come forward in the next few days, there are certain budget cutting strategies you should watch for, and as the House and Senate begin the process of reconciling our different budget proposals, there are also some potential sources for additional revenues that could be considered. I will list some of these below, along with some of the major tradeoffs that each implies. Keep in mind that every effort will be made to complete this entire process during the month of May, since at the stroke of midnight on May 31; it will then require a supermajority instead of a simple majority to pass any legislation including the budget.
To review, the House is operating under revenue assumptions contained in HR110, which limits our General Revenue Fund (there are other state funds like the Road Fund and federal grants) to $33.173 billion. As I have told you before, living within this cap will require the elimination of billions of dollars in spending from the Governor’s proposed budget. Listed below are some of the approaches to cutting/reducing expenditures. However, each has consequences and tradeoffs. Others will be like squeezing a balloon, you can make it smaller in one place and it will only have to get larger someplace else. Overarching all these decisions is the awareness that short-term cost savings now in categories like prevention will certainly increase total costs later on.
In the various departments that provide services to families and individuals you may see changes in eligibility requirements, enrollment caps or service levels reduced. There are many state programs for which enrollment/participation is based on eligibility requirements (income, age, level of disability, etc.). You may see eligibility thresholds tightened to decrease participation. In other cases, you may see eligibility requirements left alone, but enrollment capped when participation reaches the level for which there is appropriation. In other cases, you may see eligibility and enrollment left as-is, but service levels (for instance units of service per person or household) restricted from current levels.
Clearly in programs which serve vulnerable or sick populations these changes could have substantial quality of life impacts. The potential cost-shifts with these decisions over time could force some individuals into more acute care settings, or to shift from less-expensive community based settings to more-expensive institutional settings.
Examples of the shift from prevention to acute care would be limitations of participation in the AIDS Drug Assistance Program, where cost reductions in the short term could jeopardize the health of some people and shift costs to primary caregivers or acute care hospitals. Since these individuals may not have private or public health insurance, their uncompensated care will cost-shift to healthcare institutions and private payers in the form of higher charges and premiums. Another example would be reduction in after-school, violence prevention and youth services. Cost reductions in programs and services now could shift to higher law enforcement and incarceration costs in the future.
An example of how these kinds of reductions could impact the balance between less-expensive community care vs. more-expensive institutional care would be the Community Care Program for seniors. This program delivers certain in-home assistance to senior citizens to allow them to live in their own homes. If the program is eliminated or curtailed, it could force some seniors into nursing home settings which have a higher daily cost to the state (although there are certain federal matches for parts of those costs). Similar tradeoffs would apply to community-based services to persons with disabilities who might have to relocate to institutions.
In the education area, reductions in the levels of state assistance to school districts would require either revenue increases at the local level (property taxes) or budget cuts by local school districts including program elimination, layoffs, class-size increases, etc. In addition to providing funding for the basic per-student Foundation Level to Illinois’ school districts, other major areas of local district operations that could be impacted are transportation, special education, ESL, teacher preparation and enrichment programs.
There are many line items within the operations of all state departments and agencies that we will look at cutting (things like equipment maintenance and purchase, data processing, supplies, etc.) of which the largest by far is the Personal Services (salaries) and benefits lines.
Tradeoffs here that we are evaluating include trying to determine the most economical path to follow in certain lines. A few instances: in many cases the departmental motor vehicle fleet may have vehicles (cars, trucks, buses) that date back to 2002 or older. Is it more economical to pay maintenance and fuel costs on older, less efficient vehicles, or replace some of them with newer, more fuel-efficient vehicles. (Maintenance costs and escalating fuel prices represent major cost components for departments such as Transportation and Corrections). Another instance is evaluation of existing office leases and the cost of cancelling those leases and moving state workers into less expensive facilities. (Some leases signed during the peak of the commercial real estate market may be able to be renegotiated or cancelled in favor of cheaper leases now, for instance. In other cases, workers can be moved into vacant areas in other state buildings created by the elimination or reduction of some state functions.) As in the case of all contract law, the cost of cancelling each contract before its term has to be calculated into the cost savings equation.
A major area where investment in new technology now could result in substantial cost savings is electronic data processing. The state is spending hundreds of millions of dollars to operate and maintain legacy mainframe computer systems that are beyond obsolete. Not only is this draining valuable cash from other direct-service items, it is hampering our ability to manage and control budgets, accounting and service delivery in every area of state government.
As I mentioned, the largest single item in most agency budgets is the Personal Services line. These lines are seeing automatic increases due to collective bargaining agreements signed by former Gov. Blagojevich. Appropriation committee members are faced with evaluating the tradeoffs of increased labor costs and the effect of those increases on other lines such as grant lines for community-based services. If Personal Service allocations are cut and jobs eliminated, it is possible that litigation over the terms of the collective bargaining agreement could ensue.
Higher education in Illinois is supported by state funding to our public institutions. Reductions in these lines will have the immediate effect of forcing the governing body of these colleges and universities to seek increases in tuition and/of fees, and in certain cases increases to property tax levies. Tuition and scholarship assistance could also be capped or reduced, forcing some students to discontinue their educations or go into debt.
There are other grants and subsidies between governmental entities in the state budget that are not statutorily mandated that could be cut or eliminated. For instance, IDOT provides operating subsidies to Amtrak for its passenger service within Illinois and to the RTA to subsidize discount fare programs for seniors, students and persons with disabilities. There is also potential to utilize Other State Funds (OSF) monies to reduce reliance on General Revenue Funds (GRF). An example of this would be utilization of Road Fund money (which comes from Motor Fuel Taxes [as distinguished from the sales tax on fuel] and license fees) to departments such as IDOT, the State Police or Secretary of State for driver’s services.
The above are some of things that interested person should watch for in next week’s budget bills. Once approved by the full House, our version of the budget must be reconciled with the Senate version, which will be based on $1.1 billion more in revenues (and therefore fewer cuts than the House budget), as set out in SJR29. SJR29 relies upon the COGFA revenue projections for their higher number.
There are certain other things that the final budget could agree upon that would increases funds available for appropriation. Among these are decoupling Illinois depreciation schedules from the accelerated Federal depreciation schedule, which could result in another $600 million in revenue, additional funds sweeps, or agreement to cut some of the Statutory Transfers Out. Statutory Transfers Out (STO) are funds collected by the State of Illinois which are then sent to various other government bodies across Illinois. The total that is redistributed by STO is about $2.3 billion, and fund sweeps could be several hundred million.
The major STO is to the Local Distributive Fund. The LDF then redistributes the money to cities and counties across Illinois, the largest recipient being Chicago at about $220 million. Reducing these funds would blow holes in other city and county budgets that would result in local budget cuts or tax increases. The other major recipients of STOs are various public transit agencies in the state. Reductions there would result in service cuts and/or fare increases.
These are among the unpleasant options that we are considering as we try to downsize the Illinois State Budget to live within our means. As always, I look forward to your comments, thoughts and suggestions to guide me in this process. I can be reached during May at my office at the Capitol 217 782 3835 or at greg@gregharris.org.