The process of crafting state budget for FY13 took off this week with a few hopeful signs, amidst incredibly daunting challenges to come. Last year, if you recall, from the outset there was disagreement among the Governor’s Office, Commission on Government Forecasting and Accountability (COGFA), the House, Senate Democrats and Senate Republicans on what initial revenue forecast upon which to base the entire rest of the budget should be. This year, after some initial discussions and review, a common agreement on a starting point has been reached: a General Revenue Fund (GRF) number of $33.719 billion. You can see the breakdown of the various sources here in House Joint Resolution 68: http://ilga.gov/legislation/BillStatus.asp?DocNum=68&GAID=11&DocTypeID=HJR&LegId=66455&SessionID=84&GA=97
This, however, is just the first step in what will certainly be a long and painful process. Among the challenges and pitfalls that will be coming up next are:
- Conceptual differences in the way the Governor’s Office, Senate and House view the appropriations categories. This year for the first time, the Governor is dividing expenditures into 7 categories, based on Budgeting for Outcomes. Traditionally, the Senate has divided appropriations between 2 Appropriations Committees and the House has divided appropriations between 5 Appropriations Committees. While we are all meeting jointly, these differences in budgeting approaches add tactical difficulties to an already complex budgeting process.
- One of the next tasks we must agree on is what expenditure items to deduct from the revenue number before the remainder is appropriated to different departments and programs. This deduction will be in the billions of dollars and will have a profound effect on how much must be cut from operations and agencies in the final budget. Here are some of the expenditures which may be considered as part of the initial deduction, along with some estimated dollar values:
- Paying down existing bill backlog which may reach about $8.5 billion
- Pension contributions of about $5 billion
- Statutory Transfers Out of about $2 billion
- Debt services of about $2 billion
- Employee Group Insurance of about $1.5 billion
- Factors that could mitigate one way or the other on the ultimate budget include:
- Results of collective bargaining negotiations (which will not be concluded until after the end of the budget process on May 31)
- Changes to public employee pension funding
- Changes to Medicaid
- Changes to employee/retiree healthcare costs
- Changes to local revenue and/or increased federal match
The implications of changing line items are intricate and very inter-dependent. For instance, reducing or eliminating Adult Transition Centers, substance abuse treatment and other re-entry services may reduce certain line item costs in the Department of Corrections, but almost certainly increased recidivism will drive up other public safety, corrections and health care lines.
Rebalancing institutional care for mentally ill or developmentally disabled individuals will shift costs from state operated facilities to community-based care in the Department of Human Services. However funding for community organizations may be reduced, and the backlog of unpaid bills deters them from accepting new clients.
Last week I sent out an exercise in Medicaid liability reduction proposed by the Department of Healthcare and Family Services. It was clear from the results that support for any (or many) of those reductions were tepid at best. Moreover, simply cutting people off from certain medical care also does not make them healthier or cause them to disappear from the system, but may only shift the cost to other portions of the healthcare delivery system in a more acute, higher cost setting.
These are just 3 examples from among the thousands of programmatic and priority decisions the legislature will be required to make in the coming months.
As these decisions continue to unfold, and the choices become more defined, I will continue to keep you informed and ask for your advice. I can be reached in Chicago at 773 348 3434, in Springfield at 217 782 3835 or greg@gregharris.org.