Potholes Cover The Road To A State Budget Deal

Monday, May 17, 2010

Lawmakers will have to find some common ground if they intend to pass a state budget before the spring session concludes. We preview the final negotiations.
Even after passing the most bills in a single session since 1992, members of the General Assembly still have some heavy lifting to do before they commit themselves to their reelection campaigns this summer. When they travel back to Springfield sometime in the next 10 days, probably next Monday, their principle priority will be finalizing a state budget, despite a $13 billion deficit. As we saw last year, that task is easier said than done.
The good news, if there is any, is that lawmakers won't be working from scratch. Before leaving the capitol two weeks ago, the Senate approved a package of bills that (kinda, sorta) balances the budget. Their spending bill (HB 859) would provide each state agency with a lump-sum of state money from the General Revenue Fund. The initial appropriations, as outlined (PDF) by Larry Joseph at Voices for Illinois Children, pale in comparison to the funding levels agencies received just one year ago; the budgets for the Departments of Human Services, Children and Family Services, and Public Health, for example, all shrink by over 30 percent compared to FY 2010 totals.
To compensate, the Senate also passed SB 3660, which dumps $3.46 billion into Gov. Pat Quinn's lap and offers him broad emergency powers to shift around dollars from the special funds under his control to fill the holes. Combined with the implementation of 12 furlough days for lawmakers and constitutional officers and the sale of nearly half of the money owed from a 1998 national tobacco settlement, Senate leaders say the state could make it through another year without shutting down completely. If the House passes its version (SB 1211) of that package, members could get out of town relatively quickly.
That path, however, is filled with roadblocks and potholes. Nobody is juiced about giving the executive branch so much power over the state's purse, even if it saves them the responsibility of facing voters after trimming popular programs. The Senate bill also relies on multiple funding mechanisms that apparently won't fly in the House. The lower chamber already voted not to issue $4 billion in pension obligation bonds in order to meet the state's annual contribution to the pension system. Without that borrowing measure, the only realistic -- albeit much more costly -- option is to push the payment off until January. They haven't embraced an increase in the cigarette tax or a tax amnesty proposal either, which would generate about $600 million combined.
Meanwhile, this plan doesn't even attempt to pay off the $6 billion in late payments the state owes to schools and services providers, which rightfully angers the House Black Caucus and some liberal independent lawmakers, who point out that many thousands of workers will lose their jobs as a result -- to the detriment of the local economy, not to mention the students and vulnerable populations that depend on their services.
For context's sake, it's important to note that the state has been starving our human services infrastructure for years. The growth rate of general revenue spending has slowed substantiallyin the last 10 years, dropping from 6.1 percent annually between FY 1989 and 1999 to 3.9 percent in the 2000's -- lower than the state's income growth rate and just one percent higher than inflation. In fact, Illinois' spending, taken as a percentage of state gross domestic product, is the sixth lowest in the country.
Agency budgets have taken a beating as a result. State support for K-12 and higher educationhas fallen precipitously. Between FY 2003 to FY 2010, Illinois cut (inflation-adjusted) human services funding by an average of $385.1 million per year. And while Medicaid is one sector of the state's economy that has grown, that's a reflection of increasing demand and national health spending trends more than eligibility expansions. Plus, cutting back on that programendangers jobs, reduces federal matching funds, and imperils the economic security of working people across the state.
The crucial reason state government "spends beyond its means," in other words, is because our tax system is inefficient. Because there is no appetite to debate this problem, even modestly, before the fall veto session, we can expect the final budget negotiations this month to be ugly.