Budget plans short on specifics

Quinn, Brady proposals differ, but lack details

Monday, October 25, 2010

Faced with an unprecedented budget abyss, Democratic Gov. Pat Quinn says he'll raise taxes and make reasonable cuts. Republican challenger Bill Brady says he'll slash his way into the black.

Both pray the economy rebounds to help the state claw its way back to financial respectability.

The election is fewer than 10 days away, but neither candidate is providing much in the way of specifics. They're sticking to voter-friendly bromides about getting people back to work by attracting new businesses and talking about why the other guy's plan will send Illinois deeper into the muck.

Many budget experts without a horse in the race say neither Quinn nor Brady is offering workable solutions. Instead, the policy wonks argue it'll take a little bit of both approaches.

"The candidates don't appear to have any idea of what to do, either. Brady, for example, says he will tell us later," said Christopher Mooney, a political science professor at the University of Illinois at Springfield. "And Quinn, if he had a plan, you'd think he would have implemented it by now."

The scope of the problem is staggering. By the time the newly sworn-in governor starts putting together a budget next spring, the deficit will reach $15 billion, according to Comptroller Dan Hynes. That amounts to more than half of the state's day-to-day spending for a single year.

A quick history of how we got here: The dot-com bubble burst, the 9/11 terrorist attacks sent the markets reeling, then- Gov. Rod Blagojevich went on a spending spree and Wall Street imploded.

Less money was coming in, but lawmakers wanted to avoid short-term political pain. They pushed off tough decisions to greatly curtail spending or raise the income tax, electing to borrow and pile up unpaid bills instead. It's a stack of IOUs the comptroller estimates will reach $8 billion by next summer.

Quinn's plan

Quinn has spent much of his 21 months since taking over for Blagojevich trying and failing to get lawmakers to pass an income tax increase. He's been all over the map on how big the tax hike should be and what the money should go for, but the latest incarnation calls for raising the personal income tax rate from 3 percent to 4 percent. Quinn dubs the 33 percent hike in the tax rate a "surcharge" for education.

During the campaign, Quinn has told voters he has cut the budget by $3 billion, "more than any governor in Illinois history."

It depends on what gets counted.

Quinn and his budget chief focus on "discretionary spending," money for schools, state worker salaries, paper clips and the like.

Over the last three years, that number has dropped from $27.8 billion to $24.9 billion. Voila: a nearly $3 billion cut.

To get to that number, however, Quinn doesn't include some big-ticket costs, including the more than $4 billion to put toward the state pension systems.

Republicans say those costs must be counted to provide an accurate overall picture. Toss in a few other pricey items, including payments for prior loans to cover pension and health care costs, and projected spending hits $33.5 billion — $600 million more than the budget Blagojevich bequeathed Quinn.

Republicans say that's a fair figure to look at because it's among the numbers the Quinn administration uses when seeking to borrow money from investors.

Quinn defends his way of adding up the numbers.

"We had one number when I started, and we whittled it down," Quinn told the Tribune. "We have had to drain that by $3 billion. We have that much less money for the various costs that people have become accustomed to. That's why it's been a difficult challenge."

Brady, a state senator from Bloomington, calls Quinn's calculation "fuzzy math."

And Republicans question if Quinn has actually made the cuts and doubt whether they are deep enough. For months, reporters have asked for a detailed list of budget cuts, but the Quinn administration has provided only a broad outline.

Last summer, for example, Quinn announced he was cutting $891 million by ordering state agencies to hold money in reserve. David Vaught, Quinn's budget guru, says that money will not be spent. Republicans respond that the money is up for grabs until the budget year is over. At any rate, Quinn counts those reserves when he talks about his $3 billion in cuts.

"Not surprisingly, both of them are looking at what's most advantageous to the point they're trying to make," said Charles N. Wheeler III, a University of Illinois at Springfield journalism professor whose specialty is analyzing state budgets. "It's not that one guy's lying or the other guy's lying. They're being selective on what they choose to look at."

Brady's plan

If Quinn is criticized for not cutting enough, Brady draws skepticism for saying he can solve the budget problem mostly by cutting.

Brady says the state cannot raise taxes on families who are already struggling. He says the state must live within its means.

“Fixing Illinois' budget requires setting performance targets for state programs and stopping pay-to-play schemes of graft and corruption," Brady said. "Those programs that are answering a critical need and meeting their mission should be preserved; others may need to be reduced, restructured or eliminated."

Ask Brady what that means, and details prove elusive.
At first, Brady wanted 10 percent across-the-board-cuts. Even a prominent fellow Republican, former Gov.Jim Edgar, scoffed at that idea. Now Brady says he'll cut a dime of every dollar overall, providing more flexibility.

Brady contends he can't provide details on just how much or where he will cut until he gets into office and a squad of CPAs can descend on the state's books and count the beans. But one area he points to is bringing widespread managed care to Medicaid.

Quinn isn't letting Brady's lack of detail get in the way of attacking him. The governor says Brady's budget approach would decimate social services and result in major cuts to education. In turn, Quinn says, that would lead to higher property taxes as local school districts try to recoup money lost from the state.

Nonpartisan budget experts say it will be difficult for Brady to cut his way out of the hole — the shortfall is simply too large. The core of the state budget lawmakers can adjust is $24.9 billion. The deficit is expected to approach $15 billion.

Budget experts say it's possible to hold down spending over a period of several years and eventually balance the budget. Lawmakers, however, historically have not been known for such restraint.

A sizable chunk of the deficit is the unpaid bills state government carries over from year to year. It's expected to snowball to $8 billion by June 30.

Neither Quinn nor Brady says much about how they will address the problem, which has nearly crippled nonprofits across the state as they wait as long as seven months to be reimbursed for services such as child care, home visits for the elderly or helping drug addicts get clean.

Quinn has said his "goal" is to eliminate the bill backlog within two years, though lately he's acknowledged it could take as long as four years. As for how to do it, Quinn says only that it will require an "attack on all fronts," including a combination of borrowing and hoping for more money from the federal government.

Brady also said borrowing may be part of the solution, but only if it comes "with a repayment plan and as part of a comprehensive economic development plan to rebuild our state's economy." Brady said another option would be paying down the backlog "over a couple fiscal years" with tax money the state would earn if the economy rebounds.

In addition to cutting the budget, Brady wants to cut taxes. He wants to eliminate the sales tax on gasoline, repeal the state inheritance tax, and scrap higher taxes and fees imposed under Blagojevich. Critics suggest the state can't afford to lose that much money when it already can't cover its costs.

Pension time bomb

A major driver in the budget situation is costs for state worker pensions. Illinois is about $80 billion short and is supposed to be making huge payments every year to catch up. But last spring, the Senate skipped town before voting on Quinn's plan to borrow $4 billion to make this year's contribution.

Brady has attacked Quinn for wanting to borrow more money when the state already is deep in debt. Yet Brady also has said all options are on the table when it comes to funding the pension system, including borrowing up to $50 billion.

Quinn has blasted that idea and said it would do little to address the overall problem of funding the pension system, since the money would have to be repaid with interest. He said he's already signed off on a pension reform measure that will save the state more than $200 billion over the next 35 years.

Brady has said the changes do not go far enough and believes the state should switch to a 401(k) system similar to that in private industry, an idea Quinn opposes.

One thing is clear even if their plans are not: The budget isn't going to fix itself.

"Waiting and attempting to kick the can down the road is no longer reasonable. The can is now a 55-gallon drum," said Laurence Msall, president of the Civic Federation, a nonpartisan government research group. "Illinois has gone from being a state that is financially challenged to one that has become a national embarrassment."