In Illinois, roadwork won’t grind to a halt, prisons won’t run out of food and schools will reopen on time. But the six-month stopgap budget that averts a government shutdown is only digging the state deeper into the hole.
With no agreement between Republican Governor Bruce Rauner and the Democrat-led legislature over how to raise revenue, the state is on track to spend $5.5 billion more than it brings in by the end of June, according to initial estimates from the Civic Federation, a watchdog group. And the appropriations make no dent in the $111 billion debt to the state’s pensions, one of the biggest drags on Illinois, whose credit rating has fallen lower than any U.S. state in over a decade.
“This is a political gimmick to bring to resolution the state of Illinois’s inability to deal with its major issues,” said Laurence Msall, president of the Chicago-based federation, which tracks the state’s finances. “It does not end the fiscal crisis.”
Human services, higher education and government agency operations, which have had little or no funding in FY2016, received appropriations to pay for FY2016 expenses and for the first half of FY2017. Besides education spending, most of the appropriations end by December 31, 2016.
Although the stopgap budget authorizes funding for many struggling areas of State government, it is far from a complete budget. Human services grants and programs receive $667 million, which represents 65% of the total funding needed to complete the FY2016 budget and fund the first half of FY2017, according to legislative reports.
Illinois has been sued for breach of contract by a group of 82 social service providers who are allegedly owed more than $130 million for work that has been performed but not paid for on State contracts dating back to July 1, 2015. Other agencies have provided services without contracts.
No General Funds payments have been made for group health insurance in FY2016 and those appropriations are not included in the FY2017 stopgap budget. As a result, the backlog of unpaid health insurance claims stood at $3.3 billion at the end of May 2016. Without the addition of considerable resources this backlog will grow substantially in FY2017. The Governor’s recommended FY2017 budget estimated the General Funds cost at $1.81 billion, which the Governor hoped to reduce to $1.37 billion through labor negotiations. However, those talks have not yet resulted in an agreement with the State’s largest union. Group health insurance costs must be paid eventually due to State law and existing collective bargaining agreements.
Most of the State’s General Funds spending for FY2017 is not accounted for in the appropriations but will continue to be provided through consent decrees, court orders and existing statutory requirement. This includes Medicaid, employee salaries, State pension contributions and debt service. All of the appropriations in the stopgap budget are in addition to the State’s compelled spending.
To help fund the spending plan without passing a substantial tax increase, the State approved several one-time revenue measures. As proposed in the Governor’s FY2017 budget, the State will forgo repayment of approximately $450 million of interfund borrowing and spend down the entire balance of $276 million in the Budget Stabilization Fund, Illinois’ only rainy day fund.
The State hopes to reduce its debt service by $20 million through a $2 billion refinancing of its outstanding debt. To achieve these savings several provisions of the current General Obligation Bond Act were suspended for FY2017 including the level principal repayment rule and the prohibition on extending the life of principal debt beyond its original maturity. Details on the structure of the refinancing or how the savings are generated were not specified in the refunding bond authorization, which also included $2 billion of bonds for capital purposes.
General Funds resources were increased in FY2017 by approximately $150 million through a new assessment on hospitals that will pay for Medicaid costs that would have otherwise relied on the State’s operating resources.
To fund part of the higher education budget, the State appropriated $97.1 million from Personal Property Replacement Tax (PPRT) proceeds. This fund allocation will reduce the amount that would otherwise be distributed via formula to local governments, which usually totals roughly $1.4 billion annually. With the addition of the PPRT resources higher education spending will receive approximately $1.0 billion in funding compared to $600 million provided at the end of FY2016. This is still significantly less than the $1.9 billion spent on higher education in FY2015 and the $1.7 billion proposed in the Governor’s recommended FY2017 budget. The funding is also available to pay for FY2016 costs.
As previously discussed here, education funding was a major sticking point in the budget negotiations. The enacted budget legislation, Public Act 0524, includes a full-year FY2017 appropriation of $5.1 billion for General State Aid (GSA), the State’s main spending program for elementary and secondary education. That amount is $361.4 million above the $4.7 billion appropriated in FY2016 and $306.1 million higher than the $4.8 billion in the Governor’s recommended FY2017 budget.
The enacted GSA funding is intended to ensure that no school district receives less money in FY2017 than in the previous year. It also includes $250 million for schools with high concentrations of low-income students. The cash-strapped Chicago Public Schools will receive an additional $102.5 million in GSA in FY2017, according to the Illinois State Board of Education.
Another component of the budget package requires the State to pay the normal cost (current service cost) of $215.2 million for Chicago teachers’ pensions in FY2017. However, that amount is not due until June 1, 2017, and the payment will only be made if the Governor and legislature reach agreement on pension reform legislation. In FY2016 the State is scheduled to make total contributions of $3.7 billion to the Teachers’ Retirement System (TRS), which covers teachers outside of Chicago, while paying $12.1 million for Chicago teachers’ pensions.
The Governor and legislature also agreed on a measure that would allow CPS to levy a special property tax to pay pension costs. That tax, at a rate of 0.383%, would generate about $250 million per year.
- Norseman - Monday, Jul 11, 16 @ 3:06 pm:
=== “This is a political gimmick to bring to resolution the state of Illinois’s inability to deal with its major issues,” ===
I see this as a minor rule change to allow the combatants to catch their breath before resuming their battle. The problems continue to grow.
- Joe M - Monday, Jul 11, 16 @ 3:19 pm:
==higher education and government agency operations, which have had little or no funding in FY2016, received appropriations to pay for FY2016 expenses and for the first half of FY2017.==
I’mm not sure that is accurate: “If we look at this as an 18 month cycle (Fiscal Year ’16 and six months of Fiscal Year ’17) – normally we look at 12 but look at this as an 18 month cycle – normally we would have expected to receive about $72 million during that time. Now we’ve been appropriated $46 million,” said WIU Budget Director Matt Bierman.
-from: http://tspr.org/post/stop-gap-funding-measure-far-cure-all-wiu
- PublicServant - Monday, Jul 11, 16 @ 3:22 pm:
This just delays and compounds the tax increase needed to allow the state to pay its current bills, and pay back its past debt.
- 47th Ward - Monday, Jul 11, 16 @ 3:50 pm:
Calling it a gimmick was being charitable. Msall was being as diplomatic as possible.
Using language Richard Goldberg would appreciate:
https://www.youtube.com/watch?v=bphR-6Xi1_I
- Norseman - Monday, Jul 11, 16 @ 3:54 pm:
Well played 47.
- Mama - Monday, Jul 11, 16 @ 4:04 pm:
“No General Funds payments have been made for group health insurance in FY2016 and those appropriations are not included in the FY2017 stopgap budget.”
I’m surprised the group health insurance companies have not sued. I thought the contract with state employees includes providing health care insurance for state employees. It appears the state is breaching 2 contracts. The one with their employees and the other one with the health care providers.
- BK Bro - Monday, Jul 11, 16 @ 4:05 pm:
This is what happens when citizens demand services from a government they can’t afford.
- Fairness and Fairness Only - Monday, Jul 11, 16 @ 4:05 pm:
It’s a good summary on the state of the stopgap.
Good to see Bloomberg call it out for what it is - it’s a gimmick to get the minimum done and get through the elections that leaves us deeper in debt and kicks the can further down the road.
- Chicago Cynic - Monday, Jul 11, 16 @ 4:07 pm:
47 nails it again. Gimmick is putting it way too mildly. For a guy who calls himself fiscally conservative, this stopgap is painfully far from fiscally responsible. But if the choice was this or nothing, the humane choice was this. But we simply MUST fix the revenue picture.
- wordslinger - Monday, Jul 11, 16 @ 4:11 pm:
What — no mention of the big payoff in economic growth, new jobs and increased government revenues when the governor’s agenda is implemented?
Why not? That’s what this has been all about, right?
I hope the governor’s peeps are gettin’ their new messagin’ on and sellin’ it.
- Demoralized - Monday, Jul 11, 16 @ 4:18 pm:
Of course it is. But it’s a gimmick I’ll take right now. It accomplished a great deal just by the simple fact that it was the result of successful negotiations. If this ends up being the springboard to more stability then it was worth it.
- mokenavince - Monday, Jul 11, 16 @ 4:19 pm:
From the looks of it I don’t think we will ever have an annual budget.We are on a slippery slope.
- Arthur Andersen - Monday, Jul 11, 16 @ 4:20 pm:
Mama, for what it’s worth, payments from Other State and Federal sources are being made for Group Insurance and providers in the HMO plans are receiving reimbursements. The self-insured plans, like Cigna and HealthLink, are not getting paid and are not paying as I understand it.
- Keyrock - Monday, Jul 11, 16 @ 4:21 pm:
This is what happens when citizens demand services from a government that for many years hasn’t raised taxes consistent with similar states, but instead has kept taxes low for the 1%.
There, BK Bro. Fixed it for you.
- Anonymous - Monday, Jul 11, 16 @ 4:32 pm:
It was the stopgap or nothing. At this time, a needed gimmick.
- Skirmisher - Monday, Jul 11, 16 @ 4:33 pm:
Of-course it’s a political gimmick! That is all these people are capable of doing. You wouldn’t expect anything akin to responsible statesmanship, would you?
- Shemp - Monday, Jul 11, 16 @ 4:50 pm:
Absent from the Smiddy story, like every other on both sides, is a politician proposing a legit solution. Anyone can criticize.
- Just Chilling - Monday, Jul 11, 16 @ 5:24 pm:
==If this ends up being the springboard to more stability then it was worth it.==
Really? Wow . . .
- thoughts matter - Monday, Jul 11, 16 @ 5:35 pm:
I thought we were told here that the health insurance did get funded in the stop-gap for the rest of the 2016 costs, but there was no appropriation for the 2017 costs. I will admit trying to decipher the budget is next to impossible as far as I am concerned.
- Enviro - Monday, Jul 11, 16 @ 6:26 pm:
@ 4:04 ==This is what happens when citizens demand services from a government they can’t afford.==
What is really happening: This is what happens when citizens demand services from a government they they aren’t willing to pay for.
- Enviro - Monday, Jul 11, 16 @ 6:28 pm:
@ 4:04 ==This is what happens when citizens demand services from a government they can’t afford.==
What is really happening: This is what happens when citizens demand services from a government that they aren’t willing to pay for.
- NoGifts - Monday, Jul 11, 16 @ 6:43 pm:
repeating, “can’t afford it” is not the same as “don’t want to afford it.”
- realworld - Monday, Jul 11, 16 @ 7:30 pm:
all this wrong and we are still going to have a State Fair, LOL, you can not make this stuff up. Any person that supported a State Fair should be voted out of office.
- Korn Fed - Monday, Jul 11, 16 @ 8:56 pm:
If Bloomberg is right and “the state is on track to spend $5.5 billion more than it brings in by the end of June” then that’s not so bad. The state has been $5B out of balance for years - that’s the structural deficit that’s been patched with gimmicks many times over. But the collateral damage is unprecedented and awful…
- the Cardinal - Tuesday, Jul 12, 16 @ 7:14 am:
===all this wrong and we are still going to have a State Fair, LOL, you can not make this stuff up=== realworld===
Are kidding the IL State Fair? Yep thats the cause of all the shortfails in the once great state of Illinois. 10 days in August put ILL into the finacial death spiral. Lack of simple financial dicipline and accountability created this mess, not the corn dog days on 8th St. & Sangamon Ave.
- NoGifts - Tuesday, Jul 12, 16 @ 7:29 am:
I think there’s a big gap between what the wealthy of the state want to afford and what the other 90% of us want to afford.