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* You may have followed Comptroller Leslie Munger’s press conference here the other day. The Sun-Times has a write-up…
Last July, Munger’s office had estimated that without a budget, the spending deficit would reach about $5 billion by the end of fiscal year 2016. But spending at the state Department of Human Services and the Department of Healthcare and Family Services — controlled, in the absence of a budget, by court orders and consent decrees — is now expected to add an additional $1.2 billion to the projected $5 billion deficit. […]
And as the backlog continues to grow and bills go unpaid, everything from social service agencies to state universities and colleges suffer, Munger said, echoing a familiar refrain.
Munger said the state could raise taxes, but suggested doing that alone would be political suicide.
“If we solve this problem on revenue alone, we will be looking at raising our tax rate in Illinois 3.75 percent up to somewhere between 7 and 8 percent,” Munger said. “I don’t know any legislator who would vote for that and I don’t know many businesses that would stay in Illinois for that.”
That’s true. But the huge tax hike she’s talking about assumes the state will attempt to get out of this hole all at once.
It’s not going to happen that way because, as Munger herself said, who could possibly vote for it?
* Instead, once taxes are raised, the government could very well pay down that backlog over time, just like Pat Quinn did after he and the Democratic GA raised taxes. The state dragged a mountain of debt behind it for years, gradually whittling it away until most of the tax hike expired. Such a strategy could very be used again.
There are two other options that could be in the mix as well, however.
1) The government could do massive “sweeps” from special state funds to pay down the backlog. Quinn only wanted to borrow from special funds, but Rauner is fine with just taking the money.
But unless you dip into the Road Fund and municipal revenue sharing (sacrosanct funds, but where the real money is), you can’t solve that problem. Taking money from the munis means harming Chicago, so that’s out. They swept the Road Fund last year to patch the FY15 hole, and the road builders (who backed Rauner) went kinda nuts. As a result, the latest GOP fund sweep plan specifically protects the Road Fund from being dinged.
2) Since state bankruptcy is not an option, the government could require businesses and not-for-profit groups to forgive part or even all of the debt owed by the state in exchange for new contracts. That would be the “businessman” way out of this deep hole, but it could do serious damage to some businesses and not-for-profits or even put them entirely out of commission.
Imagine being told by the state: “Yeah, we owe you $6 million, but if you don’t forgive that debt we’re not giving you any more contracts and that’ll put you out of business.”
* Related…
* Children, families, providers sort through ‘devastating’ cuts in autism-related services: Families of Illinois children with autism are reporting declines in their children’s communication skills and heightened anxiety after the ongoing lack of a state budget prompted drastic reductions in services statewide… Beginning last summer and fall, Autism Program providers began cutting back on services to people without insurance coverage or those who couldn’t pay the full price. Medicaid doesn’t pay for many autism-related services or reimburses providers at low rates.
* Sangamon County’s Habitat home-building program on indefinite hold: Habitat for Humanity of Sangamon County has suspended its affordable-housing construction program indefinitely as a result of a sharp drop in donations that organization leaders say is linked to the state budget deadlock… Stone said longtime donors of money and materials have described their own cash crunch as a result of delayed state payments and lost contracts. She added that she believes state workers have turned cautious out of concern for their jobs as Illinois enters its eighth month without a budget… “The companies that are so generous, the ones that depend on state funding, they don’t have the cash,” said Stone, “or they don’t have new (state) contracts. There are very generous companies in Springfield, but we were getting the same pushback from most of them.
posted by Rich Miller
Thursday, Feb 4, 16 @ 10:56 am
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“And if you do forgive the $6 million, you’ll probably still go out of business — but that will happen far enough down the line that I won’t have to take the political hit for it. Good luck!”
– MrJM
Comment by @MisterJayEm Thursday, Feb 4, 16 @ 11:02 am
Imagine being told by the state: “Yeah, we owe you $6 million, but if you don’t forgive that debt we’re not giving you any more contracts and that’ll put you out of business.”
A businessman on the other side would say to take the money and shut the business down, instead of continuing a massive debt in exchange for contracts that have a history of going sideways. I guess that is one way to privatize health and human services in the state.
Comment by Dee Lay Thursday, Feb 4, 16 @ 11:02 am
Imagine being told by the state: “Yeah, we owe you $6 million, but if you don’t forgive that debt we’re not giving you any more contracts and that’ll put you out of business.”
Kinda like not paying into the pension funds and then asking the people in the pension funds to pay more, get less of a benefit and oh, by the way, we’re still not going to pay into the pension fund.
Comment by Union Leader Thursday, Feb 4, 16 @ 11:04 am
==Imagine being told by the state: “Yeah, we owe you $6 million, but if you don’t forgive that debt we’re not giving you any more contracts and that’ll put you out of business.”==
The Rauner business model is to make you desperate enough to agree to his terms. If I ran a social service agency, there’s no way I’d believe the state would fully repay its debt.
Comment by Century Club Thursday, Feb 4, 16 @ 11:08 am
Union leader +1,000,000
Unless you’re a bank, the state has no problem not paying you.
Comment by Century Club Thursday, Feb 4, 16 @ 11:09 am
“Unless you’re a bank, the state has no problem not paying you.”
A state’s obligations to banks are sacrosanct. A state’s obligations to its citizens? Not so much.
– MrJM
Comment by @MisterJayEm Thursday, Feb 4, 16 @ 11:13 am
Maybe we should just funnel all State expenses through bonds. At least we know those get paid on time.
Comment by thechampaignlife Thursday, Feb 4, 16 @ 11:14 am
“Imagine being told by the state: “Yeah, we owe you $6 million, but if you don’t forgive that debt we’re not giving you any more contracts and that’ll put you out of business”
You are laughin’ but that is the mumbo jumbo they laid on the state fair vendors last summer ….who are still suckin’ air. Meanwhile $uper$tar have their shiny new P3 to drive around.
Fill er up
Comment by Annonin' Thursday, Feb 4, 16 @ 11:19 am
Conventional wisdom has it that reneging on obligations, using one methodology or another, is certainly part of Rauner’s modus operandi. I’m just here waiting to see what form it will take.
Comment by Dome Gnome Thursday, Feb 4, 16 @ 11:24 am
===just like Pat Quinn did===
(and will do again. Oh!)
Comment by Ducky LaMoore Thursday, Feb 4, 16 @ 11:25 am
>That would be the “businessman” way out of this deep hole
The deeper it gets, the more “businessman” the approach Rauner can leverage us to take. That said, I would hazard that most actual businesses and people in Illinois believe in paying their debts, not weaseling out of them.
Comment by Earnest Thursday, Feb 4, 16 @ 11:25 am
Relying solely on one entity, that happens to be the state, for contracts is not a good business model. What did everyone think would eventually happen?
Comment by Free Roddy B Thursday, Feb 4, 16 @ 11:30 am
Has anyone read the 1st article yet (cuts to autism)? I feel like I’ve been stabbed in the heart. Keep in mind this is also one of the programs the Governor tried to cut in the Good Friday Massacre.
Comment by Miss Marie Thursday, Feb 4, 16 @ 11:37 am
Return to the 2011 tax rates as soon as possible. We’re into February for pete’s sake! If you want to make any retroactive tax collection, the longer you wait, the harder an individual gets hit on the paycheck that takes the initial retroactive hit. Rauner’s gotten his massive cuts through his Crisis Creation Mission on social services and higher ed. Other cuts have been implemented as well (Munger said she cut her office’s expenses by 10%). But, I know, there are many buts- primaries, general, Presidential elections. If the State were a school or a church or a community center and it burned to the ground, would you just stand by and say, “I tithed in the past. Not my problem now,”? All sides have said a combination of cuts and revenue. A return to the 2011 rates is revenue, and we’re in the middle of the pack nationwide as it is as far as volatility goes- http://www.pewtrusts.org/en/multimedia/data-visualizations/2014/fiscal-50#ind6 .
Comment by Anon221 Thursday, Feb 4, 16 @ 11:38 am
==Relying solely on one entity, that happens to be the state, for contracts is not a good business model. What did everyone think would eventually happen?==
Why didn’t we think of that! The private sector has plenty of opportunities to serve the poor, elderly, youth, despondent, disabled and imprisoned.
If these are such desirable markets for the private sector, why does the state have to do it again?
Get a clue, dude.
Comment by Jimmy CrackCorn Thursday, Feb 4, 16 @ 11:45 am
Looks like we now know what Linda meant by
“Aloha.”
Comment by cdog Thursday, Feb 4, 16 @ 11:47 am
Sorry Annon221. I can’t go with an across the board tax increase. Gotta go for the RAUN Mans jugular while we got him down. Progressive tax rates, and here’s a twist that will really kick him in the n…s. Sales tax on farm equipment,seed, fertilizer, pesticides, fungicides. Is Democratic leadership so far removed that they have forgotten the old motto, ” crisis creates opportunity!”?
Comment by Blue dog dem Thursday, Feb 4, 16 @ 11:49 am
===Imagine being told by the state: “Yeah, we owe you $6 million, but if you don’t forgive that debt we’re not giving you any more contracts and that’ll put you out of business.”===
I fear this is a definite possibility.
(expletive deleted)
Comment by 47th Ward Thursday, Feb 4, 16 @ 11:49 am
Businesses would be foolish to forgive current government debt in exchange for eligibility for future contracts. What’s to stop the State from using that same tactic in the future?
Comment by Stones Thursday, Feb 4, 16 @ 11:51 am
I guess I’ll pass on buying a OHV sticker since the funds from sticker sales wont be used as intended.
Comment by Foster brooks Thursday, Feb 4, 16 @ 11:51 am
Thanks for pointing out Munger’s slight of hand on math. I hope that she didn’t frame the problem this way (doubling the tax increase) at the behest of Governor Rootin’ ‘Tootin to fit his narrative. Her independence (or at least appearance thereof) from the Governor has been one of her greatest qualities to date.
Comment by out of touch Thursday, Feb 4, 16 @ 11:51 am
Blue dog dem- what is doable, possible within the next three years? Madigan would like to focus on the millionaire tax, others (such as yourself) the progressive, and yes, sales taxes are taxes, too. But what can be achieved realistically within the next year??? Somehow we need to get that $5 billion back.
Comment by Anon221 Thursday, Feb 4, 16 @ 11:54 am
Annon221. The RAUN Man is dealing the cards. The least we can do is cut the deck. If MJM has lost his moxy, maybe he should step down and let somebody else in there.
Comment by Blue dog dem Thursday, Feb 4, 16 @ 11:59 am
==She added that she believes state workers have turned cautious out of concern for their jobs ==
Has anyone noticed that most restaurants around Springfield don’t seem to be as busy as they used to be during peak dinner times?
Comment by spidad60 Thursday, Feb 4, 16 @ 11:59 am
sometimes when you stare into the abyss, the abyss screams: PAY ME
Comment by Michelle Flaherty Thursday, Feb 4, 16 @ 12:00 pm
I think that’s what Aloha Lingle meant when she recently wrote “prevention and population health, transitioning from institutional to community care, promoting self-sufficiency and education, paying for value and outcomes rather than volume of services, and the use of data to better know and serve the people of Illinois.”
How can Gov. and Mrs. Rauner look themselves in the mirror?
Comment by Cheswick Thursday, Feb 4, 16 @ 12:03 pm
- Since state bankruptcy is not an option, the government could require businesses and not-for-profit groups to forgive part or even all of the debt owed by the state in exchange for new contracts. That would be the “businessman” way out of this deep hole, -
Not a real “businessman”.
Comment by Daniel Plainview Thursday, Feb 4, 16 @ 12:04 pm
To the Honorable Gov Bruce Rauner:
After a thorough review of your proposal, I have decided to endorse your proposal to have the state assume control of CPS. A slight variation of this bill would include provisions to raise the state minimum wage to $14.75/ hr effective Jan 1, 2016. In light of the overwhelming support this referendum received in 2014, I am confident your staff can develop the appropriate language that would be acceptable to both caucuses. MJM
Would this be considered ” snark”?
Comment by Blue dog dem Thursday, Feb 4, 16 @ 12:07 pm
i beleive demanding money to be given a contract is illegal.
Comment by Ghost Thursday, Feb 4, 16 @ 12:20 pm
How can an administration go towards the “privatize social services” path and also talk about just flat-out not paying contractors?
Which contractors would be happy with that arrangement?
Comment by illini97 Thursday, Feb 4, 16 @ 12:21 pm
If sweeping special funds is again the plan, then some of those fees should be repealed. Why should I pay to camp in a State Park if the revenue is swept? Why should State Park campers subsidize other State operations, in effect, pay more taxes than others?
Comment by Sir Reel Thursday, Feb 4, 16 @ 12:29 pm
Forcing private providers to forgive debt under a threat of “no more business” probably is illegal under standard contract law concepts such as economic duress and unconscionability. Someone would have to sue, of course, but I think there is about a 90% chance that a court would find such tactics out of bounds. The “pay down the backlog over time” scenario is really the only one that works. Of course, another sensible approach would be to sell bonds at 4% so that the state isn’t incurring the statutory interest cost of 1% per month after 60 days. Sell enough bonds so that the bill backlog is down to six months or so, and the state would presumably save money.
Comment by jdcolombo Thursday, Feb 4, 16 @ 12:38 pm
–Since state bankruptcy is not an option, the government could require businesses and not-for-profit groups to forgive part or even all of the debt owed by the state in exchange for new contracts. That would be the “businessman” way out of this deep hole, but it could do serious damage to some businesses and not-for-profits or even put them entirely out of commission.–
Indeed, some people do business like this in the private sector.
It is best not to do business with them, if you can avoid it. I’ve been burned by slow-pay, no-pay grifters, and I just won’t work with them again.
I suspect the social service agencies that survive won’t have that luxury — and the governor knows it. That’s why they’re in the barrel.
Comment by wordslinger Thursday, Feb 4, 16 @ 1:04 pm
What was Gov. Rauner saying yesterday about CPS? That it shouldn’t be borrowin’ to cover operatin’ costs and that its a financial mess? Governor, when was the last time you looked in your mirror?
Comment by Springfield watcher Thursday, Feb 4, 16 @ 1:48 pm
It will be interesting what the non-paid service providers end of the year required reports to DHS will look like. A lot of the reporting includes financials and audits.
http://www.dhs.state.il.us/page.aspx?item=78379#a_LinktoChecklistInformation
Comment by Anon221 Thursday, Feb 4, 16 @ 2:06 pm
To DHS
From Illinois Non-Paid Social Service Providers
Can we put down negative numbers on our financial reporting forms??? And, if we’re out of “bidness”, what are our obligations to the State of Rauner???
Sincerely,
All Those NOT Ounce of Prevention
/snark
Comment by Anon221 Thursday, Feb 4, 16 @ 3:12 pm
Rich -
I can’t imagine that any of the many for-profit companies would go along with legislation that would require them to write off what the state owes them, but you could ask them.
And a law that treated for-profit corporations and non-profit corporations differently would not be legal. Just ask Donors Forum.
Comment by Yellow Dog Democrat Thursday, Feb 4, 16 @ 5:43 pm
I have been a registered republican for 27 years.
I will be voting a straight democratic ticket this election cycle.
I have no other choice, when considering the madness he is promoting.
Every AFSCME member should do the same.
Except in Dunkin’s district!!
Comment by Property of IDOC Thursday, Feb 4, 16 @ 10:24 pm