Kicking the can down the road
Monday, Jul 20, 2009 - Posted by Rich Miller
* My syndicated weekly newspaper column takes a look at the mess…
The budget - if you can call it that - which passed the General Assembly last week has as much as a $5 billion hole in it, borrows more than $7 billion from Wall Street and state vendors, disguises huge cuts to some private social service agencies with 87 percent funding for others and sets up the state for a surefire disaster next fiscal year.
Break out the party hats.
There is just no way on Earth that you can call that budget “balanced” or “serious-minded.” It is, at best, a punt until next year. Actually, it’s more like a blocked punt with a big loss of yardage.
Senate President John Cullerton said last week that he wants to help balance the budget by renewing a push for a tax increase in January, when a simple majority again will be required to pass it. But a tax hike midway through the fiscal year won’t provide nearly enough revenue to heal this budget’s gaping hole unless the increase is far larger than anything proposed to date.
The governor held a news conference shortly after the budget passed to tout his alleged success. He surrounded himself with employees of his budget office and praised their work, but he refused to directly answer reporters’ questions about any budget details.
How many state employee layoffs would be required? No answer. What sort of cuts was he planning to make to manage his way through this gaping hole? No answer. Instead, every question was addressed with a meandering, filibustering, nonanswering style. He wanted to project an upbeat mood, but this budget is as close to a fiscal nightmare as one can get.
Quinn did finally say he was issuing 2,500 layoff notices, which is 100 less than the number of layoffs he said would be required even if a tax hike passed. He wouldn’t say if more were on the way but said he wanted to talk with the unions about freezing their pay and taking furloughs. That’s just not facing reality. If he truly believes the American Federation of State, County and Municipal Employees will roll over and play dead, he ought to look at Chicago, where the union has been standing firm against give-backs.
Quinn’s office privately guesstimates the hole in this budget to be somewhere between $4 billion and $5 billion, which goes to show just how little anybody really knows about the bills that passed. It relies on about $3.5 billion in borrowing to cover the state’s payment to the pension systems and does not even touch the $3.6 billion in debt owed to vendors and providers. From what I was told last week, the state actually will extend the time it takes to pay back those vendors and providers, making their situations even worse.
If you count the hole in the current budget, the new debt that hides base spending obligations, the debt service payment for next fiscal year (somewhere around $800 million), the $500 million increased pension payment for next year, the one-time federal stimulus cash that won’t be replenished and other one-off items (like debt restructuring), you are looking at a starting deficit for fiscal year 2011 of maybe $10 billion. Or maybe more. And that doesn’t even include unforeseeable problems like continued revenue troubles.
Some private social service agencies were frantic last week because they were unable to counter the spin from the governor and the legislative leaders that their programs would be funded at 87 percent of last fiscal year. Some programs, including community-based health services for things like rape treatment, battered spouses, etc., already were looking at steep cuts in Quinn’s original budget. The “50 percent” budget proposal from several weeks ago actually slashed their funding by 75 percent. As of late last week, they still had no idea how bad the final damage would be, but they weren’t optimistic.
And now the credit ratings agencies are starting to move against Illinois the way they have against California. Moody’s lowered its California general obligation bond rating to just two steps above junk status last week, then announced it was putting Illinois’ debt under review.
“The state has essentially kicked the can down the road in terms of making decisions,” a Moody’s analyst told Bloomberg News.
That’s pretty much exactly what Moody’s decreed about California before whacking its debt rating.
If Illinois gets the California treatment, another big hole will be punched in this budget.
Wonderful.
* The above column was taken from a subscriber story published last Thursday. Have a look at the Illinois Education Association’s “Capitol Buzz”, published later that day…
The budget lawmakers passed Wednesday is unbalanced by as much as $5 billion. In addition, it borrows more than $7 billion from Wall Street and state vendors, disguises huge cuts to some private social service agencies with close to 90 percent funding for others and sets up the state for a surefire disaster next fiscal year.
A teachers union plagiarizing? Nah. Never. Can’t happen.
* Related…
* It’ll take time, cash to fix state’s video poker mess
* Analysis: Not much to celebrate in new state budget
* Krug:
Brother, can you spare $3.5 billion?
* On borrowed money, time
* SJ-R: Illinois sadly lacking in statesmanship
* On budget, on reform and on principles, Illinois Democrats drop the ball
* Smaller budget cuts to bring major change
* Parenting programs take big hit from budget cuts
* State leaves disabled in lurch
* Social-service groups waiting for details on future cuts
* New state budget is far from adequate
* Layoffs could cut blood donations too
* Mike Lawrence: Make corrections reform a priority
- fed up - Monday, Jul 20, 09 @ 10:05 am:
Just wondering is the early release of state prisoners still going to happen?
- Anon - Monday, Jul 20, 09 @ 10:09 am:
The IEA plagerized you — thats hilarious. Rich, you should write a column on the necessity of union pension reform and see if they plagerize that!
- VanillaMan - Monday, Jul 20, 09 @ 10:10 am:
a surefire disaster
That is a Millerism if I ever read it. While it is not an original, few use it with the skill of our intrepid Rich Miller. I smell a ‘cut and paste’ job.
- NewsBuddy - Monday, Jul 20, 09 @ 10:18 am:
Great catch on the IEA post, Rich! I wonder if the IEA will fess up and write a “retraction”? They certainly look like dufuses right now. Hilarious!
- The Doc - Monday, Jul 20, 09 @ 10:21 am:
Debt servicing alone will cost IL another $500 million or so over the next 5 years. And that’s prior to any downgrade. And tax receipts, by most accounts, will spiral downward as the calendar year progresses, exacerbating the deficit.
A 50% income tax rate increase might be a pipe dream come January.
- vole - Monday, Jul 20, 09 @ 10:34 am:
Does Illinois law require a balanced budget? If so, how does the legislature and governor get around the law? If this is the law, does it have any meaning or bite?
- wordslinger - Monday, Jul 20, 09 @ 10:36 am:
Just as digital technology has reduced cinema and photography, computers have devalued the time-honored skills of plagiarism to the obvious work of hacks. It’s just amazing how often it happens.
It’s like I always say, “You can fool all of the people some of the time, but there’s nothing to fear but fear itself, Mr Gorbachev, tear down this wall!”
- John Bambenek - Monday, Jul 20, 09 @ 10:37 am:
The constitution does require a balanced budget. They get around it because no one, until now, has tried to enforce it. My first court hearing on matter is at 11am today. AG is trying to dismiss, we’ll see.
- Bill - Monday, Jul 20, 09 @ 10:38 am:
==They certainly look like dufuses right now.==
Whaddaya mean right now. They always do. Calling them a “union” is a real stretch. They can’t even write their own stuff. Hilarious.
- Bill - Monday, Jul 20, 09 @ 10:40 am:
Go get ‘em Bambie!
- cover - Monday, Jul 20, 09 @ 11:27 am:
With the state now on negative credit watch and probably headed for a quick downgrade, what happens if the pension bonding plan can’t find any willing buyers? Or better yet, a downgrade might force the state to abandon its plan to borrow to pay for the members’ pork projects. Is that the only thing left that could force the General Assembly to come back and do what it should have done in May?
- wordslinger - Monday, Jul 20, 09 @ 11:30 am:
Cover, they’ll sell in a New York minute. As weird as it seems in these very interesting times, munis, just like Treasuries, are seen as virtually risk-free.
Put it this way, if Treasuries and munis go down, the planet will be back on a barter system, anyway.
- Irish - Monday, Jul 20, 09 @ 12:45 pm:
vole - The State does prety much as it wishes. If I listed every violation of OSHA, EPA, Public Health, etc. rules that I have seen bypassed mostly with the excuse “We can’t afford to do that now” it will fill a couple pages. So this is nothing new to them.
One of the hidden issues and costs that isn’t being figured in this whole mess are the vendors who will no longer do business with the State. It is becoming increasingly difficult to get contractors to bid on projects, or maintenance such as garbage, etc., when they don’t get paid for months. A lot of them are “figuring in” extra costs to cover the time they have to carry the State. Vendors who usually have the best price on needed items no longer are willing to do business with the State so we are having to pay a little more for things we buy. The end result is hidden operating cost increases that will never be known or figured into the cost of postponing the payment to vendors.
Another unmentioned issue is the affect on state employees credit when the state does not pay medical bills for months and the providers come after the employee for payment and if it isn’t made they send it in to collection. Less and less are they accepting the explanation of the fact that the insurance has not paid on it and it is out of our control.
So if an members of the GA are reading don’t be surprised in a few months. Dump the incumbants, Remember in November!
- Rich Miller - Monday, Jul 20, 09 @ 12:49 pm:
Please drop the hyperventilating bumper sticker slogans from future comments. Thanks.
- Cheswick - Monday, Jul 20, 09 @ 12:56 pm:
Maybe the plagiarists were filling in for the regular writers, who are off for the summer. I don’t know. Actually, there’s nothing funny about it.
But, on another note, “John Cullerton said … push for a tax increase in January, when a simple majority again will be required to pass it.”
I’m curious, what magic thing does he think is going to happen in January of 2010 that couldn’t have happened in April or May of 2009? Am I missing something?
- Ghost - Monday, Jul 20, 09 @ 3:55 pm:
IMHO the problem with the budget deficit is that it is so huge nobody can understand it at all. This is highlighted by the perception that we can get out of it without a tax increase by just adjusting spending.
I suspect that most peple do not truly see theimpending crisis or do not beleive it is real…. because the numbers are so huge.
The closest shrotfall we had up until now, as I recall, was a billion dollar deficit with an additional 750k in bills being slipped from one fiscal year to the next.
We passed a tax increase to cover that tiny shortfall.
- Anonymous - Monday, Jul 20, 09 @ 4:22 pm:
AFSCME did stand firm in Chicago;
300 people got laid off.
just saying
- Cindy Lou - Monday, Jul 20, 09 @ 4:25 pm:
If unions trembled in their boots every time they’re threatened with layoffs, we’d all be working for min. wage. Just saying.
- Ghost - Monday, Jul 20, 09 @ 4:30 pm:
==== If unions trembled in their boots every time they’re threatened with layoffs, we’d all be working for min. wage. Just saying. ====
lol, if unions agreed to reasonable cuts during a fiscal crisis people would not be unemployed and unable to support their families. There is no sensical or logical correlation between a pay freeze, furlough dyas and the fear of earning minimium wage. union employees with senority would rather see a few low senority employees tossed to the curb and lose their home then work together for small reasonable cuts to support their fellow worker.
BTW AFSCME employees continue to get raises while their fellow workers are being layed off to pay for them. Just saying.
- Cindy Lou - Monday, Jul 20, 09 @ 4:41 pm:
In your round-up there, Ghost, you fail to take into account that many average joes on the frontline can’t afford the ‘reasonable’ concessions being tossed around for months.
Over the past year while coming to that contract and now while trying to see that the contract remains intact there’s been thousands of $$ floating around on a table. How many of us would you like to see not be able to pay bills and lose homes?
Senority is no ’safe’ in layoffs on any given layoff plan. And given the state has hired little over the years on frontliners, lack of senority does not necessarily mean someone with a few years in. 15 to 20 yrs plus can be shoved out the door.
- Ill_will - Monday, Jul 20, 09 @ 5:04 pm:
Anon -Monday
>
Don’t know that it matters but that was my post, the auto-name got turned off somehow.
Cindy Lou, not saying they should tremble every time a l/0 threat is made, but, this was not a threat and lay offs have occurred. Everyone hurts a bit with lay offs this size; the laid off and families, employees left behind, and the public.
The Mayor said he’d tear up the furlough day/payless holidays agreement if things got better. {Please don’t take the reflexive “Why trust Daley” tack.)
I guess the left behind figure “I got mine” view. The chances that those 300 jobs come back are slim and none. Perhaps that’s good perhaps not. I don’t know, what happen to the idea that we all take a little pain to heilp our friends and co- workers?
- Cindy Lou - Monday, Jul 20, 09 @ 5:28 pm:
Ill will, with your name in place, I understand where you’re coming from a bit better as I think we crossed each other a few times last week.
I must zip the lip on the situation in Chicago as I’m not a part of that and not as familiar with all negotiations in that area thus commenting on them would be unfair of me , though I do think the mayor was given other suggestions and options and choose not to want to look at those.
- steve schnorf - Monday, Jul 20, 09 @ 9:29 pm:
For all practical purposes, the “balanced budget” the Constitution requires has come to mean not appropriating more cash than is reasonably expected to be available for expenditure. Under that approach, it is irrelevant whether the money being spent is borrowed, and irrelevant whether all incurred expenses are actually paid. I doubt Bambanek’s lawsuit will change that much.