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Pritzker orders budget cutting scenarios

Monday, Sep 16, 2019

* My weekly syndicated newspaper column

The governor’s top budget people sent a memo last week to agency directors giving them a heads up about what will be required in their annual budget request submissions. They are not easy-peasy asks.

This fiscal year’s budget was originally supposed to be austere, but then a $1.5 billion flood of unexpected revenue poured in during April and eliminated the need for drastic cuts. Even so, as the recent memo from Deputy Gov. Dan Hynes and Budget Director Alexis Sturm pointed out, billions of dollars in unpaid bills left over from Bruce Rauner’s administration still need to be addressed. Left unsaid was any mention of a possible national recession in the coming year - which some economists have been warning about for months and which could cause serious problems for a state budget that is so precariously “balanced.”

Anyway, the memo includes three directives. The first is that the agencies give the budget office an “actionable scenario” which includes a 6.5 percent cut in their operations during the upcoming fiscal year “across all appropriated funds.”

Gov. J.B. Pritzker ordered much the same thing earlier this year before the April revenue surprise. A bipartisan group of legislators was also working on cuts in the House, but the April cash bump made those cuts unpalatable to enough Democrats that the effort was abandoned.

Not all agencies will be able to come up with the full amount of cuts. The cash-strapped Department of Children and Family Services springs immediately to mind. Cutting that budget could endanger vulnerable kids at a time when Gov. Pritzker has been trying to hire new staff to prevent more tragedies.

But even if some or most of the cuts are never implemented, the exercise at least gets agency directors thinking about ways to save money. Despite that April revenue surprise, costs for next fiscal year will definitely go up and, barring another surprise gift from the revenue gods, will very likely outstrip the available cash to pay for them. It’s simply better management to have cost-cutting plans at the ready rather than leave it up to the General Assembly to find ways to reduce spending during a potential crisis.

Next fiscal year starts on July 1st. Pritzker is hoping voters will approve a constitutional amendment four months later in November that would allow for a graduated tax system. If that happens, tax hikes on upper-income earners would automatically take effect and generate over $3 billion a year in revenues. He cannot legally build that money into his proposed budget, but if voters reject the change, you can bet there will be serious budgetary stress.

The second directive in the memo is to reduce statutorily created boards and commissions under their purviews to allow the governor to reduce them overall by 10% in the upcoming budget. Some commissions haven’t met in years. But this is more about show business than actual savings. If a commission hasn’t met, it’s unlikely that shutting it down would save much money. Former Gov. Rauner, by the way, closed several boards and commissions.

And the third directive is to identify “at least two significant efficiency and savings ideas for consideration in the fiscal year 2021 budget.” Those could include things like eliminating or consolidating duplicative programs, reducing funding for underutilized or inefficient services and improvements in service delivery to streamline costs.

Pritzker was criticized last February for not proposing any significant cuts during his budget address. So, he’s apparently looking for some splashy savings that he can highlight next year. And lots of folks will want to see evidence that the governor is at least trying to save money before agreeing to give the government even more to spend.

And, as noted above, the state absolutely needs to finish paying down its bill backlog, particularly if the economy turns sour and revenues dry up. As of last Friday, the backlog stood at $6.61 billion. This needs to be fixed even if the economy continues to hum along. The state’s social service provider and private vendor systems were horribly damaged during the previous administration, and they are nowhere near back to normal.

Forcing providers and vendors to wait endless months to be paid hurts their operations and undermines the state’s ability to retain them and recruit new groups and companies. Paying down the backlog to get the state back to a 4-week payment cycle would also help the state’s much-maligned credit rating. But cutting their funding going forward won’t help providers and vendors, either. This process has to be a careful balancing act to work.

- Posted by Rich Miller        

38 Comments
  1. - Steve - Monday, Sep 16, 19 @ 9:28 am:

    As of now, I assume the progressive tax will pass. I just wonder if they really will be able to collect an additional $3 billion like their projections estimate ? What if some rich Illinois folks to decide to pull a Carl Icahn?

    https://www.bloomberg.com/news/articles/2019-09-13/blankfein-has-some-tax-advice-after-icahn-plots-move-to-miami


  2. - Anyone Remember - Monday, Sep 16, 19 @ 9:33 am:

    Steve -
    Based upon tax rates, you’d think they’d leave California before they left Illinois.


  3. - City Zen - Monday, Sep 16, 19 @ 9:34 am:

    ==As of last Friday, the backlog stood at $6.61 billion.==

    Nothing that a $6.61 billion bond couldn’t fix.


  4. - Grandson of Man - Monday, Sep 16, 19 @ 9:36 am:

    “And, as noted above, the state absolutely needs to finish paying down its bill backlog”

    This and creating a plan to pay down pension debt. We suffered through the willful deadbeatism (always a h/t to Wordslinger’s memory) of the last governor, who deliberately hurt vendors. Paying down debt should be a top priority for both parties.

    Basic fairness and morality call us to vote for a graduated income tax, to ease the burdens of those who can less-afford cuts. Hopefully that will be a big message in the fair tax campaign—appealing to voters’ compassion, morality and sense of fair play.


  5. - Steve - Monday, Sep 16, 19 @ 9:40 am:

    - Anyone Remember -

    As you know, Illinois doesn’t exactly have California’s weather which allows them to get away with a heck of a lot. We will find out soon. When you are relying on a small percentage of people to pay outsized revenue: you better hope they don’t walk into the Florida Department of Motor Vehicles ..


  6. - RNUG - Monday, Sep 16, 19 @ 9:42 am:

    == the backlog stood at $6.61 billion. ==

    The $6.61B backlog number is slightly misleading. In a annual budget of +$35B, you are always going to have a 30-60 day backlog of bills waiting to be paid. Yes, it should be less than it is today, but even if you achieve a 30 day cycle, you can probably only get it down to between $2.5B and $3B … in other words, 1/12 of the $35B budget.


  7. - lake county democrat - Monday, Sep 16, 19 @ 9:45 am:

    Responsible and good. Last I heard, the progressive tax amendment was behind the threshhold in polling. I’ve long felt one of the most dangerous attack lines would be a combination of the “this is just the beginning” with “they raise taxes without ever cutting.” Whenever I’ve mentioned possible sequestration (with some departments walled-off and in conjunction with raising or extending taxes further) as a default in case modest cuts were too politically difficult, one response you here is a challenge to define “so where would you cut?” I think it’s unfair to ask voters to become budget experts to that degree: our elected pols and the agency heads know where the budget can be cut with the least amount of pain.


  8. - Rich Miller - Monday, Sep 16, 19 @ 9:45 am:

    ===a 30 day cycle, you can probably only get it down to between $2.5B and $3B===

    That’s very true and it may be even higher than 3.


  9. - SSL - Monday, Sep 16, 19 @ 9:49 am:

    I’d prefer JB look for some real, structural changes that would yield efficiencies instead of splashy savings. But that’s probably not high on his list.

    As for the $6B bill backlog, maybe instead of a $45B capital plan, he could have landed on $39B, and paid off the backlog? I know, that’s backwards thinking.


  10. - RNUG - Monday, Sep 16, 19 @ 10:03 am:

    == creating a plan to pay down pension debt. ==

    The State has a plan for the 5 state level pension systems (TRS, SURS, SERS, GARS, JRS); it is called the Edgar Ramp.

    You can try to come up with a better plan, or a better way to find the current plan.


  11. - Rich Miller - Monday, Sep 16, 19 @ 10:04 am:

    ===he could have landed on $39B, and paid off the backlog?===

    You ever heard of the Lockbox Amendment? You may have even voted for it. You can’t use Motor Fuel Tax revenues to pay off the bill backlog.


  12. - JS Mill - Monday, Sep 16, 19 @ 10:06 am:

    = Illinois doesn’t exactly have California’s weather=

    We are not Kansas either, but not for Rauner’s lack of effort.

    =I’d prefer JB look for some real, structural changes that would yield efficiencies instead of splashy savings. But that’s probably not high on his list.

    As for the $6B bill backlog, maybe instead of a $45B capital plan, he could have landed on $39B, and paid off the backlog? =

    Rauner couldn’t find billions worth of efficiencies so they must not exist.


  13. - DuPage - Monday, Sep 16, 19 @ 10:19 am:

    = Illinois doesn’t exactly have California’s weather=
    That’s for sure. Some areas are nice, others not so much. You go inland from the coast before the mountains and you get near 100 most of the summer, and a lot of air pollution as well.


  14. - Steve - Monday, Sep 16, 19 @ 10:25 am:

    - DuPage -

    It’s easier to tax people when you get 320 days of temperate weather in some parts of California.


  15. - Grandson of Man - Monday, Sep 16, 19 @ 10:53 am:

    Taxation success has nothing to do with weather. Minnesota has brutally cold winters, a top tax rate of 9.85% and a budget surplus. Other states have cold winters and higher rates than ours.

    Illinois’ proposed graduated tax rates would be much milder than others, at least pre-deductions. Other states tax much lower incomes at higher rates. The higher rates would kick in at $250,001 annual income in the fair tax. Not bad.


  16. - Sayitaintso - Monday, Sep 16, 19 @ 10:58 am:

    It’s true, today there aren’t the super obvious areas that could be targets for severe cutbacks as in the past, but the Governor is making a point that there are suitable areas if a critical eye is employed and tough decisions made. That is why the big bucks are paid. “Lean and Mean” - (of which Pritzker is neither).


  17. - Rod - Monday, Sep 16, 19 @ 11:14 am:

    I agree with Rich that the Governor “cannot legally build that money (from a new income tax system) into his proposed budget, but if voters reject the change, you can bet there will be serious budgetary stress.” There are real dangers the amendment will not pass especially because of Mayor Lightfoot’s renewed efforts to get a state bailout of Chicago and real fears of residents living outside the city of paying for historic machine politics and years of low property taxes in the city. The Governor will need to create a fire wall between the tax amendment and the fiscal problems Chicago faces if he wants to pass it.


  18. - Skeptic - Monday, Sep 16, 19 @ 11:35 am:

    “Rauner couldn’t find billions worth of efficiencies so they must not exist.” And considering DoIT was his idea, one could argue there were fewer when he left.


  19. - Blue Dog Dem - Monday, Sep 16, 19 @ 11:43 am:

    I always get a warm and fuzzy feeling this time of year as i prepare to pay my property tax bill knowing full well my elected officials are working overtime to reduce spending


  20. - Rich Miller - Monday, Sep 16, 19 @ 11:54 am:

    ===as i prepare to pay my property tax bill knowing full well my elected officials are working overtime to reduce spending ===

    You should be asking for more state money to your local governments to keep your property taxes from rising.


  21. - Blue Dog Dem - Monday, Sep 16, 19 @ 11:59 am:

    Rich. That makes too much sense.


  22. - Skeptic - Monday, Sep 16, 19 @ 12:01 pm:

    “You should be asking for more state money to your local governments” or convince everyone that potholes and overcrowded classrooms are actually good for the community.


  23. - Anonymous - Monday, Sep 16, 19 @ 12:19 pm:

    so rich what was thepayables backlog when Blogo & Quinn were doing such a wonderful job running the state and the reason Rouner beat PQ.


  24. - Anyone Remember - Monday, Sep 16, 19 @ 12:32 pm:

    Steve -
    ==you better hope they don’t walk into the Florida Department of Motor Vehicles .==
    In that case, KY & MO, with their local personal property taxes on vehicles, should have much more to worry about … .


  25. - reality1 - Monday, Sep 16, 19 @ 12:46 pm:

    Cut? Cut what? For instance the IEPA is done 50% in staff. They’ve hire a few under Pritzker but still at least 600 fewer than 15 years ago. By the way that Agency is Federally funded. What did they do with all that money from retired staff?


  26. - Rich Miller - Monday, Sep 16, 19 @ 12:49 pm:

    ===when Blogo & Quinn were doing such a wonderful job running the state===

    Never said they did.


  27. - revvedup - Monday, Sep 16, 19 @ 1:23 pm:

    If we did another bond issue to pay off the $6.6B, could the State could still save money by reducing the interest cost of the 1% per month due vendors under the State Prompt Payment Act, as well as lower interest rates of funds paying the bond issue expenses?


  28. - Oswego Willy - Monday, Sep 16, 19 @ 1:29 pm:

    ===It’s easier to tax people when you get 320 days of temperate weather in some parts of California.===

    This is called “taxing on the sunny side of life”

    The weekend is over. This is half-baked foolhardiness.

    To the Post,

    The current administration will find that this process to find cuts is a necessary thing if only to show the proposed cuts abd how folks are either dorm room foolish or fiscally ignorant to math.

    Rich wrote a great piece here.

    This phony idea that “all the Democrat Party does is tax, tax, tax”

    So when these real cuts proposed, of the cuts that can have real hurting measure, are seen, then we’ll know who honest brokers are, and who are the phony partisans not too keen on solutions


  29. - Skeptic - Monday, Sep 16, 19 @ 1:44 pm:

    “the reason Rouner beat PQ” Well, no, that wasn’t the reason Rouner [sic] won.


  30. - Rabid - Monday, Sep 16, 19 @ 2:23 pm:

    Plan B if graduated taxes fail need to know how much to raise flat tax


  31. - SSL - Monday, Sep 16, 19 @ 2:45 pm:

    Rich, I thought there was $33B in the transportation bucket of the capital plan. Couldn’t some of remaining $12B of the enormous capital plan be reduced to address the bill backlog.

    And while we’re at it, non transportation taxes and fees should have been looked at so the bill backlog could be addressed. Doubling the gas tax was way too aggressive. Other sources needed to be explored.

    So now we still have a big bill backlog that needs to be addressed, a structural budget shortfall that has a hole blown in it at the first sign of recession, and the 2nd highest property taxes and third highest gas taxes in the Union.

    Yeah, things are only going to get better in the not so great state of Illinois.


  32. - Rich Miller - Monday, Sep 16, 19 @ 2:47 pm:

    ===Couldn’t some of remaining $12B of the enormous capital plan be reduced to address the bill backlog===

    Where does that money come from? It doesn’t just magically appear. It’s generated mainly by the MFT increase. You can’t use that for non-transportation items. C’mon. Get in the game here.


  33. - Blue Dog Dem - Monday, Sep 16, 19 @ 2:48 pm:

    SsL. You mean raising taxes on liscence plate renewals over 1000%?


  34. - RNUG - Monday, Sep 16, 19 @ 4:39 pm:

    == another bond issue to pay off the $6.6B, could the State could still save money ==

    $6.6B likely represents somewhere between 60 and 90 day backlog (see my post at 9:42am and Rich’s 9:45am response). If that is the case, then no interest is being paid since the Illinois Prompt Payment Act specifies 90 days before interest is due.


  35. - RNUG - Monday, Sep 16, 19 @ 4:51 pm:

    == You mean raising taxes on liscence plate renewals over 1000%? ==

    Come on Blue Dog, you are mostly stretching the numbers.

    Motorcycles and recreational vehicles and camper trailers were unchanged.

    Car plates went up about 50%.

    TA trailer plates had up to a 650% increase. Other trailer classes were a lower percentage since it was a flat increase.

    It was only pure electric vehicles got hit with a 1,400% increase. If you can afford one of those 1.4% yuppie toys, you can afford the new plates.


  36. - Blue Dog Dem - Monday, Sep 16, 19 @ 5:33 pm:

    RNUG. 😜


  37. - Gary - Monday, Sep 16, 19 @ 11:05 pm:

    I first read this in Sun QC Times. I found the references to the Rauner administration to be divisive and a mischaracterization. The backlog of unpaid bills has been running over 5 bil. since 2009, long before Rauner’s election.
    Gary Conrad


  38. - Question More - Tuesday, Sep 17, 19 @ 4:20 am:

    Let’s stop the unnecessary burning of cash and the embarrassment of hiring outside vendors. Some are even headquartered outside our country to run the State. The Lottery is a good example: Promises and no performance. It’s all smoke and mirrors. Sales
    and employee morale are down. The taxpayers continue to get the short end of the stick.


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