Within hours of Judy Baar Topinka releasing her budget plan last week, Gov. Blagojevich’s budget director, John Filan, was claiming that Topinka’s proposal would produce $5.7 billion annual deficits.

So, I offered Topinka’s budget point person, Sen. Steve Rauschenberger, an opportunity to respond to Filan’s claims. This is Rauschenberger’s full response. All emphasis is in the original. Topinka’s original proposal is here, and Filan’s response is here. Both are pdf files.

Thank you for the opportunity to respond to John Filan’s release on Judy Baar Topinka’s Financial plan.

Let’s look at the numbers one at a time.

Under proposed new spending.

Education $2.05 billion. It appears Filan has taken Topinka’s cumulative increase of $8.2 billion and divided by four years. For complicated reasons, that method doesn’t accurately represent the average increased spending per year. In addition, our 8.2 billion figure included teacher pensions, which he appears to double count below.

School Construction Debt Service $270 million. This appears to be an attempt to assign a debt service figure to Judy’s $3 billion school construction plan. This would be close to the level where debt service tops out, so they have picked the highest year to place in his table. I believe this figure is a shade high, but in the neighborhood. If this represents a “top-out” debt service figure, it would be applicable to perhaps FY12 or FY13 when the six year program is in full swing.

Funding Pension System at 1995 Plan $627 million. This might be John Filan’s estimate of the FY08 increase in pension payments. If that is the assumption, then he is close for an All Funds (including Federally Funded, University Income Funded, etc. employees) figure. Judy’s financial plan is a GRF plan, and the first year GRF increase is closer to $520 million.

Rehiring State Employees $150 million. Judy’s plan calls for rehiring 400 prison guards over 4 years. The funding for that initiative tops out at $16 million in FY11 if you assume $40,000.00 per guard per year. Filan’s figure would represent $375,000.00 per guard per year.

Pay Raises for Merit Comp Employees $33 million. Judy’s plan is silent on this issue (maybe John is feeling guilty and suggesting it), but she does believe pay raises for merit comp employees are important, if affordable.

Energy Plan $60 million. No one I know has any idea where this figure comes from.

Higher Education $100 million. This represents the incremental increase in higher education funding in the first year, FY08.

Local Property Tax Reimbursement $1.2 Billion. This is the total that will be spent on property tax relief in FY09.

John Filan appears to add these cherry-picked numbers from different fiscal years, and adds them up to call them “New Spending”.

Under Budget Cuts he lists only:

Cutting Healthcare to “Kids and Seniors” ($725 million). He appears to have taken the $2.9 billion four year cumulative spending difference between Topinka’s Medicaid plan and Blagojevich’s Medicaid plan, and divided by four. Unfortunately, Medicaid math does not work this way and this number is useless.

Filan fails to acknowledge the other budget savings proposed by Topinka’s financial plan including the elimination of pork spending and clout contracts and politically connected jobs.

Under New Revenue Filan lists:

Chicago Casino ($850 one-time, $250 annual per year starting in Year 2). Perhaps $850 million one-time is a reasonable estimate of the auction value of a 3000 position Chicago license… but in Judy’s financial plan they used a conservative estimate of $650 million. For the record Judy’s plan DOES NOT budget one-time revenues for the operating budget. She specifically reserves this resource for one-time spending needs, therefore the number should not even be on Filan’s chart.

As to operating revenue, John Filan is apparently assuming that a 3000 position casino in the heart of Chicago will yield $250 million in gaming taxes. According to the estimate by the Commission on Government Forecasting and Accountability, the 1200 position riverboat in Elgin will generate almost $200 million this year. The financial plan’s estimate of $600 million per year is much closer to Mayor Daley’s own estimate of three years ago.

Additional positions at existing casinos $350 million. Filan’s own revenue estimates assume the 9 operating riverboat licenses will bring in $700 million this year. He seems to be arguing that allowing existing riverboats to expand up to 150% of there gaming positions (from 1200 to 3000) will yeild a revenue increase of just 50%… he is way to low.

Filan’s rebutal fails to acknowledge the new Federal revenue that would be realized by the implementation of the Medicaid Block Grant.

Under lost revenue as defined in Filan’s response.

Economic Development Plan (from Tax Credits) $1.5 Billion. No one I know (except perhaps John Filan) has any idea where this number comes from or what it ties to.

Restore Corporate Fees/Eliminate Chargebacks $408 million. Judy’s plan calls for the elimination of fund sweeps, but does not call for the elimination of Chargebacks. I do not know where he gets this number from.

Re-Open Corporate Loopholes $30 million. Topinka, I am sure would argue the characterization, but the number is close.

Lost Federal Revenue from Medicaid Cuts $775 million. Under Topinka’s financial plan, Medicaid is converted to a block grant. You cannot lose federal match under a block grant because the federal contribution is fixed and NOT subject to matching.

For fun, let’s assume that Filan missed the whole point on Judy’s Medicaid reform, how does he forecast a loss of $775 million in federal aid when he earlier asserted this same plan called for a $725 reduction in Medicaid spending?? If his number is right on the spending reduction of $725 million, the federal aid loss is 50% or $362.5 million; if his number on loss of federal aid is right at $775 million, the program spending must be reduced by $1.550 BILLION.

I realize John Filan was taking a vacation day when he worked up this response to Treasurer Topinka’s four year financial plan. I do not fault him for not completely understanding a rather complex series of financial documents developed over more than 10 weeks at first glance. I do believe he has a responsibility as both the Budget Director and as a Licensed Accountant to make every effort NOT to mislead people regardless of how rushed he is.

The response he has issued mixes permanent and one-time revenues, uses numbers from different fiscal years as if they can simply be summed. His response doesn’t document where any of his numbers come from. In short, I believe this response was designed to confuse the issues, not debate them. That is wrong for the Budget Director to do, wrong for an accountant to do. Using the cover of one’s official office to mislead the public and the press is wrong.

- State Senator Steve Rauschenberger

Director Filan’s office was e-mailed a copy of Rauschenberger’s statement yesterday afternoon and will be allowed an opportunity to respond here as early as tomorrow. I reserve the right to allow further responses.