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Nobody is in for a pleasant experience

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Illinois

* My weekly syndicated newspaper column looks at the upcoming budget…

Last year, the Illinois House was able to control the Statehouse budget process by releasing low-ball state revenue estimates early on and then vowing to stick to those numbers no matter what.

The Senate Democrats wanted to spend more money but were eventually stymied by the House’s revenue estimates. There was just no way around the problem.

Some Senate Democrats thought about forcing the spring session into overtime, but that would’ve been stupid because it would’ve required a three-fifths majority to approve the budget — and that would’ve given the Republicans a seat at the table. And the Republicans wouldn’t want to spend more money.

It’s too early to tell, but this year may be different. Last week, the House kicked off the budget process by locking in the chamber’s new revenue estimates. The estimates are $221 million below the governor’s projections and $271 million below those of the General Assembly’s Commission on Government Forecasting and Accountability.

The main differences are in income tax revenue. The House’s estimate for personal income tax collections is $302 million below the governor’s, while the corporate income tax estimate is about $50 million above the governor’s.

The differences aren’t nearly as dramatic as last year’s round of budget-making, when the House’s estimates ended up being about $1 billion below the Senate’s. But a difference of $221 to 271 million is still quite significant, particularly in a year when so many popular state programs are facing the chopping block.

The Senate Democrats basically got rolled last year and had to swallow cuts that many members did not want. They were hampered not only by the House’s lower revenue projections but also because their two new appropriations committee chairmen got bogged down in the details of the state’s new “budgeting for results” law. The hearings on that new law slowed the Senate’s budget process and allowed the House to pass its appropriations bills first.

Senate President John Cullerton (D-Chicago) said last week that there would be some changes in the way his chamber deals with the budget this year. He also said he had spoken with House Speaker Michael Madigan (D-Chicago), and as a result, strongly believed that this year’s process would be far more cooperative than last year’s.

And, indeed, there have been changes. The new House revenue forecasts were devised in cooperation with the Senate Revenue Committee.

Even so, expecting lower revenue won’t go down well with the more liberal members of the Senate Democrats, most of whom are outraged at the cuts proposed by Gov. Pat Quinn and who have a unified and powerful voice. Finding another $250 million in cutbacks will undoubtedly be seen as a bridge too far.

These estimates also come in the context of the enormous pressure to slash Medicaid spending by $2.7 billion. The liberal push-back against that demand by Quinn is enormous — despite the very real and credible evidence that ignoring the problem, or even just coming up with a partial solution, will lead to a systemic crisis in a few years.

Doing nothing will create a roughly $21 billion mountain of overdue Medicaid bills in five years. And the total will keep going up after that. The whole system could crash.

But the people who run the government might also try a bit of old-time Statehouse fudging.

OK, we’re now going to do a little math, but it isn’t hard, so stay with me.

Quinn wanted to take $162 million next fiscal year and pay off past-due bills. Steve Schnorf, a former state budget director, suggested last week that Quinn might put that $162 million back into state spending programs. The cuts that would then have to be made would total $59 million ($221 million via the House’s revenue forecast minus $162 million returned to the budget). That would be a lot easier to swallow.

Even so, the uproar over Quinn’s proposed budget and Medicaid cuts is so intense that even if the legislative leaders and the governor do manage a bit of fudging, there are going to be some very furious people in the Statehouse the rest of the spring. Nobody is in for a pleasant experience.

* Related…

* Finke: Looks like state will try rerun of budget process

* DNR director: Expect even more cuts: Marc Miller said Gov. Pat Quinn’s proposed budget reduces DNR spending by 13.5 percent, which includes 9.4 percent less in general revenue. This comes on top of federal cuts, he said.

* Editorial: Can state officials deal with budget ‘reality’?

* IL debate arises over prison transition centers

posted by Rich Miller
Monday, Mar 5, 12 @ 9:44 am

Comments

“Nobody is in for a pleasant experience.”It’s called governing in reality and it’s what lawmakers are supposed to do. Grownups please.

Comment by Shore Monday, Mar 5, 12 @ 9:48 am
A few years of very low ball budget estimates - with any excess revenues going to past due bill payment - would certainly have to help the state’s financial picture. It might not help “enough” but it would make things less bad, if not somewhat better.

Comment by titan Monday, Mar 5, 12 @ 9:49 am
If the discussion only focuses on where cuts are made, pitting the state’s middle class against the state’s lower class, then I’m not seeing where the republicans are doing a lot of suffering here. The state needs to implement a graduated income tax and close the plethora of loopholes that exist allowing most of the state’s corporations to pay no income taxes at all for EVERYONE to actually be equally in for this session’s unpleasentries.

Comment by PublicServant Monday, Mar 5, 12 @ 10:02 am
So the answer is be an additional $162M in arrears on past due bills?

Comment by Leave a Light on George Monday, Mar 5, 12 @ 10:08 am
Those past due bills are there because of a drastic drop in state revenues caused by the recession. A comprehensive review on the expenditure side which is under way, should also include a review of the regressive tax structure of this state at the same time, if not before asking the poor and middle class people in this state to endure cuts to the programs that they depend on in addition to being most affected by the ravages of this recession already.

Comment by PublicServant Monday, Mar 5, 12 @ 10:14 am
==So the answer is be an additional $162M in arrears on past due bills?==
In the short run (this budget cycle), yes, that appears to be the solution, if the legislature and Gov. Quinn can agree that if Gov. Quinn’s revenue forecast turns out ultimately to be more accurate, then that excess revenue goes to pay past due bills.

In the long run, imho the solution is pension reform combined with amended constitution to allow for a graduated income tax.

Comment by Robert Monday, Mar 5, 12 @ 10:15 am
” I’m not seeing where the republicans are doing a lot of suffering here”

Did we forget the 66% income tax increase already?

Comment by Plutocrat03 Monday, Mar 5, 12 @ 10:16 am
Hope for the best, plan for the worst. The lowball estimates are the way to go, given the backlog of bills.

PS, I doubt very much that there can be a top-down movement toward a progressive income tax. It would have to be a grass-roots initiative. I don’t see it happening anytime soon. What can’t be changed must be endured.

Comment by wordslinger Monday, Mar 5, 12 @ 10:27 am
Pluto, the flat tax that we have in Illinois hits people already hard hit by the recession a second time. Middle class wealth, most of which consisted of the value of their homes, has taken a huge hit, and middle class jobs have and continue to disappear as a result of this recession. A graduated income tax would give the middle class and poor a boost. We should look there on the revenue side during the review of the status quo occurring now.

Comment by PublicServant Monday, Mar 5, 12 @ 10:29 am
Pluto, =Did we forget the 66% income tax increase already? =

Whether they will admit it or not, the GOP benefits from that tax increase more than the Democrats do. They not only have more money to spend, but have something to campaign on.

Comment by TCB Monday, Mar 5, 12 @ 10:31 am
Does anyone really believe the Republicans in Illinois are driving any spending policy?

Comment by Plutocrat03 Monday, Mar 5, 12 @ 10:48 am
–Does anyone really believe the Republicans in Illinois are driving any spending policy?–

No, they don’t want to cut spending on state facilities, lay off state employees, reduce Medicaid reimbursements to docs and hospitals, cut the state fair, etc.

Comment by wordslinger Monday, Mar 5, 12 @ 11:01 am
@titan -

There’s a couple of problems with that argument:

1. If the state’s plan is ACTUALLY to use that money to pay down past bills, that has to be done through the appropriations process. Its a reappropriation.

2. Absent a reappropriation, we will find ourselves in the same situation we are in today with the excess sales tax revenue. We’ve essentially created a slush fund where lawmakers are debating how to spend hundreds of millions of “new” dollars outside of the regular budget process.

With a primary election weeks away and a general election months away, you can bet that those decisions will be motivated largely by politics, not the best long-term interests of the state.

3. Many of the human services programs currently on the chopping block actually prevent huge Medicaid costs for the state in the near and long-term future. Prevention programs for homelessness, domestic violence, drug addiction, child abuse. Job training and child care programs. Public health programs. We’re not funding these programs at the level they should be now…cutting them by another $200 million will only ADD to our Medicaid costs.

4. Revenue estimates are never perfect, but they should NEVER be driven by ideology or politics, only by the best available data.

I found myself in rare agreement with Rod Blagojevich when he criticized the GA and Gov. Ryan for ignoring reliable budget forecasts, predicting economic growth for Illinois in 2002, and inflating revenue estimates by $600 million for FY 2003. That “liberal” revenue estimate led to one of the earliest adjournment dates on record. George Ryan got to focus on his fate. It also made lots of lawmakers happy because they could spend money the state didn’t have leading up to the remap elections of 2002. In the light of the tech bubble collapse and 9/11 attacks, it was also sheer and utter fantasy.

Revenue estimates that are “liberal” or “conservative” should be tossed out the window, just as we should toss out “liberal” or “conservative” estimates of expenditures.

Comment by Yellow Dog Democrat Monday, Mar 5, 12 @ 11:07 am
“No, they don’t want to cut spending …”

The just have to act as a brake to remind the free spenders that there is no money to spend. The kitty is empty Anything you spend has to be borrowed and paid pack in an ever increasing cascade of governmental debt..

Comment by Plutocrat03 Monday, Mar 5, 12 @ 12:07 pm
–The just have to act as a brake to remind the free spenders that there is no money to spend.–

What does that even mean?

Why not take all that staff you have, and all the time you have down there in the state capitol, and propose a counter-budget and sell it?

Comment by wordslinger Monday, Mar 5, 12 @ 12:25 pm
It’s a republican talking point Word. “Reminding free spenders that there is no money to spend” doesn’t have to mean anything, nor does it have to be supported with either factual evidence, or real bills that seek to implement a republican solution to those “free spenders”.

Comment by PublicServant Monday, Mar 5, 12 @ 12:46 pm
Here’s CTBA’s analysis supporting a graduated income tax in Illinois. I hope it’s OK to put this here Rich.

February 28, 2012, “The Case for Creating a Graduated Income Tax in Illinois”, a formula to eliminate state budget deficits.

Among the reports key findings, Illinois’s failure to have a graduated tax rate structure:

- Unfairly taxes people because it fails to take into account ability to pay;

- Runs counter to textbook tax policy and the historic, bi-partisan support for graduated income tax structures in America;

- Contributes significantly to Illinois’ on-going fund deficits; and

- Impedes private sector economic growth by overtaxing low- and middle-income families, who are the state’s best consumers.

The report highlights that the state’s constitutional requirement that there be only one, flat rate used for the income tax makes Illinois a tax outlier. In fact, of the 41 states with an individual income tax, all but seven have graduated rate structures.

If Illinois amended its constitution to allow implementation of a graduated rate structure for the individual income tax, that structure could be designed to:

1. Cut overall state income tax burden for 94 percent of all taxpayers—that means on average, taxpayers with under $150,000 in annual base income would receive a tax cut;

2. Despite shifting tax burden to affluent taxpayers, nonetheless keep the effective state income tax rate for millionaires at just 4.3 percent;

3. Raise at least $2.4 billion annually in new revenue to help eliminate ongoing structural deficits in the state’s General Fund; and

4. Stimulate the growth of at least 36,000 jobs in the state’s private sector through enhanced public and consumer spending. As of August, 2011, Illinois hasn’t replaced 342,000 non-farm jobs it lost during the Great Recession.

Comment by PublicServant Monday, Mar 5, 12 @ 12:53 pm
I guess that explains why the Democrats in Illinois want to continue spending money they don’t have .

Apparently a discussion of fiscal responsibility yields a ‘What does that even mean?” and the spending continues.

I sure hope they don’t follow those same spending philosophies in their private spending habits. If they run businesses they certainly know not to spend money they don’t have.

Comment by Plutocrat03 Monday, Mar 5, 12 @ 1:10 pm
The only viable solution appears to be amending the state constitution to allow a graduated tax. But the pain is not severe enough. Yet. Realization is slowly setting in that good paying middle class jobs for relatively uneducated people are gone forever. The only issue is the means of amendment. The constitutionally mandated vote on a convention was shot down by the unionists, and there is no reason to believe that the same result would not occur in the future if the legislature sought to vote on a convention. They will not allow a convention which could jeopordize the sanctity of their government pensions. And this issue will draw in significant out of state money to ensure no approval. That leaves amendment by legislative and popular vote which can be more surgical. But not yet. We’ll need several significant municipal or county failures. Five years? Keep an eye on California’s slow motion collapse in its less well-heeled communities. Vallejo is out of bankruptcy, but it will most likely be back in. And Stockton, Milipas, Hercules and Lincoln, CA look about ready to go down. CA will lead the way and give states like IL the reference point for needed action.

Comment by Cook County Commoner Monday, Mar 5, 12 @ 2:19 pm
If we could get the CTBA plan on the ballot — with tax cuts for 94% of taxpayers — I bet it would be ratified. I doubt Democrats have the stomach for it.

Comment by reformer Monday, Mar 5, 12 @ 2:38 pm