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Civic Federation rips Rauner budget proposal

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Illinois

Gov. Rauner’s latest budget proposal is at least $3.5 billion out of balance, according to a new analysis released Tuesday by the Civic Federation, a government finance watchdog group.

The report found Rauner’s budget plan “does not fully account for the actual cost of essential state services and is based on projected savings that are unlikely to be realized.”

Those unlikely savings include reducing pension contributions by almost $750 million, largely by deferring payments, as well as cutting employee health insurance costs by $445 million. An additional $475 million in one-time savings would come from emptying the state’s rainy day fund and the sale of the James R. Thompson Center in Chicago, which requires legislative approval.

If that deficit is not addressed, the Civic Federation estimates the state’s backlog of unpaid bills could reach a new high of $12.8 billion by the end of the next fiscal year.

* Greg Hinz…

In a beyond-blistering report being issued today, the Chicago watchdog says the budget’s reported $3.5 billion deficit—a shortfall Rauner has suggested might be filled with spending cuts and perhaps some tax hikes—in fact is “more like $4.5 billion to $5 billion,” federation President Laurence Msall told me in a phone interview last evening.

* From the report…

The Civic Federation opposes Governor Rauner’s recommended FY2017 budget because it has an operating deficit of at least $3.5 billion and presents an insufficiently detailed plan for closing the gap. The $3.5 billion figure appears to be understated because it does not fully account for the actual cost of essential State services and is based on projected savings that are unlikely to be realized.

And how is this deficit understated? Read on…

The Civic Federation is concerned about the following aspects of the Governor recommended FY2017 budget:

* The General Funds budget has an operating deficit of at least $3.5 billion and an insufficiently detailed plan to close the gap between revenues and expenditures;

* After declining for the past three years, the State’s backlog of unpaid bills is expected to be significantly higher in FY2016 and FY2017 due largely to the phaseout of temporary income tax rate increases in the middle of FY2015;

* The State’s pension contributions are reduced by $748 million partly by deferring costs to future years;

* The proposal budgets a reduction of nearly one-fourth in group health insurance costs, with savings that depend on either a successful resolution to labor negotiations or the removal of health insurance from collective bargaining; and

* The Budget Stabilization Fund, the State’s only rainy day fund, is depleted to help balance the budget.

* The proposal to save nearly $198 million by moving seniors who are not eligible for Medicaid from the Community Care Program to a much less costly program could lead to increased institutionalization of elderly residents; and

* The use of one-time resources to pay for ongoing operating costs guarantees future deficits and continues the ongoing budget imbalance. These include fully depleting the Budget Stabilization Fund and the sale of the James R. Thompson Center and savings from not repaying FY2015 interfund borrowing.

* One big problem…

Because of the FY2016 budget impasse, the backlog of unpaid claims had grown to $2.9 billion by the end of February 2016 and was expected to increase by $200 million per month. Group health insurance is one of the main areas of government that has not received funding during the budget standoff. However, the costs of the program must be paid eventually due to State law and union contracts, and interest penalties will be paid at the same time.

* More…

The administration arrives at the $3.5 billion operating deficit for FY2017 by beginning with a maintenance budget that has a $6.6 billion shortfall. The Governor’s recommended FY2017 budget reduces the operating deficit to $3.5 billion through projected spending cuts of $2.6 billion and the use of $476 million in one-time revenues.

The $3.5 billion figure appears to significantly understate the shortfall because it does not fully account for the actual cost of essential State services and is based on projected savings that are unlikely to be realized. The administration has not released details about its proposed cuts to the Community Care Program, which seeks to keep elderly residents out of nursing homes, or any actuarial reviews of its proposal to save money on pension contributions. The recommended savings on overtime pay and group health insurance depend on changes that have so far been rejected by the State’s largest labor union.
The administration is also seeking to transform other areas of government, including streamlining the procurement process and modernizing the information technology system, according to the FY2017 budget document and the Governor’s State of the State speech in January 2016.

The Civic Federation supports efforts to increase the efficiency and effectiveness of government through major reforms. However, it is imprudent to base so many deficit-reduction measures on untested initiatives. Given the State’s dire financial plight and long history of fiscal mismanagement, the State cannot afford to ignore the discipline of budgetary balance. […]

The backlog of unpaid bills declined from $8.1 billion at the end of FY2012 to $5.2 billion at the end of FY2015. If additional appropriations are enacted with no additional revenues, the backlog is expected to reach $9.3 billion at the end of FY2016. It will remain at that level in FY2017 if the operating deficit in the proposed budget is closed. If the gap is not eliminated, the backlog could grow to $12.8 billion, or 37.5% of projected FY2018 revenues.

posted by Rich Miller
Tuesday, May 3, 16 @ 8:43 am

Comments

I bet everyone is relieved that we’ve got a fiscal conservative in office.

Comment by Anon Tuesday, May 3, 16 @ 8:47 am
=The State’s pension contributions are reduced by $748 million partly by deferring costs to future years.= Isn’t that why we are in this predicament to begin with?

Comment by Bogey Golfer Tuesday, May 3, 16 @ 8:49 am
Our Governor needs one of these:

https://capitolfax.com/wp-content/10402582_10154297573025038_5462604553969740713_n.jpg

Comment by AC Tuesday, May 3, 16 @ 8:49 am
The idea of factoring in health care savings *while they are being bargained* is one of the weirdest, most corrupt things I’ve seen in a while.

Bad faith bargaining? Nah. Why would anyone — anyone — think that?

Comment by Formerly Known as Frenchie M Tuesday, May 3, 16 @ 8:52 am
==The backlog of unpaid bills declined from $8.1 billion at the end of FY2012 to $5.2 billion at the end of FY2015.==

In other words, the tax hike was a huge help. We need to raise taxes again. Only this time, do not let them sunset.

Comment by Fusion Tuesday, May 3, 16 @ 8:54 am
Selling the JRTC may be one-time revenue but let’s not badmouth it either, it’s the one really good idea the Governor has had.

Another way to raise revenue would be to auction off the right to burn down the Stratton Building. I’d consider robbing a bank to win that auction.

Comment by The Captain Tuesday, May 3, 16 @ 8:55 am
Isn’t this the very thing he has been hammering Madigan for-appropriations without adequate revenue?

Comment by Anonymous Tuesday, May 3, 16 @ 8:56 am
When commenters keep saying that the Governor’s own budget requires a tax increase, this is what they are referencing. A progressive income tax that only generates $2 billion will not cover a $5 billion dollar shortfall. When this mess is over, you’ll wish you had a 5% income tax.

Comment by AC Tuesday, May 3, 16 @ 9:01 am
===If that deficit is not addressed, the Civic Federation estimates the state’s backlog of unpaid bills could reach a new high of $12.8 billion by the end of the next fiscal year.===

So…

Rauner still thinks a “revenue give” is still “optional, or…

Governors own the budget. Been that way since the third Wednesday of forever.

“Pat Quinn failed… ”

Ok, Pat Quinn failed, but if I believe that, then… the $12+ Billion deficit is Bruce Rauner failing Illinois.

Don’t worry…

HBO - “Dad’s Home State” - Season 2, Episode 27

Bruce visits the University of Illinois, leaves earlier than expected. ===If that deficit is not addressed, the Civic Federation estimates the state’s backlog of unpaid bills could reach a new high of $12.8 billion by the end of the next fiscal year.===

So…

Rauner still thinks a “revenue give” is still “optional, or…

Governors own the budget. Been that way since the third Wednesday of forever.

“Pat Quinn failed… ”

Ok, Pat Quinn failed, but if I believe that, then… the $12+ Billion deficit is Bruce Rauner failing Illinois.

Don’t worry…

HBO - “Dad’s Home State” - Season 2, Episode 27

Bruce visits the University of Illinois, leaves earlier than expected. Diana writes out thank you notes to Ounce of Prevention Gala sponsors, Diana’s State Employee sends cookies and fruit plates to the Budgeteers. Goldberg writes a letter to the Civic Federation, “ck” emails a list of all the towns supporting the Turnaround Agenda that didn’t pay a $25,000 fine, Lance Tweets pictures to Rep. Lang of the “Veto” stamp. Comedy, 63 minutes.

Comment by Oswego Willy Tuesday, May 3, 16 @ 9:03 am
Taken at the far end of the range, this shows Rauner’s budget proposal was $1B further in debt than the passed and veto’ed Democrat budget.

Comment by RNUG Tuesday, May 3, 16 @ 9:05 am
Ugh… Apologies… Phone acting up.

===If that deficit is not addressed, the Civic Federation estimates the state’s backlog of unpaid bills could reach a new high of $12.8 billion by the end of the next fiscal year.===

So…

Rauner still thinks a “revenue give” is still “optional, or…

Governors own the budget. Been that way since the third Wednesday of forever.

“Pat Quinn failed… ”

Ok, Pat Quinn failed, but if I believe that, then… the $12+ Billion deficit is Bruce Rauner failing Illinois.

Don’t worry…

HBO - “Dad’s Home State” - Season 2, Episode 27

Bruce visits the University of Illinois, leaves earlier than expected. Diana writes out thank you notes to Ounce of Prevention Gala sponsors, Diana’s State Employee sends cookies and fruit plates to the Budgeteers. Goldberg writes a letter to the Civic Federation, “ck” emails a list of all the towns supporting the Turnaround Agenda that didn’t pay a $25,000 fine, Lance Tweets pictures to Rep. Lang of the “Veto” stamp. Comedy, 63 minutes.

Comment by Oswego Willy Tuesday, May 3, 16 @ 9:09 am
This is also proof that both the graduated income tax at about $1.9B and the expanded service sales tax at about $4B are both needed to close the gap and again start paying down the backlog.

Comment by RNUG Tuesday, May 3, 16 @ 9:10 am
And if the State health insurance is cut any further, they will be paying claims 2 years behind instead of the 1 plus years right now.

Comment by RNUG Tuesday, May 3, 16 @ 9:12 am
And the solution?

Maybe we should talk about the solutions we haven’t heard much about lately. A tax on retiree income. Pension reform. Corporate loopholes-heh. Cuts-what cuts has Rauner actually made. With no formal budget for this past year and no union agreement, it’s hard to tell. And that progressive tax is still iffy. As to service taxes, we don’t know what services our political masters are thinking about, but we can assume that service trade groups will raise an unholy howl when they find out they are targeted. Right before an election. Do our political masters see taking billions more out of the middle class via an increase in the flat tax the least risky option? Is the rest noise? After all, it really is all about them. Maybe the middle class, to them, is the weakest link. The most pluckable.

Comment by Cassandra Tuesday, May 3, 16 @ 9:14 am
Glad we have a fiscal conservative in there. One who knows how to run the State like a business.

Public finance 101. Underestimate your revenues, overestimate your expenditures, minimize risk that you end up in the red. Our finance directors in the smallest villages in the State get this. It’s time the Governor be honest and say he’s just not up to the job. It’s harder than he thought.

Comment by illini97 Tuesday, May 3, 16 @ 9:14 am
Not to belittle the square root of negative one, but I really do love real numbers. I also hate savings and/or revenue counted on that are in reality unlikely. If we do end up with some kind of windfall it shouldn’t be part of the budget, but used to pay down debt, whether pension or late payments.

Comment by Earnest Tuesday, May 3, 16 @ 9:16 am
Of course, if we taxed Coal, Natural Gas, Fracking Sand and Oil like other States, including States with no income tax like Texas, we could raise….?

Comment by Beaner Tuesday, May 3, 16 @ 9:17 am
-OW-

You need a Deadbeat Illinois episode. Maybe the State Capitol gets awarded to AFSCME to settle the back pay awards and the JRTC is turned over to a consortium of utility companies as an award for unpaid utilities? Possibly the State motor pool is handed over to insurance companies whose customers were bit by state vehicles?

Comment by RNUG Tuesday, May 3, 16 @ 9:17 am
I would take any of the Governors that were charged with a crime or sent to prison over what we have now. I would love to see a Blago vs. Rauner poll. “If the election was held tomorrow and your choices were between Bruce Rauner and imprisoned former Governor Rod Blagojevich, who would you vote for?”

Comment by Saluki Tuesday, May 3, 16 @ 9:22 am
Saluki,

Maybe Blago could sell a Senate seat and deposit the takings into the general fund? Golden!

Comment by illini97 Tuesday, May 3, 16 @ 9:24 am
@Saluki - Rauner, with reluctance. Blago was a major factor in getting to this point.

Comment by Bogey Golfer Tuesday, May 3, 16 @ 9:31 am
AC is right about the graduated income tax, its not even close to enough money and most everyone seems to understand this. Yet there it is… proposed and $3 billion short.

Comment by From the 'Dale to HP Tuesday, May 3, 16 @ 9:34 am
- RNUG -

===You need a Deadbeat Illinois episode.===

‘Tween us…

In a treatment sitting around the writers’ room, there’s an episode with auctioneers at state facilities, including the Mansion, and the group purchasing everything is led by Jim Edgar. It’s in between an episode where the butter cow is held hostage for a Turnaround Agenda ask and an episode of the electricity being turned off during GA votes so votes are recorded by the color candle you light, yellow, red, or green.

HBO is holding all these episodes. Like the Governor, my “hands are tied”. - OW

Comment by Oswego Willy Tuesday, May 3, 16 @ 9:40 am
Yet, you’ll still hear the GOP legislators say that we can cut our way out of this problem.

Comment by Norseman Tuesday, May 3, 16 @ 9:46 am
I don’t understand the line of criticism that the graduate income tax isn’t enough to fill the hole so we shouldn’t bother with it. Isn’t that precisely what a “mix of cuts and revenues” means? I may have just missed something, but I’ve yet to hear a single person say that a tax hike is the silver bullet for all our problems. Now, I’ve surely heard Rauner characterize Dems as taking that position. But I’ve never actually heard anybody stake out that position themselves

Comment by Johnny Pyle Driver Tuesday, May 3, 16 @ 9:46 am
===savings include reducing pension contributions by almost $750 million===

It appears that some people, after all these years, still do not understand how the problem with the state pension systems was created. To solve the pension problem yearly pension contributions need to be increased and not decreased

Comment by Hit or Miss Tuesday, May 3, 16 @ 9:46 am
Just to clarify:

Rauner’s budget proposal is more out-of-balance than the one Democrats passed and Rauner vetoed a year ago?

RNUG, Oswego Willy, Wordslinger: if anyone could clear this up, I’d appreciate it.

Comment by Juvenal Tuesday, May 3, 16 @ 9:48 am
“Madigan and the Civic Federation he controls.”

Comment by G'Kar Tuesday, May 3, 16 @ 9:51 am
=It appears that some people, after all these years, still do not understand how the problem with the state pension systems was created.=

He understands perfectly. His hope is to drive the pension system (and possibly the whole state) into the ground as quickly as possible. Vulture capitalism at its finest.

Comment by MSIX Tuesday, May 3, 16 @ 9:57 am
The Civvies are no leftwing group. These are big business execs who are calling out Rauner. Ironically, Rauner said the budget Dems passed last year was “unconstitutional” because it was unbalanced by, as I recall, #3.5 billion.

Comment by anon Tuesday, May 3, 16 @ 9:57 am
—the Civic Federation estimates the state’s backlog of unpaid bills could reach a new high of $12.8 billion by the end of the next fiscal year.–

According to the Comptroller’s office, the backlog of unpaid bills when Rauner took office stood at $4.3 billion.

So, he’s looking at nearly tripling it in 2.5 years. That’s quick work.

Perhaps the governor could share with his constituents just how much projected economic growth his Turnaround Agenda will generate in tax revenue to pay off $12.8 billion in debt.

Please show your work.

Comment by wordslinger Tuesday, May 3, 16 @ 9:58 am
===These are big business execs===

That’s a different group. Civic Committee.

Comment by Rich Miller Tuesday, May 3, 16 @ 9:58 am
Lou Lang to the rescue offering a tax cut to the 99 percent while we raise 1/10 of the revenue required to fund the shortfall. Mission Accomplished!

Comment by Lucky Pierre Tuesday, May 3, 16 @ 10:02 am
With Blagojevich the trains did not run on time, but the trains were still on the tracks. Rauner seems bent on putting the entire railroad out of business, and auctioning off the engines.

Comment by Saluki Tuesday, May 3, 16 @ 10:02 am
No one but the Dan Profts of the world believe there is not going to be a tax increase. But no one but members of public employee unions want to just hand MJM and Cullerton a blank check to raise taxes as high as they please without something real and substantial in return.

Comment by JB13 Tuesday, May 3, 16 @ 10:08 am
“no one but members of public employee unions want to just hand MJM and Cullerton a blank check to raise taxes as high as they please”

Do people really believe that union members are just itching to pay higher taxes?

Comment by Johnny Pyle Driver Tuesday, May 3, 16 @ 10:22 am
- Juvenal -

If you disallow the bogus “savings”, yes.

Comment by RNUG Tuesday, May 3, 16 @ 10:24 am
While debating abolition of the Lt.Gov. office, they might consider doing the same for Governor. We have been without one for a year and a half.

Comment by orzo Tuesday, May 3, 16 @ 10:25 am
The Civic Foundation may be accurate about the issues with Rauner’s budget, but their comprehensive plan for the budget wasn’t much better. They called for $8 billion in new revenue, when we would be lucky to get 1/2 of that to pass the GA. The GA has to do both some revenues and some cuts.

Comment by Bazinga2014 Tuesday, May 3, 16 @ 10:33 am
Gov rauner..”presents an insufficiently detailed plan”.
Put that on the tombstone for this administration.

Excellent report from CF. Will it spur the GA to actually deal with the shortcomings, or will they throw patches at the holes, declare victory, and run away?

Comment by Langhorne Tuesday, May 3, 16 @ 10:35 am
=== It appears that some people, after all these years, still do not understand how the problem with the state pension systems was created. ===

They understand, but like an alcoholic, they think they can control their use.

Comment by Norseman Tuesday, May 3, 16 @ 10:37 am
-But no one but members of public employee unions want to just hand MJM and Cullerton a blank check to raise taxes as high as they please without something real and substantial in return.-

OMG! How did you know that? I was just talking to Michael the other day. “No”, I said, “You cannot have your apple till we have a bill that raises taxes to Swedish levels! Don’t give me excuses Michael! The UNION demands action.” s/

Comment by Honeybear Tuesday, May 3, 16 @ 10:39 am
This being illinois, i can see them MAYBE passing tax CA, and rate bill, only to have it fail w the public. Those opposed to service taxes should support income tax changes.

Comment by Langhorne Tuesday, May 3, 16 @ 10:40 am
=== … or will they throw patches at the holes, declare victory, and run away? ===

Yes. That’s what they do.

Comment by Norseman Tuesday, May 3, 16 @ 10:45 am
–But no one but members of public employee unions want to just hand MJM and Cullerton a blank check to raise taxes as high as they please without something real and substantial in return.–

What are the “somethings,” what makes them “real,” and how do we “substantiate” that?

It’s May 2016. The expiration date on the empty catch phrases is long past.

That projected tripling of the state backlog of bills to $12.8 billion in just 2.5 years?

That’s really something substantial.

Comment by wordslinger Tuesday, May 3, 16 @ 10:57 am
Given the need for revenue, they need to make the need for revenue clear. Also pass a bill increasing the flat income tax rate to 8%, ramping down to 5% as the backlog is paid off, and totally sunsets ONLY if the graduated tax replaces it.

Comment by RNUG Tuesday, May 3, 16 @ 11:00 am
Honeybear, be careful, if you say any more about the union and the apples they control, you won’t get an invite to nexts months meeting at Mulberry Grove where we plan out the Marxist takeover of Illinois.

Comment by AC Tuesday, May 3, 16 @ 11:20 am
RNUG - as always - is on to something…
Pass a temporary rise in the flat tax to say 7% for three years, or upon replacement of a graduated income tax - based upon passage of the amendment to be voted upon this November. If the amendment fails, at least there is an opportunity to reduce the backlog. Individually vote up or down the rest of the Gov’s hokey pokey agenda and move on. By then we’re into 2017 and ready to replace this venture capitalist with hopefully a serious candidate…or not.

Comment by Captain Illini Tuesday, May 3, 16 @ 11:22 am
===The backlog of unpaid bills declined from $8.1 billion at the end of FY2012 to $5.2 billion at the end of FY2015. If additional appropriations are enacted with no additional revenues, the backlog is expected to reach $9.3 billion at the end of FY2016. It will remain at that level in FY2017 if the operating deficit in the proposed budget is closed. If the gap is not eliminated, the backlog could grow to $12.8 billion, or 37.5% of projected FY2018 revenues.===

Meep meep.

Comment by 47th Ward Tuesday, May 3, 16 @ 1:07 pm
Nice report from Larry Msall and his folks at the Civic Federation, but it seems to me that I read almost every major concern and proposed solution right here first.

Comment by Arthur Andersen Tuesday, May 3, 16 @ 1:27 pm
I would be remiss if I didn’t point out that the report includes some recycled pension ideas, including combining Chicago Teachers’ Pension Fund and TRS, having the State assume responsibility for CTPF’s unfunded, cost shift to school districts, and elimination of pension pickups for TRS.

Good luck with that.

Comment by Arthur Andersen Tuesday, May 3, 16 @ 2:32 pm
As they should.

Rauner should be ripped for introducing an unbalanced budget. The General Assembly should be ripped for passing an unbalanced budget. Both of their predecessors should also be ripped for many years of unbalanced budgets and running up the debt now siphoning off so much $ to debt payments.

Pointing fingers, however, has done nothing to move the ball. This ultimately boils down to Rauner and Madigan.

Comment by Formerly Known As... Tuesday, May 3, 16 @ 3:32 pm
We all need to thank The Civic Federation for analyzing Rauner’s woefully inadequate unbalanced budget.

This budget proposal accomplishes one thing for Rauner, a $800,000 a year tax cut for himself.

All the rest is a circus sideshow.

Comment by Chicago 20 Tuesday, May 3, 16 @ 3:55 pm
If Illinois would halt all these FREE programs, then the people who came from other states to Illinois so they could get more FREEBIES, would return to the states they came from. That would help Illinois and also then the other states would also share the burden of helping the poor; as it is now Illinois and California is footing the bill with all their programs. Do this couples with either a tax increase or tax reform, and just MAYBE Illinois could finally get back on track.

Comment by Crispy Critter Tuesday, May 3, 16 @ 5:29 pm
- Crispy Critter -

What exactly are you saying?

===If Illinois would halt all these FREE programs, then the people who came from other states to Illinois so they could get more FREEBIES, would return to the states they came from.===

Don’t be shy, say it.

Comment by Oswego Willy Tuesday, May 3, 16 @ 6:33 pm
Very “solution” is a 100% plus tax increase.

Do all the wizards believe that the high net worth folks will gladly pay and not hire hire their own experts to find a way to avoid this increase?

Why should we continue to fund these same people would lead the state to massive unfunded debt?

Comment by cannon649 Tuesday, May 3, 16 @ 8:37 pm
cannon, we serfs to our public workforce and the pols. Just bend over and take it.

Comment by Tone Wednesday, May 4, 16 @ 7:47 am