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* While I’m preparing a few more complicated posts, have a look at my weekly syndicated newspaper column…
I’m going to tell you right up front that this is a column about the state budget and involves a little math.
Wait! Don’t move on to the next story. I know this can get a bit tedious. But the math is easy and the story itself tells us a lot about how this state is being governed.
I decided to write about this when Gov. Pat Quinn appeared on public television’s Chicago Tonight show last week and was grilled hard by hosts Phil Ponce and Carol Marin.
The governor did his best to deflect some very tough questions about his budget and other topics (many of the questions seemed to come right from one of my previous columns, by the way).
One thing the interviewers returned to again and again was how Quinn’s proposed budget cuts more than a billion dollars from education spending. The governor wants to stop those cuts with a one percentage point income tax surcharge. Quinn has warned that, without a tax hike, the schools would suffer. Thousands of teacher layoffs would result. Kids would be put into ever-more crowded classrooms.
The governor kept explaining that the federal government was primarily to blame. The state got about a billion dollars from the U.S. government’s stimulus program last year to fund schools, but that cash won’t be forthcoming again this year, and now there’s a crisis.
Blaming Washington, D.C., is always fun, but his comments were misleading at best. Quinn and the General Assembly actually did cut state education funding last year, and that’s why we have a problem now.
The truth is that federal education dollars were used to replace existing state funding last year.
Here’s what they did.
First, the schools budget was cut by about a billion state dollars and then the hole was immediately refilled with about a billion federal dollars. Quinn and the General Assembly essentially put that federal money into the state’s permanent spending base, instead of using it to supplement what the state already was spending.
And now, with the federal school program ending, that billion-dollar education budget hole has reappeared.
The absolute worst part about this whole thing is Quinn and everybody else knew last year that the federal stimulus program was a temporary, one-shot deal. They knew what the consequences would be if the economy didn’t turn around quickly and state revenues began to grow again. Instead, the economy may have since bottomed out, but unemployment still is rising and state tax revenues have continued to plunge.
This time, Quinn’s plan is to fill that hole yet again with a one percentage point income tax surcharge.
What they did last year is pretty much what the state does with lottery proceeds. Instead of increasing dollars to schools, lottery cash (which is about $650 million a year) just frees up money so it can be spent on the rest of the budget.
Despite all this, it’s tough not to blame Quinn for pulling that little fiscal trick last year. The budget was such an intense, unprecedented disaster, and not enough political will existed to increase taxes, that Quinn and the other leaders - Democrats as well as Republicans - were looking for anything they could do to keep the government afloat.
While some did call for big cuts last year, particularly the Republicans, even they blinked when reality started hitting home. It was the Senate Republican Leader, after all, who demanded that money be found somehow, some way (without a tax increase, of course) to fund human service providers last summer when the prospect of providers going out of business became an all-too-clear reality. So, pulling the switcheroo with that federal school money was an easy target. They did what they had to do to get through the crisis.
No matter the reasons or the excuses, this year’s education hole is the governor’s fault, shared with the General Assembly. And it’s entirely misleading to blame the feds for this current calamity with school funding. They did it to themselves.
Thoughts?
posted by Rich Miller
Monday, Mar 22, 10 @ 10:00 am
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between sleight of hand tricks like this and deferring pension obligations a very very deep hole has been dug
Comment by Balance Monday, Mar 22, 10 @ 10:06 am
You completely forget to mention he state lost 3.2 billion in tax revenue in the past two years. given 1.3 billion in education funds from the federal govt, would u still slash human services? the fact is, the state needs revenue and it has needed revenue for a very long time. Let’s make sure to remember all the facts, not just those convenient to the point we’re trying to make.
Comment by ndgrad67 Monday, Mar 22, 10 @ 10:18 am
Yep, citing the loss of the federal dollars was a convenient sleight of hand to help justify the 1% tax increase proposal. But if a one billion dollar hole was filled with the stimulus, this still does not explain why education was still so seriously shorted in the actual money stream handed out to the districts and the universities.
The shell game is missing a couple of shells.
Comment by vole Monday, Mar 22, 10 @ 10:35 am
You also forgot to take into account the magic beans.
Comment by Anonymous Monday, Mar 22, 10 @ 10:39 am
Although it’s been many years, the lottery switcheroo still honks off people across the political spectrum. When you talk state government with folks who don’t live and work it day-to-day, they invariably bring the subject up in anger or disgust.
Comment by wordslinger Monday, Mar 22, 10 @ 10:41 am
Lawmakers need to fix the structural deficit through increasing the state revenue base and telling their constituents why it had to be done, or shoulder the consequences of eliminating social services and laying of teachers and dealing with frustrated voters because now they realize services they’ve relied on for years are gone.
Comment by Leroy Brown Monday, Mar 22, 10 @ 10:41 am
You can’t blame the stimulus for causing this situation. The stimulus saved the state budget last year from complete catastrophe. Routing education funds to a GRF-balancing goal was absolutely fine by me. They were meant to prevent teacher layoffs - and they weren’t contingent on you also cutting the budget elsewhere.
The bigger blame can be found in those at the federal level who demanded that State budget relief funds be stripped out of the stimulus package in the first place. When all the states are focusing on raising taxes, or spending all their time debating over what to cut, they aren’t spending that time working to create jobs, and implementing the other stimulus programs.
You can also blame the national economic collapse for the huge drop in revenue that is, as of right now, compounding on itself.
Comment by George Monday, Mar 22, 10 @ 10:46 am
This just deals with the education funding which is bad enough in its own right. But just wait until the State’s medicare/medicaid funding liabilities start to take effect as a result of the legislation passed last night.
I have absolutely no idea where this state is going to get money to survive. We’re completely screwed now and getting worse by the minute.
Comment by Logical Thinker Monday, Mar 22, 10 @ 10:56 am
I guess the question can be asked: OK, one of the goals of the stimulus was to prevent teacher layoffs. But, given that, if the school districts had known last spring how much money they would actually receive from the state this fiscal year, would they have sent out a bunch of pink slips a year ago? I am not sure that the federal stimulus really put a billion dollars into the schools as it ended up. Education funds had to have been cut more than a $billion.
Comment by vole Monday, Mar 22, 10 @ 11:07 am
1. You cannot blame republicans. The dems have had absolute control for 8 years. More then ample time to fix any Ryan malfeasance. They are responsible period, end of story.
2. I get that people are mad, but until they change their vote, it won’t change. The only way to change how Mike Madigan does business is to put him in the minority seat. The IEA can complain all they want, but if they want the problem fixed long term vote Republican.
You have tried the same thing for 4 consecutive election cycles and 8 consecutive budget cycles each time the result gets worse. Perhaps we should try something else.
Generally by the 3rd or 4th time I have my head slammed in a car door I figure out it hurts, I guess voters in IL are a bit slower.
Comment by the Patriot Monday, Mar 22, 10 @ 11:08 am
Logical Thinker, you’ve made two big errors.
First, Medicare is a federally funded program. Not state.
Secondly, Medicaid expenditures will rise, but not nearly what has been bloviated about.
Comment by Rich Miller Monday, Mar 22, 10 @ 11:09 am
What gets me is that politicians think that no one is watching this… and then the other thing that gets me is that not more school districts are speaking out about the switch-a-roo. Illinois is dead last in percentage of the state’s share for education funding and we dig the hole deeper. The media on the west side of the state likes to focus on school district spending but don’t want to tackle the issue of how school districts are underfunded.
Comment by Island Girl Monday, Mar 22, 10 @ 11:09 am
If Quinn really only wanted to make up the education dollars (or most of them–the education industry really does need to do some non-classroom cutting, and there is plenty of room to do that) wouldn’t the proposed tax increase be lower? As I understand it, a one percent increase will bring in about double what Quinn needs to fill his the billion or so education “gap.” What’s he planning to do with the extra–a lot of extra.
We all know that our tax money is sooooo fungible when it gets into the hands of the greedy Democratic pols who have been running the state for almost 8 years, but it’s Quinn who has set the terms of the discussion around the supposed education deficit. What’s he going to do with the rest of the money? Save it for the next round of union raises? 2012 is coming up fast.
Comment by cassandra Monday, Mar 22, 10 @ 11:10 am
Good column, Rich. Thank you!
Comment by Will County Woman Monday, Mar 22, 10 @ 11:13 am
Actually, the state will benefit - It will see an increase in the medicaid reimbursement rates. It will be budget-relieving.
Comment by George Monday, Mar 22, 10 @ 11:26 am
People are not stupid, so we have to better understand why we are seeing so much stupidity in our current governments.
Is it a political benefit to these people to handle our state affairs so badly? Are these people getting personally rich to the point where they just don’t care what happens to us anymore?
Our political leaders have quit us. They are no longer leading, solving problems or planning. The people in elected office are not being swayed by the threat of political extinction anymore. We have reached a point where either they are operating in a virtual world disconnected from reality, or they believe that their political power is permanent and cannot be taken from them.
Perhaps they don’t care anymore because if they lose the next election, there is still a lot of money and political power outside the Dome. So they just continue to do nothing as our situation worsens and continue to feather their own nests as we lose ours.
Ryan. Blagojevich. Now this guy? Illinois can no longer suffer under this level of governmental malpractice. Yet our political parties continue to serve up some of our nation’s worse government officials. And if they can’t get elected, then they do deals a-la-Burris, Jackson Jr, and the next Lt. Governor nominee-a-la-American Idol.
You can’t blame millions of voters when the ballot choices are two people who were unwilling during the campaign to tell voters any form of truth. I’m willing to start demanding that instead of public debates - we should be forcing candidates to take lie detector tests on live television. If our candidates will not level with us, then we will have to find new ways to get around their campaign blather and outright lies. If our traditional media refuses to be unbiased or tell us of their biases up front - then I’m ready to start strapping these people into chairs and putting them under truth serum too.
Comment by VanillaMan Monday, Mar 22, 10 @ 11:43 am
When the price of gas hovered around $3 a gallon during the Ryan administration, the State suspended sales tax on gasoline for a period of time. Ryan noted the state had received a “windfall” in sales tax because of the price of gasoline. Why is no one talking about the windfall now? How much more sales tax is Illinois collecting on gasoline sales over previous years?
Comment by 3 beers to springfield Monday, Mar 22, 10 @ 11:45 am
Cassandra: maybe Quinn will put the cash into the State employee pension system and/or borrow less money to pay the bills…what a despicable use for “extra” revenue….ummm, NOT!
Comment by Loop Lady Monday, Mar 22, 10 @ 11:47 am
===Why is no one talking about the windfall now? ===
The “windfall” came before the state reduced the sales tax. After he cut the tax, Ryan admitted it was the biggest policy mistake he’d ever made. Receipts went down. There were no magic beans.
Comment by Rich Miller Monday, Mar 22, 10 @ 11:54 am
Loop Lady-
The problem is, we don’t know. It’s like a gigantic $1 billion plush slush fund for the Democrats to do with as they wish in an election year. Quinn has not been explicit about what he would do with it….or even really talked much about the extra cash from his “education” tax hike.
I agree that the state should benefit from the changes just passed in Congress re Medicaid, especially as Illinois already provides more Medicaid coverage than most states…not sure
how soon that will show up though. Hopefully, the feds will consider stimulus monies to carry the states through until 2014.
Comment by cassandra Monday, Mar 22, 10 @ 11:55 am
cassandra, you’re not paying attention, perhaps willfully.
The extra cash goes to pay the bill backlog to schools. The question is where does the money go in the out years.
Comment by Rich Miller Monday, Mar 22, 10 @ 11:58 am
But the Legislature might not agree.
Comment by cassandra Monday, Mar 22, 10 @ 12:08 pm
Rich, you are absolutely right, and its not just the stimulus money. Any time the state uses excessive amounts of one time revenues to pay normal operating expenses, they are screwed in the out years. This all pretty much traces back to the way the POBs were used in the first two Blago budgets.
Comment by steve schnorf Monday, Mar 22, 10 @ 12:26 pm
I was listening to the audio out of the Committee Rm 114 last Thursday, one representative mentioned that as many as 17,000 pink slips could be going out to teachers statewide as a result of this. I suppose these teachers would then be eligible for state unemployment benefits (which I believe are pretty well cashed out). Several States have been looking to Washington to make up the shortfall - so the federal dollars may be printed up whether they teach or not
Comment by Das Man Monday, Mar 22, 10 @ 12:27 pm
Rich,
What do you base this comment on?
“Secondly, Medicaid expenditures will rise, but not nearly what has been bloviated about”
Please give one example of cost containment in a government funded program. The expenditures will be much worse than anticipated when the number of people on the medicaid rolls swells beyond projections.
Comment by Logical Thinker Monday, Mar 22, 10 @ 12:27 pm
Please give one example of cost containment in a government funded program. The expenditures will be much worse than anticipated when the number of people on the medicaid rolls swells beyond projections.
We can just do Medicaid.
- Disease Management Program
- Primary Care Case Management Program
- maintaining low specialist reimbursement rates
I can do more… but I don’t think it will matter.
-
Comment by George Monday, Mar 22, 10 @ 12:38 pm
Through their actions, legislators are very clear about their role in leadership of this State. They are proud stewards… in one-year increments only. Their concern is only what will affect the State (and themselves) in the current year. Not two years, four years, or ten years. Legislators are simply not going to look out for the long term well-being of our State.
It’s leaders, not politicians, that Illinois needs to cultivate, and as officeholders not legislators. People with vision and the presence, persistence and persuasion to move connected pieces forward, even though self-concerned parties may not recognize the connection. Leaders who can use the legislative process at the right time to move some of the pieces, but also know and rely upon non-political avenues to advance other pieces.
Illinois is currently led by politicians with one year time horizons. Even if we filled the hole in the deficit, we would be going nowhere.
Comment by KeepSmiling Monday, Mar 22, 10 @ 12:43 pm
===What do you base this comment on?===
I base it on the fact that last week some politicos were neglecting to point out that the feds were covering 100 percent of new Medicaid recipients for three years, then 95 percent for another three years. Then 90 percent.
Comment by Rich Miller Monday, Mar 22, 10 @ 12:44 pm
Rich,
I’d find your self-promotion (questions asked by the newsies) disgusting if I didn’t find the very same traits in myself. Don’t know what to say about Ponce deLeon, but as for the other, just consider yourself a Marin aid.
Comment by You Go Boy Monday, Mar 22, 10 @ 1:55 pm
It’s the kind of sleight-of-hand the state has been using for years–pension raids, asset sales, borrowing splurges, etc.
Smart folks understand you can’t fund ongoing programs with one-time revenues. The state needs either to cut services it can’t fund or increase ongoing revenue streams. Whatever path it chooses, the state cannot continue to dig this hole deeper.
Comment by Fan of the Game Monday, Mar 22, 10 @ 3:14 pm
great explanation on how the fed $ were used and I didn’t realize just how much the feds will continue to fund in medicaid - I am more informed. sometimes on this blog shorthand references to facts go over my head (current example: i don’t understand why state has to spend capital budget), so appreciate the links to your columns, Rich.
if I had to pick on anything in the column, I’d say that the legislators should have been singled out for a little more criticism than Quinn. At least with the 1% tax hike, Quinn is attempting some part of a solution (maybe he’s solving roughly 20% of the problem?), whereas the legislators aren’t solving 1%. or am i wrong - are they doing more to solve the budget problems than quinn?
Comment by Robert Monday, Mar 22, 10 @ 5:06 pm
First my comments then questions. The way to increase revenue is to make it worthwhile to companies to do business in IL again. Companies have left in a steady stream to states where the cost of doing business is lower. Companies wont locate here, and instead go to other states for the same reason. Texas has added more jobs in the last 10 years than the rest of the states combined because they figured this out. But you dont have to look that far away. Look next door to Indiana. They figured this out and have landed thousands of jobs that we couldnt. Also, due to the differences in taxes now, there is a steady stream of people going to other states to shop and spend their money. Make this state favorable to companies again, they will come. Make this state as affordable, and they will stay home and shop.
Second, stop spending money on unnecessary things and then saying there is no money for Education. The state is throwing money away all over the state, then cutting Education in order to get people upset and demand a tax increase. Its hard to believe their story when they cry about having to lay off teachers, while they are spending millions on new sports complexes and new buildings. Its hard to believe they absolutely have to lay off teachers when they increase salarys for administrators.Cut there first.
Now a couple questions. How much is to be spent this year on programs that were either created or expanded during the last 8 years? How much is going to be spent by the state to start allowing prison inmates to have video visits over the internet since the state decided to pass HB 1995? Why cant this money be spent on Education instead?
Comment by SoIL M Monday, Mar 22, 10 @ 5:18 pm
George,
I’d agree that the Medicaid expansion will cost the state down the road. However, the feds are very quickly going to take some of the state’s current drug rebate revenues, probably to the tune of double-digit millions per year.
Comment by Budget Watcher Monday, Mar 22, 10 @ 6:00 pm
–Texas has added more jobs in the last 10 years than the rest of the states combined because they figured this out.–
They figured out how to pump oil and access (better than Illinois) the cheap illegal Mexican labor at their doorstep.
Really, Texas? That’s the model? Not me, brother. My advice? Buy land in the Great Lakes watershed.
Comment by wordslinger Monday, Mar 22, 10 @ 7:41 pm