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* My weekly syndicated column looks at the budget problem…
The chickens are coming home to roost.
In fact, more chickens are on their way than we’ve ever seen before.
And they’re mad.
Gov. Rod Blagojevich spent years ignoring and exacerbating the state’s structural budget deficit. What that means is he did a lot of one-time budget fixes with one-time revenue sources to stem the tide of red ink, while at the same time expanding state spending exponentially.
You can get away with that as long as other revenues are growing enough to help patch the rest of the budget holes, but state revenues have tanked along with the national economy, and we’re in big trouble. Hence, that ginormous flock of angry chickens heading our way.
Comptroller Dan Hynes predicted last week that next fiscal year’s budget deficit could be as high as $9 billion. Considering that the budget is about $60 billion, and the money the state actually controls in the budget is about half that amount, we’re looking at a problem unseen since the Great Depression. The fiscal year, by the way, begins July 1.
Hynes’ estimate is based on a $4.3 billion deficit in the current fiscal year and a relatively flat growth in state revenues in the coming fiscal year.
Flat revenue growth may be overly optimistic. The legislature’s Commission on Government Forecasting & Accountability’s latest report, headlined, “The patient has taken a turn for the worse,” suggests expected state revenues could be $1.6 billion lower in the current fiscal year than they were last fiscal year. And things aren’t exactly looking up for next year, either.
Hynes’ deficit projection also relies on no spending growth for the rest of state government. Every dollar of growth adds to the deficit. But expecting flat growth is probably not realistic, as recessions traditionally provoke and even require more government spending, not less.
There are two areas of hope.
First, the federal stimulus plan could bring $3 billion into state coffers next fiscal year, lowering Hynes’ projected deficit to $6 billion. But as I write this, the stimulus package has hit rough waters in the U.S. Senate. While a deal still looks likely, nobody really knows yet what the states will get out of the final package.
Hynes also reported that if state revenues for July and August match last year’s take from the same period, then the current year’s deficit would be lowered to around $2 billion. Still, Hynes reported last week, “Without a major infusion of cash from borrowing or another source, the state will be virtually insolvent.”
There are some very difficult choices ahead.
One option, albeit distasteful, would be to leave the Medicaid payment cycle where it is, which would be hotly opposed by nonprofit service providers of all stripes. They’re already struggling mightily to make ends meet, and some are actually going out of business while they wait for state checks that never seem to come. The deficit could be lopped further, perhaps about $1 billion, if the political heat could be sustained, which it probably can’t.
The state’s mandated pension payment will rise by $1.2 billion next fiscal year, which may get a closer look by legislators. Five hundred million dollars of that payment will be required to make up for investment shortfalls by the pension funds, according to Hynes. The rest is a mandated increase in order to eventually reach “full funding” of the systems.
So, if the General Assembly decides to shaft Medicaid providers and short the pension funds, and if revenues bounce back in late summer and the stimulus passes Congress intact and legislators completely rein in spending for next fiscal year, the budget deficit could be pared to a bit over $2 billion.
It might be possible to bond future proceeds from the recent sale of the 10th state casino license, which would lower the deficit a bit more. Huge state employee layoffs, giant cuts to schools and universities, significantly reduced services for the poor and everyone else would be required to balance the rest of the budget without a tax increase, if the General Assembly could somehow defy logic and muster up the insane courage required to do all that.
That’s a whole lot of “ifs.”
Cue the chickens.
* Related…
* Fox Chicago Sunday : Dan Hynes, Illinois comptroller talks about the report he issued this week, indicating Illinois is facing a $900 billion budget deficit.
* Doug Finke: No tax hikes? No chance
posted by Rich Miller
Tuesday, Feb 10, 09 @ 9:05 am
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It is truly time for Pat Quinn to look at a zero-based budget analysis. We are at a point where “trimming the fat” is not enough anymore. I mean, the budget deficit is more than twice the state payroll!!! Oy… is there even anything that can be done?
Comment by Heartless Libertarian Tuesday, Feb 10, 09 @ 9:18 am
“Dan Hynes, Illinois comptroller, talks about the report he issued this week, indicating Illinois is facing a $900 billion budget deficit.” I hope that’s a typo or we’re REALLY in trouble
Comment by Secret Square Tuesday, Feb 10, 09 @ 9:21 am
Scary fax this morning. I like Governor Quinn, but he needs to understand that he is now the state’s chief executive. He needs to lead. Is it worse to not come to the governor’s office each day (as Blago did — he worked from home), than to govern from the lt. gov’s office? Talk about the 16th floor being adrift. If 16 doesnt have its stuff together, how can the agencies be expected to have theirs together?
Please governor — grab the wheel and jerk it away from the guardrail.
Comment by anon Tuesday, Feb 10, 09 @ 9:22 am
The gravity of this situation I think is lost on most average Illinoisans. That’s good and bad. Good, in that it makes it more difficult to just throw a huge tax increase on the table without having to “sell” it to the general public. I think that’s good because is makes it harder to just build all of this government expansion into future budgets. Bad, in that it means the average Illinoisan doesn’t have much of an idea what state government does, nor do they really care. I think they might when they find out their taxes are going to increase in the midst of their attempts to pinch pennies in their family budgets.
You write that the state budget is $60 million. Do you remember what it was, roughly, when Blagojevich took office in 2003? I’m just curious how much the increase has been when he came in talking about what a mess George Ryan left for him to clean up.
The whole things is disgusting. I cannnot believe one man allowed this to happen - not Blagojevich. Emil Jones. Had he stood up to the governor instead of trying to work sweetheart deal after sweetheart deal (with the tacit approval of his caucus), he and Madigan could have cleaned up the mess with or without the governor’s approval.
What a mess.
Comment by Amuzing Myself Tuesday, Feb 10, 09 @ 9:25 am
Crafting budgets is the responsibility of the General Assembly, not the governor. The undeniable duty in the Constitution to pass balanced budgets rests on the ILGA *alone*. The language of the constitution is quite clear.
Personifying all the years of negligence on Rod and then pretending the many around him didn’t enable him is ludicrous. The last 2 years the governor was barely part of the budgeting process and at times explicitly kicked out of the room. Legislators made this problem, not Rod.
Comment by John Bambenek Tuesday, Feb 10, 09 @ 9:28 am
Yes, it’s a lot worse to never show up to the governor’s office than to govern from a separate, now temporarily arbitrary, floor in the same building. Slow protocol to move some furniture and networking up a few flights of stairs? Please.
And “he needs to lead”? That’s such a great suggestion. How novel and succinct.
Comment by Barnacle Tuesday, Feb 10, 09 @ 9:28 am
===Crafting budgets is the responsibility of the General Assembly, not the governor. The undeniable duty in the Constitution to pass balanced budgets rests on the ILGA *alone*. The language of the constitution is quite clear.===
From the Illinois Constitution…
===The Governor shall prepare and submit to the General Assembly, at a time prescribed by law, a State budget for the ensuing fiscal year.===
Comment by Rich Miller Tuesday, Feb 10, 09 @ 9:30 am
Are we in a situation where tax refunds will be late/delayed? What does it take for that to happen?
Wumpus - early filer.
Comment by Wumpus Tuesday, Feb 10, 09 @ 9:30 am
The rules concerning pensions needs to be changed. Currently, the time required to work and the credit for getting pension benefits is to generous, when compared to other private pension plans. Although not a quick fix it would put the pension plans on a more actuarialy sound basis and reduce cost in the future.
There should be a freeze on all programs for the next few years and absolutely no new programs started and funded during this time.
Comment by Ken Tuesday, Feb 10, 09 @ 9:35 am
Before we can even BEGIN to address the budget problem, we need to answer the question: What are State Government’s Top Priorities, and In What Order?
Only then can you begin to identify the most cost-effective means of achieving those objectives, and start cutting programs at the BOTTOM of the list.
I know that’s shocking advice from a Democrat, but Democrats do need to come up with $1 Billion in REAL spending cuts if their going to convince the public to swallow a “temporary” tax increase.
So lets ask ourselves:
- Can we afford to spend $520 million a year incarcerating non-violent drug offenders?
- Is now really the time to spend more than $20 million promoting tourism, or $6M on a State Fair?
Here’s the FY ‘08 budget book! Have fun Campers!
Comment by Yellow Dog Democrat Tuesday, Feb 10, 09 @ 9:35 am
Ah, Barnacle, you’re in for a rough two years, I’m afraid.
Comment by Rich Miller Tuesday, Feb 10, 09 @ 9:44 am
=== The last 2 years the governor was barely part of the budgeting process and at times explicitly kicked out of the room. Legislators made this problem, not Rod. ===
Dear John,
I’ve promised not to waste ink on the former governor, so let me say this in response: if Governor Quinn fails to offer a realistic budget - one that recognizes the real needs and priorities of Illinoisans, the economic reality of our state, the budget realities of state government, and the political realities on Main Street which are represented in the General Assembly - its he that will bear responsibility, not the General Assembly.
In good times, budget-crafting is easy. But in hard times or when confronting big issues, Governors MUST lead. And the failure of any governor to lead doesn’t mean the leadership mantle passes to someone else. It just means failed leadership.
That said, despite all of the current machinations regarding the 2010 elections, I believe that both Cullerton and Madigan will bend over backward to assist and guide Governor Quinn if he will let them. There are pragmatic reasons: Cullerton was elected on the promise of change, and Madigan knows that he’ll be excoriated in the press if there’s even a whiff of sabotage in the air.
Beyond that, Cullerton and Madigan really do have the state’s best interests at heart.
What’ll be interesting is to what the Republicans. Will they play ball, or will they snipe just enough to try to bring any budget deal down? The GOP really hasn’t staked out any territory as far as I can see. In fact, except for supporting a capital bill, they’ve been noticeably quiet.
If Brady, Rutherford and Lauzen start popping off at the mouth from the sidelines instead of getting in the game and offering concrete solutions, it’ll be a long session.
Comment by Yellow Dog Democrat Tuesday, Feb 10, 09 @ 9:50 am
@ Wumpus
The issue of tax refunds has been addressed. The Income Tax Refund FUND (0278) has a current balance of $1,651,865,900. The money is only avilable for payment of income tax refunds. It is forbidden to “sweep” the fund for other purposes.
You can check the comptroller site for the current balance daily if you would like. Just use the fund # above.
Your refund is safe, and will be paid without problems. Unlike California where the budget crisis is a threat to refunds. Illinois is ready and able to cover all refunds as they are presented for payment.
Comment by How Ironic Tuesday, Feb 10, 09 @ 9:50 am
a democratic governor, democratic majorities in both the senate and house - sounds like somewhere else, change we can beleive in
Comment by anon Tuesday, Feb 10, 09 @ 9:53 am
How Ironic, thanks. People here are so dang smart. I am not worried about my refund, but was aware of teh CA issue and I know our beloved state’s fiscal situation is not too much better.
Comment by Wumpus Tuesday, Feb 10, 09 @ 9:59 am
People are not stupid. Julie Hamos polled 11,000 constituents, and this morning she reported that the number one priority was a belief that the state has to do what our families have to do - live within our means.
So claiming that Illinois voters are uninformed, misinformed, uncaring, or ignorant cows to be led by the right salespeople is a corrupted idea we cannot pretend to believe. Even if it was true, it doesn’t solve a thing, so it is best to let it go as some kind of an excuse. Consider it a condition that must be met instead.
That said, citizens know we are in a huge mess. We’ve been watching the Blagojevich administration destroy Illinois finances. We’ve been watching the Illinois Democratic Party play along with the destruction while enjoying the mortgaged booty and their “live for the day” mentality. Blagojevich wasn’t the only toad in the stew of governmental corruption and mismanagement we’ve witnessed. You guys stirred this stinkpot of an administration. The General Assembly has lost a lot of credibility since 2006. Impeaching Blagojevich is a mild nostrum of hope that came out of a governmental body of inaction and paralysis.
So Quinn and company needs to deal with us transparently and honestly. After a looooong 2008 campaign, we’re burned out with happy talk about “uniting”, “bi-partisanship”, “reform”, and no longer merely accept talk after five years of nothing but. We want action and we wanted it two years ago.
As Obama campaigns across the US, claiming we are in the worst economic situation since the Fall in the Garden of Eden, we are also aware that if Dan Hynes was really a canary in a coal mine, there would be nothing left of him but skeletal remains after these past few years of dire warnings.
But before the Democrats jack up our taxes further, they must first demonstrate that the past is indeed the past, and that they are willing to do more than just raise our taxes to throw our wages into that black hole of structural deficit budgeting they have refused to fix. The Illinois Democratic Party has screwed this state by larding their constituent’s pockets with borrowed money instead of setting this state’s finances right. Their promises have driven our credit rating into the toilet before we hit this “worst economic situation since the Great Depression”, (thank you President Barack Jeremiah of Great Biblical Disasters).
So Governor Quinn, don’t raise taxes or even discuss it, until you demonstrate to Illinoians fed up with lethargy, bureaucracy and paralysis that your political party can become reformed and renewed. Don’t ask us for a dime until your party first demonstrates an interest in leading.
Comment by VanillaMan Tuesday, Feb 10, 09 @ 10:05 am
Ken - I hope you are referring to ALL government pension plans and not just SERS. The most generous of the plans cover the GA members and Judges. Gee, that’s a surprise, isn’t it? Those two plans should be overhauled first, then look at SERS, SURS and TRS. They may need to be overhauled, too, but until the GA reforms their own pension system, they need to stay out of mine!
Comment by lincolnlover Tuesday, Feb 10, 09 @ 10:06 am
==until the GA reforms their own pension system, they need to stay out of mine!===
The last I checked, the GA system was doing quite well. One reason is that members contribute a whole lot more to the system than state employees.
Comment by Rich Miller Tuesday, Feb 10, 09 @ 10:11 am
Ken and lincolnlover -
Chasing after the wind again. The pensions and their terms, including retirement age, are constitutionally guaranteed for ALL current workers and pensioners. Changing those terms for future workers might be a very astute move for IL’s future generations, but will do very little to change the state’s financial situation for the next 10-15 years.
Comment by Six Degrees of Separation Tuesday, Feb 10, 09 @ 10:15 am
To cheer, everyone up, I think it’s helpful to view our problems here through the prism of the worldwide economic downturn.
A couple of weeks ago in China, workers left the once-booming cities to return to their rural hometowns for the nation’s annual holiday. An estimated 26 million of them were told not to bother to come back to their jobs, and try to scratch out a living back home.
In Russia, Iran and Venezuela, the politicians who were flying high last summer on $120 barrel oil are facing increased anger and danger from citizens who thought the good times would never end.
The list goes on and on. We created a lot of our own problems here, no question. But let’s not forget that since about September, the Best and the Brightest have been working feverishly to ward off a worldwide economic collapse.
Here in the states, the Feds are already giving away money to the banks, yet they’re still not lending. If the pump-priming currently being debated in Washington doesn’t work, today’s problems here will soon look like child’s play.
Comment by wordslinger Tuesday, Feb 10, 09 @ 10:22 am
Chickens coming home to roost? More like angry hornets!
Comment by Louis G. Atsaves Tuesday, Feb 10, 09 @ 10:40 am
HL, I don’t think he is going to get much zero-based analysis done before he has to send his budget to the printer about 4 weeks from now.
Comment by steve schnorf Tuesday, Feb 10, 09 @ 10:41 am
Sir that appears inaccurate. According to the most recent COGFA analysis (which is now a year old) the GA pension system has the lowest funded ratio of the 5 state pension systems (Table 2, pg 15):
SURS - 68.4% (State Universities)
TRS - 63.8% (Teachers - nonChicago)
SERS - 54.2% (State Employees)
JRS - 48.4% (Judges)
GARS - 37.6% (General Assembly members)
However, you are correct that General Assembly members contribute the largest amount of their salary toward their pension plan. From the same report, pages 4-5, the percentage of salary contributed by participants of each system to their pension plan:
GARS - 11.5%
JRS - 11.0%
TRS - 9.4%
SURS - 8.0%
SERS - 4.0%
Comment by Scooby Tuesday, Feb 10, 09 @ 10:52 am
I stand corrected. Thanks.
Comment by Rich Miller Tuesday, Feb 10, 09 @ 11:10 am
community based human services providers are closing their doors all around the state, and a frightening percentage of them are borrowing in order to make payrolls.
By July 1st, human services spending may be down due to significantly fewer providers applying for state contracts. Waiting lists will grow to unconscienable lengths, and more deaths will occur from lack of appropriate family counseling and intervention services.
The problem is too low rates, and late payment of what the state chooses to reimburse.
Anyone saying that this is “somebody else’s problem” is invited to re-read the Preamble to the Illinois State Constitution. Our state government exists, in part, to take care of the most vulnerable among us.
The problem is not that we need tax increases and restructuring today. The problem is taht we should have addressed our revenue inbalance four, five, or six years ago - and we did not, mostly because of the then occupant of the Governor’s Office. If the General Assembly did not roll over him in those past years, it was because of conservative democrats and non-moderate republicans.
Just like letting a sore fester, our problems are much worse today than they were five or so years ago. If we do not address revenues now, the problems will only grow. Why is this so hard for everyone to understand???
Comment by Capitol View Tuesday, Feb 10, 09 @ 11:15 am
Why is this so hard for everyone to understand???
There are at least two ways to prevent economic catastrophes; make more money, or spend less. Over the past five years our state has refused to spend less. It has refused to address our structural deficit. It has allowed billions in debt on Day 1 of every fiscal year instead of actually balancing the budget as the intention of the Illinois Constitution requires.
On top of all of that, the General Assembly and former Governor Blagojevich surrendered our state budget to budget eaters - rampantly growing social costs. Using politics and vote-getting strategies, they promised what they had no business in promising. Citizens depended upon them when they were undependable. Everyone is getting the economid shaft because of this political move.
The problem isn’t revenues. Every dime we can take from your neighbor’s wallet every week will fall into a festering structural deficit no one is fixing. Like peeing on a forest fire. Then add the social programs that are eating us out of house and home. What we need to do first is fix the structural deficit and adjust the social programs promised so that those in the health care fields will be paid for services rendered. We must cap the costs these social programs are creating and live within our means. Does that sound unrealistic? Then you need to better appreciate the fact that when you allow exploding social program costs to eat up our taxes, you end up causing more working families to struggle. You are taking from one family to pay for another, causing hardships for both.
Comment by VanillaMan Tuesday, Feb 10, 09 @ 11:32 am
Wow. Fox News really didn’t catch that $900 billion error?
That’s bigger than the whole stimulus bill! And 15 times the budget itself!
Comment by Obamarama Tuesday, Feb 10, 09 @ 12:04 pm
Rich-
While you are quoting the constitutional requirement of the gov to submit purely advisory recommendations to the ilga, also quote the balanced budget clause so we can see where that responsibility lies.
(Sorry on blackberry or I’d do it)
Comment by John Bambenek Tuesday, Feb 10, 09 @ 12:05 pm
I work at a public university, and at my department’s staff meeting today, managers were told to submit plans for cutting 5, 10 and 20 percent of budgets. Five is baked in the cake and 10 is likely. Twenty, and you are talking big layoffs. I assume that similar contingencies are being put together all over the state.
Comment by up2now Tuesday, Feb 10, 09 @ 12:42 pm
Reality Checker,
Shouldn’t we hear from the Governor first on how to fix it? Why would Lisa (Or Hynes or Alexi) comment before he does? Doesn’t he deserve the opportunity to present a budget? Not sure why following the Illinois Constitiution and allowing Quinn to do the job that he accepted and wants to keep is considered a cowardly act. If you or Quinn want Madigan or Hynes or Giannoulias to do his job for him then he can step aside and let them do it. If not, then lets give the guy a month to propose a budget and we can then see what the others do in response.
Comment by Cosmic Charlie Tuesday, Feb 10, 09 @ 12:58 pm
[…] In Illinois, the state government’s deficit is about $4.3 billion this year and could be as high as $9 billion next year, Comptroller Dan Hynes estimates. […]
Pingback by Newstips v2.0 » Blog Archive » Senate: less for states, jobs Tuesday, Feb 10, 09 @ 3:04 pm
Hey black cat-AA is the last guy to defend:
a)bloated bureaucracies
b)putting friends of Filan on the payroll. (BTW, what was Mr. Pension Reform Alexi’s vote on the question of “JFs” hiring at IFA? Oh, never mind)
Having said that, one of the many reasons Gen. Holland has been issuing findings by the barrelful on the Governor’s agencies is that the Office of Internal Audit has been understaffed since its inception and hasn’t been able to do all the statutorily required audits at all the agencies in the required timeframe. Boom, there’s Finding 1 before the external auditors have their coats off and laptops hooked up. In that context, hiring internal auditors may be reasonable.
In AA’s experience, which is considerable, I could whack 20 percent out of any university budget and never harm instruction one iota. Probably down to 15 by now, but still 25 at UIUC.
Comment by Arthur Andersen Tuesday, Feb 10, 09 @ 6:07 pm
To borrow a phrase from “Chicken Run”: “They’re organized, I know it!”
Comment by Bookworm Tuesday, Feb 10, 09 @ 7:07 pm
Sorry, AA, but I live in Champaign-Urbana-Savoy, and I can tell that when the actual order comes down to cut the budget, the UIUC bigwigs will start talking about cuts in instruction to stir up the populace and get some of their cuts rescinded. They’re already talking about staff furloughs and reduced hiring/capital expenditures.
Comment by Lynn S Wednesday, Feb 11, 09 @ 11:28 pm