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They’re coming back

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Illinois

* Expect a special session next week…

Gov. Pat Quinn said [yesterday] he wants state lawmakers to return to Springfield next week to fix a makeshift budget that will mean big spending cuts for many social services.

Quinn has been warning for days that he will have to make dramatic cuts in services for the elderly, disabled and children unless lawmakers approve a major income tax increase. Democratic lawmakers sought to put off that politically sensitive move last month, choosing to partially fund the budget and leave the statehouse.

The Democratic governor stopped short of ordering the legislature into special session–a highly unpopular but frequent move during the Rod Blagojevich years. But he said he will be blunt with legislative leaders when he meets with them Wednesday in Chicago.

* The deficit has grown…

Quinn’s office said lawmakers left a hole of $9.2 billion. That amounts to nearly one-third of all the money that’s directly under state government’s control and not subject to federal restrictions. The current budget totals $67 billion, according to a report from the General Assembly, but most of that is federal money the state doesn’t really control or spending authority for long-term construction projects.

Legislators voted to protect education money, further limiting how the deficit could be closed.

Stermer said the “half-baked partial budget” would require that most cuts come from money the state pays to local organizations.

That’s far higher than the $7 billion they were talking about earlier. I didn’t get a briefing yesterday like the AP did, or I’d have asked what exactly caused the deficit to jump a full $2.2 billion. The most I’d heard so far was $1.7 billion because the state was unable to capture federal Medicaid matches.

* I’ve been telling subscribers about this for weeks…

More than 10,000 state employees face layoffs unless the state can find a way to close its budget deficit by cutting costs in other ways and raising taxes.

Officials with Gov. Pat Quinn’s administration will meet with state employee union officials today in Springfield to discuss alternatives that could reduce the number of potential layoffs.

Those alternatives include unpaid furlough days, a wage freeze or even a wage reduction.

But the administration acknowledged Monday that even with cost-cutting measures and a tax hike, some layoffs may still be necessary.

* There’s still a lot of head in the sand activity out there…

For Sen. Dave Syverson, R-Rockford, the latest pronouncement from the governor is political gamesmanship. “Last week it was they were going to cut all human service providers by 50 percent, but (the human service providers) didn’t know that. This week it is laying off thousands of employees. ‘It’s like ‘Stop scaring our families, governor.’”

Rep. Jim Sacia, R-Pecatonica, said Quinn is being “totally disingenuous” with his job-cuts announcement.

Sen. Brad Burzynski, R-Clare, agrees: “I simply don’t believe that it would be a reality.”

Even AFSCME knows the budget passed by the GA will force nearly 10,000 layoffs, so I’m not sure where those legislators are getting their “reality” from.

* The guv’s office is going out of its way to pick a fight with Speaker Madigan…

But how long legislators will be willing to remain in Springfield is uncertain because several have been invited on a junket to Turkey the final week of June. […]

House Speaker Michael Madigan was among those invited to go on the Turkey trip, but an aide now says he will skip the trip if necessary.

Madigan spokesman Steve Brown refused to identify the sponsor of the trip, telling the Sun-Times to ask the governor’s office.

“I’d call whoever told you about it and ask those questions because I don’t have that information,” Brown said. “I’m told Quinn was telling people that story. I’d call them back and get the rest of the details.”

Always fun.

* And the Illinois Policy Institute has an op-ed today in which it claims it found at least $3.9 billion in budgetary savings. But some are impossible without reopening the union contract…

A 10 percent temporary pay cut for state employees will save $500 million.

Some are politically untenable, like cutting aid to local governments (read: Chicago)…

The state sends 10 percent of income tax receipts it collects back to local governments, a total of $1.2 billion of the $53 billion local governments spend (2.2 percent).

Some may be overstated…

In addition to our recommendations, we support many of the Taxpayer Action Board’s recommendations. For our use here, we focused on the low range in the several spending categories for a total of $419 million

Steve Schnorf, remember, said in his TAB dissent that he’d be surprised to find $200 million in savings next fiscal year.

And some may be duplicative…

Of course, some modest double counting may occur. For example, a 10 percent reduction in some government agencies may include wages, which are also included in the 10 percent pay reduction for employees.

Other than that, even implementing all those cuts would still leave a gigantic budget hole.

* Related…

* Recession pounds states’ budgets

* Get serious about solving budget impasse

* Luciano: Shame on lawmakers’ priorities

* Lawmakers need to stop playing games with people’s lives

* Area social services to be hit hard by state cuts

* Budget may cut funding for Center for Prevention of Abuse

* Legislative inaction costs taxpayers plenty

* ‘Breakdown’ cited at state veterans home

* Local agencies bracing  for cuts

* Philosophy behind ‘member initiatives’ is flawed

posted by Rich Miller
Tuesday, Jun 16, 09 @ 9:25 am

Comments

“The most I’d heard so far was $1.7 billion because the state was unable to capture federal Medicaid matches.”

Interesting…do you happen to have a link for that story?

Comment by Sewanee Tuesday, Jun 16, 09 @ 9:33 am
The deniers should read the statesonline.com survey of state budget situations.

It’s the same all over. And remember, folks, that stimulus money doesn’t last forever.

Comment by wordslinger Tuesday, Jun 16, 09 @ 9:35 am
===Interesting…do you happen to have a link for that story? ===

Click here.

Comment by Rich Miller Tuesday, Jun 16, 09 @ 9:38 am
Rich -

Its frightening but a credit to you that CapitolFax bloggers understand the dire financial straits our state is in better than rank-and-file lawmakers.

If nothing else, Rep. Burzynski, who’s district includes Northern Illinois University, SHOULD have known that cutting financial aid for 120,000 Illinois college students would have an adverse impact on his district.

Hell, by this time next year, we might be closing NIU due to lack of enrollment.

Comment by Yellow Dog Democrat Tuesday, Jun 16, 09 @ 9:53 am
The current financial crisis reminds me of the man who fell off a 10 story building and was heard saying as he passed a 2nd floor window….”So Far, So Good.”
Why Quinn trusted the legislature to grasp the severity of the fiscal crisis from numbers reported as black dots on a printed page is beyond naive. Quinn should have begun progressively shutting down state government in March when he presented his FY 10 budget address. Someone on his staff should explain to Quinn in clear political language that his 30 year penchant for communicating through press conferences doesn’t fit now that Quinn is the Chief Executive of a 56,000 state employee enterprise. Governors take action and he needs to take executive action NOW! Calling another press conference to discuss the budget is a waste of time. He should begin shutting down state government TODAY and call for a special legislative session beginning next week.

Comment by Louis Howe Tuesday, Jun 16, 09 @ 10:04 am
the layoff numbers are way too low on both sides. Since the State has spent so many years freezing or reducing merit comp employees salaries to pay for things, the vast majority of State employees elected to join a union. only about 4,700 non union left in the entire State. So the remaining 65,000 or so are all Union.

When you do a layoff the most senior employees keep thier jobs and the newest employees go. So you are keeping your highest paid workers who have maxed their salaries, and laying off the people at the very bottom of the pay scale. When they do layoff calcualtions they tend to use a mean or median salary to select numbers. But you are really cutting those who are paid below the mean/median. So the number of predicted layoffs are low IMHO, probably closer to 12,000.

Comment by Ghost Tuesday, Jun 16, 09 @ 10:08 am
More importantly, why wasn’t the state able to capture these Medicaid matches. Did somebody forget to fill out some paperwork? Were some of Quinn’s Blago budgeteers counting Medicaid reimbursement chickens before they hatched?. Or did somebody in Quinn’s budget office not notice that the matches wouldn’t occur when they counted up the alleged deficit.

Either way, sounds like a rather casual approach to providing ciitzens with an accurate, transparent picture of the budget situation.

A casual approach to our money, that is.

Comment by Cassandra Tuesday, Jun 16, 09 @ 10:10 am
Is the 2.2 billion pension payments? I still cant believe AFSCME wont support this. Do they realize the result?

Where are Poe and Brauer? Is their constituents getting laid off not enough reason to support a tax increase? What about Bost and Reis who have thousands of prison AFSCME workers in their District? Because they wont support a tax increase we are gonna have to take furloughs and lay off alot of our co-workers. I wont forget this.

Comment by Maximus Tuesday, Jun 16, 09 @ 10:11 am
I love Quinn stickling Madigan on his Turkey trip. Madigan deserves plenty of stickling this year.

Comment by Niles Township Tuesday, Jun 16, 09 @ 10:14 am
Why in the heck are Ill state house members going to Turkey and why would Madigans spokesman refuse to say who is paying for the trip. Yeah we should give these guys more tax money they are so honest and straight forward.

Comment by fed up Tuesday, Jun 16, 09 @ 10:21 am
I think the Illinois Policy guys should add “Make a wish on the evening star” as one of their plausible solutions, if only the Gov has the courage to implement it and Mike Madigan doesn’t use his evil powers to intercept the wish on its way.

Comment by steve schnorf Tuesday, Jun 16, 09 @ 10:38 am
I sat down near an 800 pound fat man who had dozens of waitresses and cooks serving him. When the bills started arriving, he turned to everyone around him and asked them to pay his bills. When the other patrons began balking, the fat man warned us that if the bills wouldn’t be paid, the waitresses and cooks would have to be laid off, closing the restaurant. The big man claimed that if the restaurant closed, no one would be able to eat, even though there were restaurants across the street with signs advertising new dishes and drive through services.

As patrons left for the other restaurants, the big guy told the remaining patrons that our portion of his bills would be higher since there were fewer of us. He warned everyone again about how the restaurant would close if they didn’t pay his bills.

“Why don’t you eat less?”, suggested many in the room. “I can’t lose weight fast enough so that I can survive on less food. I would really like to cut back, but if I did, there would be less work for this large wait and cook staff, and some would have to be laid off”, he replied.

“Why don’t you just start trying now?”, questioned a retiree. “What’s the use?”, the fat man claimed, “I’m hungry now! What is important is feeding me so that the restaurant can stay open and everyone can keep their jobs.”

“What if you exercised more?”

“I’m too fat to do that safely”

“Do you need to eat all that expensive food?”

“If I change too soon, I will get a tummy ache!”

“I’m sorry”, said a little girl, “but I have to eat too, and if you take money from my parents, I will have less to eat.”

“You can just eat some of the food off of my plate”, the fat man promised.

“You waste a lot of the food you are given”, piped up one of the cooks, “you can be served less food and eat just as well.”

“But I’m hungry now, and until my bills are paid by the folks left in this room, I will be unable to eat, and that little girl won’t get any food off of my plate, because I need everything given to me now.”

What everyone in the room has failed to recognize is that the fat man has remained in the restaurant so long, he was now too fat to ever leave through the doors he entered through before his eating binge. As more patrons left the restaurant to the other restauarants across the street, the situation became more dire.

Comment by VanillaMan Tuesday, Jun 16, 09 @ 10:45 am
Thanks VM, that’s helpful.

Comment by 47th Ward Tuesday, Jun 16, 09 @ 11:00 am
Eliminating 400 of blago’s appointees will save approx $40 million in payroll and fringe benefits.

I realize that it will not plug the gap but it but will go along way to show good faith by & savings by Quinn. It is unacceptable that Quinn has Blago hacks STILL on the payroll making in excess of $100,000 who do not work a full day and do not understand the programs they are claim to “manage”. It’s a joke.

There have been NO real changes by Quinn from the Blagojevich regime at the working staff level.

It is not a difficult task to gain the intelligence inside an agency to determine who actually earns their pay and who the people are that are a waste of tax dollars and impeding people and good programs.

Comment by Larry Mullholland Tuesday, Jun 16, 09 @ 11:23 am
Larry M. You are 100% correct.

Comment by Leave a light on George Tuesday, Jun 16, 09 @ 11:45 am
I sat down near an 125 underfed man who used to employ dozens of workers serving the people of Illinois with police protection, safe schools, roads to drive on, safe food and water. He was working himself into an early grave covering the work of 50 people with a staff of 20, and trying to fill in the reats of th gaps himself. His employee’s and work spent money employeeing various small buisness’s and restraunts, grocery stores and other shops that survived on the money from his work force. He ran out of money and laid off all his workers. All the small shops which survuived on the purchases made by his workplace and employee’s cried out for sales. But there was no one left to make the pruchases. the small buisness looked at the 1,000 diollars in money they saved from no new taxes, but realised with there were no shoppers or spending going on to bring in regualr revenue. All the shops began closing, for the money they saved was not close to off setting the money they lost when all the revenue was pulled out of the states economy. The other store and service people who lived off the sales of those shops also began to fail, for no one was purchasing from them now as well. Soon they found themselves standing in shanty towns next to the 125 pound thin man, wanting to know why he did not simply do the work of 50 people, continue to make all the pruchases he had, and spend the money those 50 workers would have earned in their stores so there reveneu would have remained up while they clutched at a small amount of savings long ago vansihed. the man looked near to collapse, and simply said, did what I could with what you left. The store owners only relaised theri interdependence on the economy after it was too late. They visitied the exhausted man when they could, but with so few police and treatment centers for social issues, it was not safe to step outside the guarded enclave in whcih they now struggled to survive.

Comment by Ghost Tuesday, Jun 16, 09 @ 12:26 pm
I believe that anyone who says this budget problem CAN be solved in an acceptable manner without a tax increase has no credibility.

I believe anyone who says it WILL or SHOULD be solved without significant budget cuts has no credibility.

Comment by steve schnorf Tuesday, Jun 16, 09 @ 12:50 pm
If layoffs occur within State government they should start at the top and include staff that serve the legislators. Leave the lower paid people alone and get rid of the fat.

Comment by white tiger Tuesday, Jun 16, 09 @ 1:10 pm
Cassandra,

Under the ARRA (the federal stimulus plan) Illinois stands to receive a significant premium on its Medicaid match rate if they meet timely payment standards. I would assume that the new Medicaid hole is due to the assumption that, absent a tax increase, Illinois won’t reach the timely payment performance benchmarks and therefore, will miss out on the enhanced federal match rate. Cuts to the service package also disqualify the state for enhanced federal match.

Obviously, when the Governor’s plan unraveled, several base assumptions had to be revisited. The Medicaid piece is only one of many. There will be all kinds of lost federal opportunities beyond Medicaid that Illinois stands to lose if it cuts services. Many federal grant programs assume a state maintenance of effort. If Illinois cannot or will not maintain a base funding level, the feds will withdraw their funding also.

Comment by Budget Watcher Tuesday, Jun 16, 09 @ 1:22 pm
Until the State stops foolish spending like building airports no one wants and choo choo trains for a small number of people, no one should talk about revenue enhancement.

While it may take a tax increase to solve the budget problem, there appears to be no serious effort to trim the fat.

A permanent tax increase will gush excess money in a few years when the economy recovers. It is imperative that the urges to spend foolishly are constrained now.

Comment by Plutocrat03 Tuesday, Jun 16, 09 @ 6:45 pm
Geez, stop with the self immolation plans, will ya gov?

Here’s a reaaaaal simple solution: Eliminate all spending on programs (and new programs) that was added since 2002. We’ll all go back to the stuff we had in 2002, OK? I don’t think that puts us back into the caveman days, or throws widders and orphans out on the street.

Then add whatever income tax we need to finance that level of government assistance. I don’t think you’ll get too much resistance from either party.

Took me about 15 seconds to come up with that idea. Understand you’ve been busy, but c’mon.

Comment by Bobs yer Tuesday, Jun 16, 09 @ 9:25 pm
steve schnorf, there’s no doubt that you know more than anyone else on this Board regarding the way the state spends money.

The problem is that you have your political biases just as the rest of us do, and you may not want to tell about potential reductions in state spending that would cause minimal pain.

I may have missed it in one of your posts, but isn’t it a fact that in your TAB efforts you were forbidden from making cuts that require a change in policy or result in elimination of certain services?

With those kind of restrictions, it must have been like trying to fence with two hands tied behind your back!You only wind up skewered.

Essentially, it appears that the TAB was set up to fail to make Quinn’s tax grab seem more credible.

Here’s my challenge to you; What are the least painful spending reductions the state can make with EVERYTHING ON THE TABLE to make up for the $3.2 billion that would be raised from an income tax increase.

New legislation to give the state more leverage to renegotiate contracts and entitlements not controlled by the Feds is also fair game.

Also, do you know if Quinn’s projected tax revenues from the 50% income tax and service tax extensions are based on a static model, or do they take into account loss of jobs, businesses and other income sure to occur after such a massive job killing tax increase?

I haven’t seen any projection on how many private sector jobs would be lost, or just not created, due to this tax increase.

This isn’t meant to be a flame. I would honestly like to know what you think SHOULD be cut from the Illinois budget in both the short and long term, and what $3.2 billion in reductions would least hurt the citizens of Illinois.

You have unquestioned technical credibility. Now please show us that you have political credibility by identifying the least important $3.2 billion in state spending.

Comment by PalosParkBob Tuesday, Jun 16, 09 @ 10:47 pm
PPB, there aren’t $3.2 billion in painless cuts. The problem with the next filter (least painful) is to whom? Even then, we still have a multi-billion dollar deficit in the budget.

There were no real limits put on what TAB could do except recommending spending more money (which we did anyway) and recommending additional revenues.

I don’t believe there is much legislatively that can be done to the union contracts because of the “impairment of contracts” provisions in our Constitutions.

Personally, I think in the long runs cuts are probably no more important than some reforms that will avoid long term excess spending. There are pieces of the budget that involve big dollars that left to their own devices will grow faster than state revenues. As time goes by, those items will slowly but surely cannibalize the rest of the budget or, to avoid that, require tax increases. The most obvious is Medicaid, but I believe k-12 education fits into that category also.

Right now in most “normal” years state revenues will grow by 4%+/- each year. In round numbers, a billion dollars. Some years a little less, some years more, perhaps up to $1.5B. So, you have to use the good and normal years to pay down payment cycles, bank some reserves (which is unbelievably hard to do), and hold overall state spending growth to below that 4% mark. Then in bad years you freeze or severely limit what spending growth you can, let the payment cycles grow a bit, etc.

Unfortunately we’ve had 5 disastrous years in the last decade. Negative growth in state base revenues had happened only once, a minor drop, in 50 years. Now it seems to be almost a bi-annual occurrence. That makes it much harder to plan or manage.

But, the bottom line is IMHO you can’t grow too much in normal and good years and you have to really clamp down in sub-par years. That’s what hasn’t happened in the past six years, and to make matters worse, one-time revenues have been used to avoid the need to clamp down, creating precipitous cliffs for us to deal with each ensuing year.

Add to that our in my opinion unsolvable (in any practical terms I can think of) pension debt and we’re completely screwed. And, I emphasize here, the pension problem isn’t per se benefits that current benefits are too rich.

Properly funded, normal pension cost will only grow about as fast as payroll. The problem is that in the past we “borrowed” (by failing to make the necessary deposits into the accounts) many multiple billions of dollars from the pensions. Why? Once again, so we could avoid the need to hold down spending growth and/or avoid tax increases.

And, we borrowed that money at 8%+ compound interest. If the state made every penny of the pension contribution it is legally supposed to make this year, we would not even pay the interest on the debt, much less reduce the principal.

Comment by steve schnorf Tuesday, Jun 16, 09 @ 11:38 pm
Steve, thanks for the in-depth response.

One clarification I need to make, however, is that I didn’t ask for you to recommend “painless” cuts, but “least painful” cuts.

For example, ending the prevailing wage overpayments on non-Federal projects is certainly within the powers of the GA and Guv, but is politically “painful” because of contractor and union campaign influence.

I didn’t see this addressed in the TAB report, even though paying for market rates for non-Federal public workd should generate substantial spending savings at every level of government.

Why did TAB leave that off the table if there were not restrictions on it?

I’ve worked with others to estimate how much could be saved, but those estimates are rough. A detailed and accurate number should be established if everything is on the table.

Minimizing new pension obligations was somewhat addressed in the TAB report, but I didn’t see any receommendations for immediate downward adjustments in end of career boosts.

the sad fact is that it appears that budget decisions are being made by Quinn based upon hurting those who contribute the least to their political campaigns rather than protecting the truly needy.

I guess what I’d like to see is methodology by which cutting decisions are made so that it could be done as objectively as possible. I think it’s reasonable for the press to demand such a declaration, but most are looking for sympathetic “budget cut” stories, so I doubt fairness will drive the pundits to push towards making the least painlful budget decisions.

The questions still stand about Quinn using a static model for tax revenues, which always overestimates them, or considering the economic contractions from tax increase job and income loss.

Have you seen anything on this?

Thank you for your valuable insights, but I guess the question about the “least painful” (none are painless) spending reductions still stands.

Comment by PalosParkBob Wednesday, Jun 17, 09 @ 7:44 am