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Wednesday, March 18, 2009 09:04 pm

No gain on budget deficit without some pain

Republican State Sen. Bill Brady

Republican State Sen. Bill Brady kicked off his new gubernatorial campaign the other day by claiming that Illinois’ horrific budget deficit can be “managed.” But a new report by the governor’s office makes that claim even less realistic that it already was.

As you already know, Democratic Comptroller Dan Hynes has estimated the state’s budget deficit could reach $9 billion next fiscal year, not including aid from the federal stimulus package. We can toss those numbers out the window now, but this is all Brady had to go on when he announced his campaign, so let’s look at it anyway.

Brady told WGN Radio the day before his official campaign kickoff that the budget deficit was about $4-5 billion “on an annual basis.” That’s pretty much exactly what Comptroller Hynes projected. Hynes included $4 billion or so in unpaid bills from this fiscal year in his $9 billion deficit projection for next fiscal year, which begins July 1st.

But Brady insisted that the budget deficit could be managed. “The first thing we need to do is to deal with that $4-5 billion deficit. And you can manage that. When you’ve got a $53-plus billion budget, you need to manage it,” Brady said.

Brady did the math and concluded that the state budget broke down to $4,000 for every man, woman and child in Illinois. “If the people who are elected into office can’t balance a budget taking $4,000 from every man, woman and child, then maybe we ought to find someone who can,” Brady said.

What Brady didn’t say, of course, was that the $53 billion budget figure he cited was for all funds, including federal funds. The state’s operating budget — the part that Illinois government actually controls — is about $28 billion. Healthcare programs and education spending account for all but $3 billion of that total. So, there’s really no way to “manage” the state out of even a $4 billion deficit without big slashes in spending for schools and Medicaid recipients and providers.

Most importantly, there are about 100 days or so remaining in the current fiscal year, which ends June 30. So getting ourselves out of this fiscal year’s deficit crisis with the game almost over would require unimaginable cuts. You’d essentially have to shut the government down.

Brady also claimed that Illinois could pay for a capital construction program without raising taxes like the motor fuel tax, a proposal made by some legislative Democrats. He’d do this by stopping all transfers from the state’s Road Fund, which he says is over $1 billion a year. That’s mostly true. But reversing those Road Fund transfers means that the state would have to either eliminate or slash programs paid for by the Road Fund, which includes the State Police, or blow a billion-dollar hole in the rest of the state budget. The problem, in other words, would be worse.

And here’s where it gets worse. Much worse. The governor’s office is now estimating the combined state budget deficit to be $11.5 billion. Income and sales taxes are crashing, to the tune of over $3 billion. Medicaid costs, employee wages and benefits, including pension costs, are skyrocketing.

In short, it’s a horror show.

But, if we can’t cut our way out of this mess, we certainly can’t fully tax our way out of it, either.

Gov. Pat Quinn wants to make the income tax burden as “progressive” as possible, so as of this writing Quinn’s tax hike plan is expected to avoid taxing anyone at all under the federal poverty line. Plus, nobody making less than $57,000 a year would see any income tax hike.

So even though the governor wants to raise the income tax by 1.5 percentage points, which is a 50 percent increase, he won’t get nearly the sort of revenue that an across-the-board hike would give him. That means cuts, and some of them will be painful.

There are other innovative ways to help balance the budget that don’t involve painful cuts or tax increases. But none of those ideas gets you to $11.5 billion. Not even close.

Forget about the political rhetoric and get ready to pay more for less.

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