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Thursday, June 24, 2010 01:40 am

Passing the buck

State fiscal irresponsibility will have devastating effects

For the second consecutive year, the Illinois General Assembly has confronted the state fiscal crisis by “passing the buck.” Last month, the legislature passed a General Funds budget for fiscal year (FY) 2011 that would give most state agencies lump-sum funding rather than line-item appropriations. The largest gaps between FY 2011 appropriations and current funding levels are those in human service agencies. Some portion of these shortfalls will be offset by an additional lump sum to be allocated by the governor, although the governor is not required to distribute the entire amount. Related legislation would give the governor sweeping emergency budget powers to control spending and make changes in state programs.

On the revenue side of the budget, the General Assembly has again relied on stop-gap solutions. Gov. Quinn’s proposal for a 1 percent income tax surcharge earmarked for education garnered virtually no support. Another revenue measure — House Bill 174 — would raise the state income tax to 5 percent and expand the base of the state sales tax to cover more consumer services. This legislation was approved by the state Senate in May of last year and was still a legislative option for FY 2011, but it was never brought up for a vote in the House of Representatives. In the meantime, the recession has continued to batter state revenues, which plummeted by $2 billion in FY 2009 and are expected to fall another $2 billion by the end of FY 2010.

In April, the governor signed pension reform legislation that will reduce mandated state contributions by about $1 billion in FY 2011. Nonetheless, the matter of pension funding for the coming fiscal year remains unresolved. In FY 2010, the lump-sum appropriations allocated by the governor — $3.46 billion — were specifically tied to borrowing the same amount to cover pension costs. The FY 2011 budget has again appropriated $3.46 billion to the governor’s office, but the General Assembly has not authorized additional borrowing or provided any other source of funding.

The FY 2011 budget passes the buck to the governor to make decisions about allocating funding to particular programs and services. Some areas of the budget will be partially protected by federal funding and related federal mandates, while programs funded primarily with state revenue are likely to be in much greater jeopardy. Especially vulnerable areas include early childhood education, bilingual education, community mental health services and youth services.

Moreover, by ignoring the huge backlog of unpaid bills, lawmakers have passed the buck to educators, service providers and local communities. The backlog now exceeds $5 billion, including $1.47 billion in delayed payments to public school districts. The state also owes hundreds of millions of dollars to higher education agencies, health care providers, social service agencies, and local governments. These “de facto” budget cuts have already caused staff layoffs, service reductions and elimination of state-funded programs in many communities. In FY 2011, with the state facing a one-year operating deficit of $3.8 billion and a cumulative deficit of $9.8 billion, the backlog of unpaid bills will grow, and the disintegration of public services will continue.

The General Assembly’s inability to enact a responsible budget will exacerbate the burgeoning fiscal firestorm. Legislators from both political parties have chosen maneuvering for short-term political advantage over policymaking for the long-term common good. They have missed another window of opportunity to fashion a balanced solution to the state budget crisis. The key elements of such a solution must include a significant amount of new, sustainable revenue, appropriate spending restraints, and meaningful fiscal reforms. Illinois must decide what kind of state it wants to be: one that meets its fiscal and social responsibilities or one that undermines its own future by allowing the erosion of essential programs and services for children, families and communities.

Larry Joseph, director, and Manya Khan, policy analyst, are with the Budget & Tax Policy Initiative at Voices for Illinois Children, a statewide advocacy group. This article is taken from their June 2010 special report on the Illinois fiscal situation. The full report is available at www.voices4kids.org.
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