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Ends and Means

WheelerLeaders have responded abysmally to the state’s fiscal crisis

by Charles N. Wheeler III

Illinois faces its worst fiscal crisis in eight decades, a daunting challenge for the state’s purported leaders. So how have they responded?

In a word, abysmally. Indeed, the leadership deficit almost rivals the state’s dollar shortfall. Consider:

In his budget memo last month — at 21 minutes, too short and devoid of specifics to merit being called an address — Gov. Pat Quinn essentially punted.

The Democrat did call for a one-third increase in income tax rates, which he said would avert planned cuts in school spending and allow the state to pay some bills, paring the deficit by a few hundred million dollars.

But he also chose to defer some $11 billion in red ink for another day.

His Republican opponent, state Sen. Bill Brady of Bloomington, termed the governor’s proposal a “catastrophe,” but he had little to offer as a rational alternative. In fact, former Republican Gov. Jim Edgar politely deemed “naive” the GOP hopeful’s “cut-10-percent-across-the-board” campaign sound bite.

Democratic House Speaker Michael Madigan and Republican Minority Leader Tom Cross, meanwhile, remained locked in a partisan standoff that had nothing to do with good public policy but everything to do with the November election.

Madigan won’t allow the House to vote on a proposed income tax increase unless some Republicans are willing to support it; Cross says none will, mostly because GOP strategists figure they have a winning hand whether the state implodes — “It’s all the Democrats’ fault; they control everything” — or taxes are raised without GOP help — “It’s the Democrats’ fault; they raised your taxes.”

What no one disputes is the enormity of the problem. Heading into the fiscal year that starts July 1, Illinois is facing a $13-plus billion shortfall between the cost of maintaining existing programs and the money likely to be there to pay for them. The gap equals roughly half of the state’s current general funds budget, the state’s equivalent of a checkbook account.

In a feeble effort to deal with the deficit, Quinn proposed cutting current programs by about $2.7 billion, with about $1 billion of the savings shifted to boost Medicaid spending to capture more federal matching funds. Major cuts would include:

  • $1.2 billion in money earmarked for local public schools and an additional $90 million in higher education funding, which would be restored if the income tax hike passes.

  • $325 million in health care costs, by requiring retired state workers to pay more for health coverage and slicing in half prescription drug assistance for seniors.

  • $276 million from human services programs such as child care, community mental health services, and home care for older adults.

  • $300 million by reducing state aid to cities and counties.

  • $203 million by requiring state workers to take furlough days and to pay more for health insurance.

  • $300 million in pension costs by reducing benefits for new state employees.

Even assuming that the proposed reductions and the income tax increase will pass — a monumental leap of faith — the resulting FY 2011 budget still would be some $11 billion out of whack, more than 40 percent of its total.

The governor’s solution? Borrow about $5 billion and simply don’t pay the rest; just roll the bills over until FY 2012.

Brady and his Republican cohorts, meanwhile, seem content to heckle from the sidelines. They blasted Quinn for proposing a tax increase while unemployment rates are high; they lambasted him for wanting to borrow billions with no clear way to repay it; they castigated him for threatening to cut education. What they failed to do, though, was offer viable, real-time solutions.

Take Brady’s signature 10 percent cut. Were the legislature to follow his advice and pare 10 percent from every spending line, the savings would amount to less than $3 billion. Moreover, some items can’t be cut at all. For example, state law requires that debt service — the principal and interest the state pays on bonds, an estimated $1.6 billion in FY 2011 — be paid in full, even if no funds are included in the budget.

Two other standbys in the GOP rhetoric — managed care for Medicaid recipients and scaled-back pensions for new hires — merit debate as public policy options. Pension changes in particular could produce significant future savings. But neither suggestion would do much to close the current gap between costs and revenues.

In fact, only one candidate for governor has a comprehensive plan to solve the state’s budget crisis, one in which the numbers actually work: the Green Party’s Rich Whitney. The Carbondale attorney issued a 21-page platform on the state’s tax structure and economic development, laying out in considerable detail his ideas for fixing the structural budget deficit and building a full employment economy.

In contrast, Brady’s Web site devotes 193 words to the senator’s thoughts on balancing the budget and an additional 265 to his ideas on “saving and growing” jobs. Whitney endorses income and sales tax increases coupled with tax relief for middle- and lower-income families, good for some $7 billion, and he would cut $2 billion that he says “exists only to reward political supporters of favored legislators,” such as patronage hires and pork-barrel projects.

Perhaps his boldest suggestion, though, is a financial transactions tax on what he terms “speculative trading” such as futures, options and interest rate products. The value of such securities traded on the Chicago Mercantile Exchange and the Chicago Board Options Exchange topped $1 quadrillion in 2008, Whitney says, so a tax measured in 10-thousandths of 1 percent would produce more than $4 billion.

Other proposals — a greenhouse gas fee, a state bank, legalizing and taxing marijuana — would generate additional revenue in the future to bolster school funding, health care, social services and other programs.

Whitney’s ideas may strike one as unconventional; certainly they’re controversial. But unlike Quinn’s half-measures and the GOP’s sound bites, the Green candidate’s platform squarely addresses the state’s deficit and proposes detailed solutions.

Voters weary of the political games played by the two major parties might find that refreshing.

Charles N. Wheeler III is director of the Public Affairs Reporting program at the University of Illinois at Springfield.

Illinois Issues, April 2010

 

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bullet What no one disputes is the enormity of the problem.