The Shriver Brief : Poverty Law Commentary & Insights : Sargent Shriver National Center on Poverty Law : Affordable Housing, Healthcare Reform

Gov. Quinn made a grim budget request today. His proposed budget includes $2.2 billion in spending cuts and again relies heavily on borrowing ($4.7 million) and not paying the state's bills ($6.3 billion).  $1.3 billion of the spending cuts would be in the area of education with a 17 percent across-the-board cut.

As an alternative to cutting education spending by $1.3 billion—unimaginable in an election year—Gov. Quinn proposed increasing the individual income tax rate by one percent of income, from three to four percent. The $3 billion in proceeds from this increase would all go to education—$1.3 billion to eliminate the proposed cut and $1.7 billion to pay back bills.

Gov. Quinn has not proposed any means to avoid the $900 million in spending cuts he proposes to non-education programs. 

Equally disappointing, Gov. Quinn's proposed budget includes no long-term plan for eliminating the state's $13 billion revenue shortfall and getting out of our fiscal mess. Rather, it appears to be a "take what you think you can get" budget built on diminished expectations of what can be accomplished in an election year.

All of which means big cuts in services to some of our most vulnerable populations. For example, mental health services will be cut by over $50 million. The Illinois Department of Human Services estimates that as a result, 70,000 people, including 4,200 children, will lose their mental health services; 4,000 mentally ill people will have to leave their state-subsidized housing; 3,800 mental health jobs will be lost; as many as 87 mental health agencies may close; and persons not eligible for Medicaid, such as the formerly incarcerated, will be unable to access mental health services.

The Governor's proposed budget now goes to the General Assembly. 

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There is something almost purely ideological about opposition to the revenue reforms that knowledgeable analysts agree Illinois needs right now – not only to escape its fiscal crisis but to make its tax system more fair and sustainable.

I suppose ideological biases are fair enough among some anti-government zealots and politicians who hope to use them and lead them.  But somehow one would hope for a more balanced and dispassionate approach from mainstream media, such as the Chicago Tribune.

It can only be ideology that justifies the anti-tax position by reference to taxpayers “already devastated by the recession.”  In fact, under leading revenue-reform plans, many lower- and moderate-income households would pay no increased income tax or a modest increase; the lowest-income households would pay less. 

But for those who’d pay a few dollars more per paycheck in income tax – is that more weighty than maintaining state-assisted care for their elderly relatives, safe roads and bridges, schools with a full complement of teachers and educational programs, or the public health programs that protect us from epidemics?

This crisis demands a balanced approach that includes significant new revenues raised in a fair way. Polling and history show that, while nobody likes to pay higher taxes, people appreciate honest leadership in a crisis and understand and support a balanced approach.  We already are suffering from severe cuts; we are already borrowing; we will continue to seek as much help as possible from the federal government. But those measures are not enough. We need significant, new revenue to complete the balance and navigate out of the crisis with a sounder future in store.

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Earlier this week President Obama announced his budget proposal for the coming year. These are precarious times with conflicting demands. Most economists agree that more government spending is needed to help speed the end of the recession and bring down unemployment. But there is also mounting concern that that federal deficit is getting too large, which weighs against added longer term spending. The President’s proposal walks the tightrope between these concerns and promotes both the short term “jobs” goal and the longer term deficit-reduction goal.  It contains important policy and spending priorities and deserves support.

Help for states and working families

The President proposes to extend the life of crucial enhanced payments to states under Medicaid, the state fiscal stabilization program, and the TANF Emergency Contingency funds. These three funding streams created by the American Recovery and Reinvestment Act (ARRA) stimulus law have helped states patch their budgets, save and create jobs, and protect health coverage. It is important that as much of this relief as possible be included in the immediate “jobs” proposal (some call it a “second stimulus”) being debated for passage in Congress in the next weeks, rather than waiting for the next federal fiscal year.

Improve revenues overall while protecting middle-class tax relief

The budget proposal allows the Bush-era tax credits for the wealthy to expire as scheduled, and it closes a number of tax loopholes. It also makes permanent the improved middle-class tax relief that was put in place by ARRA through the Earned Income Tax Credit, Child Tax Credit, and the American Opportunity Tax Credit.

Targeted discretionary spending freeze, but program increases

The discretionary spending freeze got the most press. It is a “global” freeze, in that the overall number is frozen, but within that number there are important priorities. Some programs actually get increases, while less effective programs will be cut. Child care would get a $1.6 billion per year increase. Housing Choice vouchers (Section 8) would get a $1.3 billion increase, enough to fully fund renewal of all 2.1 million current vouchers. Pell Grants would increase by over $7 billion and would be taken out of the “discretionary” category altogether.  And Head Start would increase by $1 billion.

Assumes passage of health reform

By making financial decisions that assume that health reform measures are in place, the budget proposal corroborates the frequent statements of the President and others that the Administration intends to complete the health care reform process.

The budget proposal walks the difficult line between short-term stimulus and long-term deficit reduction, while setting important priorities for low- and middle-income working families. 

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Medicaid is a vital safety net for Illinois residents who cannot afford increasingly expensive private health insurance and fills the gap in employer-provided insurance for the growing ranks of the unemployed and their families. But a recent report by Heather O’Donnell, of the Center for Tax and Budget Accountability (CTBA), Medicaid Plays a Critical Role in Illinois’ Economy, reveals the tremendous additional impact that Medicaid dollars have in bolstering our economy. The report shows that Medicaid not only provided health care coverage to 2.6 million Illinoisans (over half of whom were children) in 2008, it also supported “wages, employment, business income, consumer spending, state tax revenue, and overall economic output.”

The Medicaid program is financed by both the state and federal government. In fiscal year 2008, 53% of the total funding for Medicaid came from the federal government. Under the federal American Recovery and Reinvestment Act (ARRA), states receive increased federal funding through December 2010 to help during the recession. The CTBA report explains that, with this enhanced federal share, if Illinois cuts Medicaid spending by $10 million, it will actually lose $16.2 million in federal matching funds.  

But that would only be the beginning of the impact of such a cut. Medicaid spending reimburses health care providers, and then providers pay employees’ wages. The employees then purchase goods and services in the local economy. According to the CTBA report, Illinois’s 2009 state and federal Medicaid spending resulted in approximately $46 billion in additional business activity and supported about 385,742 jobs. This would mean that a cut of just $10 million in state Medicaid spending would result in an estimated loss of more than $80.4 million in business activity and $27.6 million in lost wages across Illinois.  

This positive ripple effect of Medicaid spending means cuts to Medicaid programs would hurt the Illinois economy, increase unemployment, and prolong the recession. Cuts to Medicaid would not only deprive people of health coverage and health care, but also exacerbate the financial strain felt by businesses and workers and cause Illinois’ economy to further deteriorate. 

 

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When newly-installed Governor Quinn gave his budget address March 18, 2009, he put forth the case for a combination of budget cuts and tax increases necessary for the indebted state of Illinois to get through this devastating recession. Although he pushed this message throughout the legislative session and the Senate approved a substantial tax hike, in the end the budget signed into law on July 15 relies instead on borrowing and harsh cuts to essential services in Illinois.

In a year of many notorious firsts within Illinois politics, this year’s budget is unprecedented in many ways. It relies tremendously on borrowing, jeopardizing the state’s credit-worthiness and resulting in a massive projected deficit of $10 billion for next year. It grants the Governor unheard of discretion by appropriating lump sum amounts to agencies under his control and leaving up to him the decision as to which programs to cut, rather than providing line-by-line programmatic spending authority as in past years, in an attempt to push the blame for the required cuts onto him. To the devastation of the state’s most vulnerable, it makes deep cuts in many programs on which thousands of residents rely.

The full impact of this year’s budget will not be realized until the Governor and his agencies make the tough decisions the legislature chose not to make, deciding which programs will be fully funded, which will be cut, and which will be eliminated. But the ultimate impact of this budget will continue to be felt for years, as the state will cope with addictions that could have been treated, violence and homelessness that could have been prevented, and increased expenses from seniors forced into nursing homes.

Before this budget was even signed into law, the uncertainty caused by the failure to adopt a new budget before the start of the state’s fiscal year and the massive cuts being proposed led to hundreds of social service providers being laid off and thousands of Illinois residents in need of assistance being turned away. Since the adopted budget funds social services at about 85% of the Governor’s requested budget, which already contained cuts, more layoffs will occur and additional services will be cut. But the fight is not yet over. With continued advocacy by the thousands who have written letters, called legislators, attended rallies, and struggled to make their voices heard, the legislature will return in January to renewed cries for the tax increase the state so desperately needs. Perhaps then, when the cuts are real and the legislators see the suffering their cowardice created, they will step up and meet the needs of the people and state they supposedly serve.

To read the Shriver Center's complete analysis of  the Illinois State budget, click here.  

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The Illinois General Assembly meets this week to attempt to resolve the budget.  Failure carries with it incalculable costs that prolong the recession and hit every legislative district. 

The impending cuts directly impact hundreds of thousands of children, seniors, people who are sick and hurt, the unemployed, and workers.  The costs to them are staggering, but there are other costs:

• The state will get sued repeatedly.  Some of the cuts would violate federal or state laws.  Some would violate existing court orders and consent decrees.  The Attorney General’s office must defend all these cases, but it has its own shrunken budget and would be swamped.
•  Proposed cuts violate the condition in the federal stimulus law that states not cut Medicaid.  This will cost us billions in federal stimulus funds.    
• The state would also lose massive sums of federal matching funds and block grant dollars across a range of programs.
• These lost federal funds come out of the Illinois economy – it is money not spent on goods and services in our state.
• The Department of Human Services estimates that the cuts to its budget would cause a loss of 170,000 jobs outside of state government.  These are entrepreneurs, independent caregivers, and employees of non-profit or for-profit businesses that provide or support the programs in various ways.
• Legislators have spent their careers building important programs that will be gutted or eliminated by this process.  Time, talent, and hard-won accomplishment would be wasted. 

The General Assembly’s budget would prolong the recession and hurt the state, not just those who need the programs.  We need to fund the government and not bring about all of the above incalculable costs.

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