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

Yesterday, Governor Quinn signed into law the bills that amount to the Illinois state budget for fiscal year 2011. These are the bills the General Assembly sent him, together with roughly half of the money needed to pay for them. The Governor made some alterations and revealed a host of decisions around the funding for agencies and programs. The budget includes cuts of over $240 million for elementary and secondary education, $100 million for higher education, and $312 million for human services. Ninety percent of Illinois general fund spending is aimed at education, health care, human services, and public safety. It follows that those are the vital things being cut, like it or not.

Governor Quinn and his Administration made it clear that they are not happy with these cuts, necessitated by the failure of the General Assembly to produce sufficient revenue to responsibly fund the government. The Governor himself has repeatedly explained the need for and expressed support for the significant new revenues needed to sustain Illinois financially. He has been criticized for failing to engineer support for those revenues from the General Assembly, but he at least was clear about the need and his own position. 

Interest groups, representatives of needy populations, and others will be making specific points about the decisions and priorities in the Governor’s actions to implement this budget. Those are important debates and worth close attention. Yet they have the feel of a desperate squabble over scraps. 

Most of the cuts in this budget are harmful and unwise. They are not driven by policy considerations or evidence-based program evaluations, but by the brutal calculus of the state’s fiscal default. These are the kinds of sorry, no-win decisions that must be made when the Legislature hands the Governor a budget with a shortfall that is HALF of the needed money. The truth is that the budget does not contain the resources to ensure that the items not being cut will in fact be paid for. Some will, some will not. All will have to wait far too long. 

The bigger picture here is that the crisis cries out for responsible leadership and a comprehensive solution that includes adequate new revenues. An election season is not the time to hide from responsibility, take shelter behind a self-justifying poll (“my poll says my constituents do not want to pay higher taxes”), or blithely assert with no specifics that there is a magic way the crisis can be solved without new revenues. It is the time to tell the truth, to teach the constituency what is needed to solve a historic crisis, and then to lead the effort to win it. Illinois voters are capable of adult decisions--nobody wants to pay higher taxes, but most will understand the need. A comprehensive solution is one that puts in place the revenue infrastructure to navigate through the crisis over at least two years. A comprehensive solution will include pain--we have that part already--but it must also avoid making unwise and harmful cuts to essential services. And it must have adequate new revenues to back up strategic borrowing that is also needed to get through the crisis.

For now, we have the embarrassing and sad spectacle of the distribution of scraps and the dismantling of important policies and programs by default. Illinois needs a responsible budget that stops cutting vital programs, meets the state’s needs, keeps the state’s promises, and pays the state’s bills.   

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The General Assembly recessed on their planned adjournment date of May 7, having failed to enact a state budget for fiscal year 2011. May 7 was an artificial deadline. The real deadline is May 31, after which bills may not take effect before January 1, 2011 unless they pass by a 3/5 majority, which would require there to be Republican votes  to pass a budget bill. May 7 may have served a useful purpose for Senate President Cullerton and House Speaker Madigan, however, since it allowed them to determine exactly where the fault lines lie and determine what they must do to get a budget enacted before the May 31 deadline.

The failure of the General Assembly to agree on a budget is a temporary victory for the Responsible Budget Coalition since the only budgets that were on the table on May 7 were fiscally irresponsible and would have inflicted severe pain on our most vulnerable state residents. The House resoundingly rejected both proposed budgets – one that would have required massive cuts in services and the other that would have resulted in massive borrowing. Speaker Madigan did not allow a vote on the other option – raising revenue.   

In the waning days of the session before the May 7 recess, the General Assembly also gave serious consideration to enacting an Emergency Budget Act. The proponents apparently believed that putting all responsibility for budget cuts on the Governor would allow them to escape detection when the residents of Illinois dust for fingerprints on the elimination of services to the mentally ill, developmentally disabled, homebound elderly, infants and toddlers, and so on. The Emergency Budget Act would allow the Governor to implement emergency rules to cut programs, make all state programs “subject to appropriation” and thus optional instead of mandatory, and establish contingency reserves that could be used to eliminate budgeted state programs. In short, the Emergency Budget Act would give the Governor unilateral power to cut spending and eliminate programs as he sees fit, without legislative review.

Governor Quinn would exercise these extraordinary powers for the first six months of the fiscal year that begins on July 1. If Quinn were to lose the November election – and all the polls show him trailing -- then the power to eliminate any and all state programs would fall into the hands of Senator Bill Brady for six months until the emergency powers expire on July 1, 2011.  Brady has proposed cutting taxes by $1 billion in the face of Illinois’ $13 billion revenue shortfall, a position so extreme that it’s not even embraced by the radical free market Illinois Policy Institute.

So how do you close a $13 billion budget shortfall?  Here’s what the General Assembly was considering:

That's right--$4 out of every $5 used to "balance" the state budget would be either borrowed or obtained by not paying our bills.

Last week's action shows that the messages of the Responsible Budget Coalition are penetrating. There is growing momentum to find a real solution to our fiscal crisis and not simply to postpone the problem and, in the meantime, make it worse. Slowly the conventional wisdom that revenue increases are not possible during an election year is being whittled away. The game is far from over though and advocates for a responsible budget that raises the revenue needed to begin to dig us out of our deficit hole still face an uphill climb. Nor is there any sign that the leadership of the General Assembly is willing to seriously entertain a proposal to significantly increase state revenues. In the meantime, there will also be great pressure on the budget holdouts to end their resistance to the enactment of a bad budget. It's still all hands on deck for a responsible budget.

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“Act like leaders, not like fools,

Save our services, save our schools!”

So chanted 15,000 people gathered in front of the State Capitol on Wednesday, in the largest Springfield rally ever. The  demonstrators demanded that the General Assembly not return to their home districts on May 7 as scheduled, or at any other time, until they have enacted a responsible budget that raises the revenue needed to avoid the human catastrophe facing  Illinois in the form of draconian state budget cuts.

Reasonable minds do not disagree: a substantial increase in the state’s revenues is an indispensable piece of the fiscal puzzle if our state is to avoid financial collapse. Earlier this year, the Civic Federation, the voice of Chicago’s business community for over 100 years, released its report on the state’s fiscal crisis and called for an $8 billion tax increase, saying:

We do not enjoy advocating a significant tax increase in the middle of a difficult recession. However, continuing to do nothing would be by far a worse option.   

In jeopardy unless there is a revenue increase are programs that provide vital services to people in need – seniors, the disabled, low-income single parents, people with drug addictions or suffering from mental illness, children at risk of academic failure, adults with developmental disabilities. These same programs provide jobs for teachers, home health care workers, substance abuse and mental health counselors, child care workers, persons who work with adults with developmental disabilities, and others. 

Those who say that raising taxes will cost Illinois jobs are wrong.  The truth is that our continuing failure to raise the revenue needed to pay our bills will result in a devastating loss of the jobs described above as well as those of police, firefighters, and others. 

And let’s consider the private sector. The belief that businesses make decisions on where to locate based solely on tax rates is demonstrably wrong. Does anyone really believe that a crumbling infrastructure and an educational system in shambles create a favorable business climate?

Those who say we over-spend and over-tax have their facts wrong. The facts are that Illinois’ three percent state income tax rate is the lowest of all 41 states that have a state income tax, and Illinois is 43^rd in the country in general funds spending as a percent of the state’s gross domestic product.

Nobody likes to pay higher taxes. Nothing is politically easier than to say, “I didn’t raise your taxes.” But we cannot afford to remain on the path of expediency.

Franklin Delano Roosevelt said: “Taxes are the dues that we pay for the privileges of membership in an organized society.”

Oliver Wendell Holmes put it even more succinctly: “Taxes buy civilization.”

We’re not going to climb out of our $13 billion hole in one year, but we can’t wait to start.

“Show some guts,

Stop the cuts!”

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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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