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

The American Taxpayers Relief Act (ATRA), signed into law by President Obama on January 2 to avert the fiscal cliff, includes several major victories for low-income people.  At the same time, it sets the stage for a titanic battle over spending cuts that could devastate programs of critical importance to low-income people.

The major victories for low-income people secured by President Obama in ATRA consist of:

• A one-year continuation of extended unemployment insurance benefits for the long-term unemployed. Without this action, two million long-term unemployed people would have been immediately cut off benefits, and more than five million would have been cut off over the course of 2013.
• A five-year continuation of the 2009 improvements to two low-income tax credits, the child tax credit and the earned income tax credit. These improvements lift a million people out of poverty. Also a five-year continuation of a college tuition tax credit.
• No cuts of any significance to low-income programs including Medicaid and SNAP.

On the negative side of the ledger, no action was taken to prevent expiration of the temporary two-percent reduction in the payroll tax. This will significantly reduce take-home pay, driving down consumer demand and resulting in higher unemployment.

ATRA postpones sequestration--large automatic cuts to domestic and defense discretionary spending--until March 1. This is also when the government is expected to exhaust its borrowing limit, which would require Congress to raise the debt ceiling.  

The last time Congress had to raise the debt ceiling, in 2011, House Republicans insisted on a dollar-for-dollar reduction in spending, resulting in $1.5 trillion in spending cuts. The House Republicans have vowed that they again will use the need to raise the debt ceiling as leverage to exact huge spending cuts. This is a potent weapon, since failure to raise the debt limit would cause the United States to default on its obligations, with catastrophic consequences for the worldwide financial system.

The pressure to make big spending cuts is exacerbated by the fact that ATRA wound up raising only $563 billion in new tax revenue over ten years, about $1 trillion less than the $1.6 trillion originally sought by President Obama. The President has said that he will continue to fight for additional revenue through reform of the tax code as part of any future deficit reduction package. 

Those who favor large cuts in government spending can be expected to push a number of proposals that would cause grave harm to low-income people, such as:

• A “per capita cap” that would limit states to a fixed dollar amount per Medicaid beneficiary. This is another version of a block grant, which would shift increasing health care costs to the states and lead to major cuts in the services available to low-income Medicaid participants.
• Raising the retirement age for Medicare and/or Social Security from 65 to 67.
• Turning Medicare into a private insurance voucher program, thereby exposing seniors to unaffordable increases in the cost of medical coverage.
• Reducing future Social Security benefits by changing the indexing mechanism to a “chained” CPI (consumer price index).
• Additional deep cuts and structural changes to federal programs, including possible block granting of the Supplemental Nutrition Assistance Program (SNAP).

The major victories that President Obama secured for low-income people in ATRA should be celebrated. At the same, it is urgent that we immediately confront the looming threat of overwhelming spending cuts.

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What do gradually raising the retirement age for Medicare and Social Security, reducing military defense spending, and limiting the home mortgage interest tax deduction have in common?

The answer: Each of these deficit reduction options is more popular with the American public than reducing federal funding for programs that help lower income Americans.

Polling released by the Pew Research Center last week compared the public’s support for different deficit reduction strategies and found that cutting funding for programs that help the poor is “particularly unpopular,” disapproved by the public by a margin of 58-38%.

The most popular deficit reduction options put the burden on those who are able to afford it, including raising the income tax on income over $250,000 (69-28% approve), limiting tax deductions, raising taxes on investment income, and reducing Medicare and Social Security benefits for higher income seniors.

These poll findings demonstrate strong public support for rejecting deficit reduction measures that increase poverty, hardship, and inequality. The Bowles-Simpson National Commission on Fiscal Responsibility and Reform expressly endorsed this principle in crafting its deficit reduction package, and every previous deficit reduction agreement has adhered to it.

The Pew polling found that an overwhelming majority (74%) agree that deficit reduction must be accomplished by a balance of tax increases and spending cuts, with only 7% saying the focus should be on mostly tax increases, and 11% saying the focus should be mostly on spending cuts.

The Pew polling also yielded a number of political findings – notably that President Obama’s job approval rating is up, that he is viewed as making a serious effort to work with Republicans, and that the Republican Congress and Speaker Boehner are viewed very unfavorably and will be blamed if a deficit reduction agreement is not reached.

Polling findings, however, do not equate with political outcomes. The budget written by Rep. Paul Ryan and passed by the full House of Representatives earlier this year would have cut taxes for the average millionaire by $265,000, paying for this largesse with massive spending cuts. Two-thirds of these spending cuts would have come from programs for low-income people like the Supplemental Nutrition Assistance Program (SNAP, formerly Food Stamps) and Medicaid.

Hence, there is a very wide chasm between what the House Republicans want and what President Obama, joined by a strong majority of the American people, wants. This chasm must somehow be bridged if there is to be a deficit reduction agreement that avoids the fiscal cliff.

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The final budget voted by the Illinois General Assembly makes historically deep cuts to medical assistance and other programs that help and provide opportunity for the poor. These cuts could have been mitigated by an assortment of revenue ideas advanced by the Responsible Budget Coalition, among others, but those ideas were never seriously considered. As always, the decision to target programs for poor people was a question of priorities, not necessity.

The $1.6 billion in cuts to medical assistance included the elimination of programs, restrictions in eligibility, new co-payments, and utilization limitations. Here are some of the more significant and potentially worrisome cuts:

• Elimination of the Illinois Cares RX program, which made it possible for 180,000 poor elderly and disabled people to afford prescription medications. Advocates are asking Governor Quinn to amendatorily veto the budget bill to eliminate this cut or at least delay it until January to allow people to adjust and try to minimize the damage.
• Reduction in Family Care income eligibility from 185% to 133% of the federal poverty level, terminating medical assistance to 26,000 parents whose children receive medical assistance.
• Elimination of restorative dental, including fillings, crowns, and dentures. Only emergency dental—teeth-pulling—will be covered.
• Imposition of maximum allowable co-payments for prescription drugs and services received at health clinics.
• Hiring of private vendor to verify income and residency. Accuracy in eligibility determinations is a good thing, but the concern is that private vendors have a history of inaccurate, over-aggressive, profit-motivated caseload reduction.

To its credit, the General Assembly spared children from the medical assistance cuts entirely, including undocumented immigrant children who remain eligible for the AllKids program. The General Assembly also avoided even deeper cuts by raising $800 million in new revenues through an increase in the cigarette tax, an enhanced hospital assessment, and federal matching funds.

In addition to the cuts to medical assistance, many other programs that primarily serve poor people were hit hard.  This included:

• The education budget was cut by $210 million, including a $160 million cut to General State Aid and a $25 million cut to the Early Childhood Block Grant that funds Illinois’s Preschool for All pre-kindergarten program.  Funding for Preschool for All has been cut by $80 million since FY 2009, eliminating services to 26,000 at-risk children.
• Child Care Assistance – program cut of $46 million, most of which will be realized by steep increases in parent copayments. In addition, the state will not adhere to the principle of parity whereby center rate increases have matched home increases negotiated by the Service Employees International Union, which represents home providers.
• Temporary Assistance for Needy Families (TANF) – the effective date for assistance was changed to 30 days after application rather than the date of application. This yields $10 million in savings by eliminating one month’s payment to TANF applicants whose applications are approved.  Thirty-thousand families per year will lose a month of benefits.  
• The budget for the Department of Children and Family Services (DCFS), the state’s child welfare agency responsible for abused and neglected children, was cut by $86 million. It is not yet clear how this will affect the services the agency provides.

Many of the “savings’ generated by these cuts are illusory. Persons whose medical assistance is terminated will seek care in emergency rooms, at much greater cost to the state. Eliminating preventive services will result in much greater costs later from problems that could have been avoided. Every child denied Preschool for All will, later in life, cost the state an average of seven times more in special education, welfare, incarceration, and other costs than the cost of the investment in preschool education would have been. Those who supported the medical assistance and other cuts to poor people’s programs claimed they were doing so in the name of not saddling future generations with unsustainable debt, but the fact is that their short-sighted and expedient decisions will impose far greater costs on future generations.

The Responsible Budget Coalition and others proposed revenue-raising measures that would have ameliorated the need for cuts. These ideas included:

• Closing five corporate tax loopholes ($700 million).
• Broadening the sales tax to include selected consumer services ($550 million).
• Reinstituting sweeps of surplus revenue from non-GRF funds ($300 million).
• Using excess revenue from the Road Fund for the Secretary of State and State Police ($250 million).

In addition to these immediate sources of additional revenue, the most important long-term revenue initiative is the Fair Tax Coalition’s proposed constitutional amendment to eliminate the flat tax provision of the Illinois Constitution and permit a graduated income tax. Until this occurs, Illinois’s revenue shortfalls will be chronic and increasingly severe.

Watch for future issues of the Shriver Brief that will provide more detail on the resolution of medical assistance and other FY 2013 budget issues as well as other substantive issues of significance to low-income people.      

John Bouman contributed to this blog post.

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Last week, House Republicans approved a budget plan titled The Path to Prosperity: A Blueprint for American Renewal.  In his introduction to the budget plan, House Budget Committee Chair Paul Ryan argues “[t]he social safety net is failing society’s most vulnerable citizens and poised to unravel in the event of a spending-driven debt crisis.”  Unsurprisingly, the Republican budget contains many cuts to the social safety net, including cuts to the Supplemental Food Assistance Program (SNAP), formerly known as the Food Stamp Program.  The Ryan budget would cut 17 percent of the SNAP budget over ten years, beginning in fiscal year 2013. 

Despite the draconian nature of the SNAP cuts, the Ryan budget proposal is notably short on details regarding how exactly the cuts would be structured.  The only concrete proposal the Republicans offer is to convert the SNAP program into a block grant “tailored for each state’s low-income population” beginning in 2016, with benefits “contingent on work and job training.”  Block grants are fixed sums of money that the federal government gives to the states. These grants are unresponsive to changes in need and fail to provide a stimulus during economic slowdowns.

It is worth reading some of Ryan’s critique of SNAP in detail. Ryan acknowledges that SNAP “serves an important role in the safety net by providing food aid to low-income Americans,” but criticizes the program’s growth.  Ryan writes:

“Enrollment grew from 17.3 million recipients in 2001, to 23.8 million in 2004, to 28.2 million in 2008, to 46.6 million today.  According to the U.S. Department of Agriculture, “The historical relationship between unemployment and SNAP caseloads diverged in the middle of the decade … As the unemployment rate fell 1.4 percentage points between 2003 and 2007, SNAP caseloads increased by 22 percent.” The trend is one of relentless and unsustainable growth in good years and bad.  The large recession-driven spike came on top of very large increases that occurred during years of economic growth, when the number of recipients should have fallen.”  

According to Ryan, the “unsustainable growth” in SNAP participation has been driven by the program’s structure. In Ryan’s view, because states receive money in proportion to how many people they enroll, they have an incentive to enroll as many people as they can, with no incentives to make sure that SNAP recipients are working or participating in job training programs.

Let’s unpack Ryan’s assertions.  First, where is Ryan getting his numbers?  His numbers describing the relationship between unemployment and SNAP caseloads come from a March 2012 article titled ”What’s Behind the Rise in SNAP Participation?” in the U.S. Department of Agriculture’s magazine, Amber Waves.  Ryan’s quotation from the article is selective, to say the least; immediately after the language Ryan quotes describing the decline in unemployment between 2003 and 2007, the authors write that during the same time period, “[t]he number of people in poverty rose by 4 percent, indicating that economic need remained high even as unemployment declined.” 

But Ryan left that part out.

Second, do the article’s authors come to the same conclusion that Ryan does?  Not really.  It is true that, over the last decade, several pieces of legislation allowed states to be more flexible in how they administered SNAP.  As the states improved their application processes and it became easier for people to apply, more people participated in the program.  But there have also been changes in federal policy that have increased SNAP participation. As the Amber Waves authors note, several agricultural bills expanded categories of exempt assets—allowing people with retirement and educational accounts, as well as car owners, to receive SNAP benefits. Ryan also ignores the 2009 increase in benefits that was a part of the American Recovery Reinvestment Act of 2009—an increase that was always intended to be temporary and will expire in November 2013.

As the New York Times pointed out in an editorial about Ryan’s budget plan, “[a]lready, most people who get SNAP benefits use them up in the first two weeks of a month, and many turn to food banks by month’s end. Cutting benefits so sharply would lead to a significant increase in hunger, particularly among children, which would quickly create dangerous ripples through the health and education systems.” Indeed, almost half of SNAP recipients in fiscal year 2010 were children. That fact might be particularly important in Ryan’s analysis. After all, children don’t vote.

The Center on Budget and Policy Priorities has excellent resources for advocates concerned about the Ryan budget’s impact on SNAP, including a comprehensive analysis of the budget’s effects on SNAP recipients and a table describing the cuts’ state-by-state impact.  For example, in Ryan’s home state of Wisconsin, 844,000 people are currently scheduled to receive SNAP benefits in 2013.  That’s 844,000 people who would feel the belt-tightening effect of these cuts.

Clearinghouse Review: Journal of Poverty Law and Policy recognizes the importance of SNAP to legal aid lawyers and other advocates for low-income people, which is why the Review is dedicating its 2012 special issue to hunger and food insecurity.  Historically, the Review has prioritized helping advocates stay current with trends in SNAP advocacy.  The Review recently published articles about the use of SNAP at fast food restaurants and the legality of subjecting participants to new identification requirements such as fingerprinting.  The 2012 special issue will examine SNAP’s past, present, and future, as well as physical, employment-related, and environmental aspects of low-income communities that limit access to nutritious food and affect people’s overall health.  Look for the 2012 special issue of Clearinghouse Review in the fall. 

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There is an intense debate over Rep. Paul Ryan’s (R. WI) proposal to scrap Medicare and turn it into a voucher program shifting costs to seniors, a debate that became even more intense when it was passed by the Republican-controlled House of Representatives. The Senate has not passed it, and the President has registered his opposition. The American people are also firmly opposed. 

But that debate has taken news focus away from the substantial improvements to the Medicare program that have been accomplished in just the last year under the Affordable Care Act, with more improvements soon to come. Costs are lower and care is better for seniors all over the country.

Here is what happened in 2010 and is about to happen in 2011 in Medicare under the Affordable Care Act. The numbers apply to Illinois, but the same impact is happening everywhere in America.

1. Prescription drugs are more affordable. In 2010, 152,170 Illinois residents hit the Medicare prescription drug “donut hole” and received at $250 rebate check to defray their costs. Across the state, this came to $38 million in savings for seniors. In 2011, everyone in Illinois who hits the donut hole will receive a 50% discount on their brand name and generic prescription drugs. As of March, Illinois Medicare beneficiaries who had triggered into this benefit were getting about $800 a month in savings.
2. Preventive services are free. In 2010, when this section of the new law had not yet taken effect, Medicare charged co-pays for preventive services like mammograms and other cancer screenings. In 2011 all of the 1.9 million Medicare beneficiaries in Illinois now get all recommended preventive services with no out-of-pocket costs.
3. The annual checkup is free. In 2010, when this section of the new law had not yet taken effect, Medicare charged a co-payment for the annual checkup. Starting in 2011, Medicare beneficiaries can go to an annual wellness visit with no out-of-pocket cost. As of April 20, 17,508 Illinoisans have had a free wellness visit. 
4. Premiums are lower. Under the new law, in 2010 Medicare Part B premiums were nearly $8 less per month than projected by the Medicare trustees. In 2011, the premiums are almost $5 less per month than projected by the Medicare trustees. The lower premium translates to $107 million in savings for Illinois Medicare beneficiaries in 2011.
5. Medicare Advantage. In 2010 and 2011 all beneficiaries still retain the option of joining a Medicare Advantage plan if they so desire.

This is a story typical of many things in the Affordable Care Act. Improvements to the system are constantly rolling out, but the general public remains unaware of them. In part, this is because the subject matter is complex and hard to absorb unless you are directly affected. And in part it is a deliberate strategy of the opponents to keep the focus elsewhere and downplay the accomplishments of the law as they endeavor to repeal it and roll back its benefits. The intense reaction to Rep. Ryan’s proposal shows that at least the people directly affected – seniors who depend on Medicare – are well aware of the increasing quality of their program. 

An earlier version of this blog post inadvertently referred to Rep. Paul Ryan as "Jack" Ryan.  This has been corrected, and we apologize for the mistake.

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Published reports indicate that Illinois Governor Quinn’s office may soon announce extraordinary, mid-year (FY11) cuts in human services funding in the order of $400 million. There are published reports that the child care assistance program (CCAP) alone could be slashed by $100 million.

Cuts of this magnitude would cause devastating cuts in services under any circumstances. However, the effect of these cuts would be greatly magnified by the fact that there would be only four months left in FY11 when the cuts take effect. This means that services would have to be cut by three times as much as they would have been cut at the start of the fiscal year to obtain comparable savings. Looking to the future, the service levels after these mid-year cuts would likely be the baseline for future budgets.

Just what effect would the FY11 mid-year cuts under consideration have on program services? As of December 2010, there were approximately 188,000 children in the CCAP. A $100 million cut in the CCAP's budget for the remaining four months of FY11 would be approximately a one-third cut in the CCAP's budget. The number of kids affected, and exactly how they would be affected, would depend on how the cut was implemented. But, the straight math, for estimation purposes, is that at least 63,000 children would have to be cut from the program over the remainder of FY11 to save $100 million.

One strong possibility is that intake would be stopped. This would mean that when a low-income single parent gets a job, she would no longer be eligible for the child care assistance she needs to get her child into quality care and make it possible for her to work. An estimated 7,000 to 8,000 children per month would be unable to access child care assistance if intake is frozen. Illinois has never instituted a waiting list since the CCAP began in 1997.

Cutting child care assistance is bad public policy all the way around. It is about the worst policy decision there is in terms of killing jobs during a recession with unemployment rates hovering around 10 percent. Every dollar of child care assistance both makes it possible for a low-income single parent to work and pays the wages of a child care worker. It also has the third important benefit of enhancing the life prospects of the child receiving care. Let’s hope the Governor and his advisers step back from the precipice and decide not to proceed with the threatened cuts to child care and other vital human services.

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In the waning hours of the lame duck legislative session, the Illinois General Assembly approved a temporary increase in the state income tax along with a series of spending restrictions designed to ensure that the new revenues go towards paying down the state’s massive debt and bringing financial stability to our state. The passage of this revenue package is the culmination of the efforts of the Responsible Budget Coalition, an unprecedented coalition of anti-poverty, human services, education, labor, good government, seniors and faith-based advocates.     

Under the legislation, S.B. 2505 amdt. 3, the individual income tax will increase from 3 to 5 percent for the tax years 2011-2014, revert to 4 percent for the next ten years, and then go to 3.5 percent thereafter. The corporate income tax will increase from its current level of 4.8 percent to 7 percent for the tax years 2011-2014, revert to 5.6 percent for the next ten years, and then go back to 4.8 percent thereafter. 

It is estimated that increasing the individual income tax from 3 to 5 percent will yield over $6 billion in revenue. Increasing the corporate income tax to 7 percent will yield another $1 billion.

The legislation includes a number of spending restrictions designed to ensure that the new revenues go towards paying down the state’s debt and addressing the structural imbalance that has resulted from state revenues failing to keep pace with needed expenditures. These spending restrictions are:

• A hard cap on spending for the next four years. The cap will be $36.8 billion in year one (FY12), or 10 percent more than FY11 estimated spending of $33.5 billion, and will then increase by 2 percent each year for the following three years. The reason that the first year cap in 2012 is higher is so that it can include all of the spending lines from 2011 that the state simply did not pay--the pension payment, bills to providers, making up for the loss of federal  stimulus funds, debt services, and more. Once that “base” is set, then limits for the three following years are very tight.
• The hard cap encompasses all state spending, including general funds, continuing appropriations (pensions), and general funds transfers.
• Within 60 days after the General Assembly passes a law authorizing state spending from state general funds (e.g., the state budget), the Illinois Auditor-General will have 60 days to review the legislation and determine whether the spending in the bill exceeds the hard cap. If he determines that it does, then the General Assembly has 45 days to reduce spending below the cap or, failing that, the Governor then has 15 days to do so. If spending is not reduced below the cap, then the individual income tax rates revert to the existing rates of 3 percent for individuals and 4.8 percent for corporations.
• The spending cap can be exceeded only if the Governor declares an emergency and neither the Comptroller nor the Treasurer notifies the General Assembly that they do not concur with the Governor that there is an emergency.
• Statutorily mandated spending of any kind may be reduced by the Governor if he determines that doing so is necessary to remain within the annual spending cap.

The cumulative effect of these spending restrictions will require further assessment, so stay tuned for a future blog on that topic. Nevertheless, the magnitude of the spending cuts that would have been required had the revenue package not been approved are unimaginable and would have imposed grave hardship on millions of Illinoisans and consigned our state to a very bleak future. Illinois would also have begun defaulting on loan payments and missing payrolls, becoming a financial pariah.

The revenue package also provides that in 2015, after the spending restrictions expire and the individual income tax reverts to 4 percent, a defined amount of funds will be set aside for education, and the same amount will be set aside for human services. The education and human services set-asides will be 3.1 percent of increased revenues from 2015-2024 and 3.6 percent thereafter.

The revenue package approved by the General Assembly is also noteworthy for what it did not include. Despite the fact that Illinois’ individual income tax is highly regressive, with all taxpayers subject to the same 3 percent rate, the final package did not include any provision to lighten the burden on the working poor, such as an expansion of the state’s earned income tax credit. On the positive side, while the package includes tough restrictions on spending over the next four years, they are temporary and will expire. The General Assembly did not pass a proposed constitutional amendment that would have permanently locked in spending at levels that would have eventually led to drastic cuts in services.

In closing, nothing threatens a politician’s career more than voting to raise taxes, especially an increase of this magnitude. In the end, the members of the General Assembly who voted in favor of the revenue package, and its leadership, must be lauded for their courage in doing the only responsible thing they could do to restore financial stability to the State of Illinois and ensure that it lives up to its obligations and does not forsake its children, its teachers, its mentally ill and developmentally disabled, and all of its other most vulnerable residents. The Senate vote is available here, and the House vote is available here. Be sure to thank those who voted yes and rally to their defense if they are attacked for their vote.

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Wondering about the level of honest discourse to expect from leaders of the new Republican majority in the U.S. House of Representatives?  Their first salvo does not bode well.  

House Republicans announced earlier this week that they are targeting the Temporary Assistance for Needy Families emergency contingency fund (TANF ECF) for elimination.  

Representative Tom Price (R-Ga.), chairman of the House Republican Study Committee, explained that the program encourages states to increase their welfare caseloads “without requiring able-bodied individuals to work, get job training, or make other efforts to move off of taxpayer assistance.”  

Price claimed that eliminating the program would save $25 billion over ten years.   

Now the facts:

1. The TANF ECF primarily funded jobs for the recently unemployed. For example, Illinois used over 90 percent of its TANF ECF allotment to provide 25,000 jobs through the Put Illinois to Work program.      
   
   
2. TANF recipients who did not participate in the Put Illinois to Work program still were subject to the TANF program’s work requirements, instituted as part of welfare reform 14 years ago. Representative Price was in office when the Bush Administration made TANF work requirements even more stringent in 2006.
   
   
3. The $25 billion in savings claimed by the Republicans assumes that the program would be funded at the level of $2.5 billion for the next ten years. But the program expired on September 30th, so “eliminating” it would produce no savings at all. 
   
   
4. Furthermore, the longest extension considered before the program expired would have been for one year, not ten.

The bottom line: make-believe cuts to a program that has been wholly mischaracterized and no longer exists.   

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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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