Wednesday proved to be D-Day for Illinois, as the newly inaugurated Republican Governor Bruce Rauner presented his budget for the troubled state, one that has earned the nickname, “Scorched Earth,” from some observers, so draconian are the proposed cuts. The former business man, and venture capitalist, is calling for, what the Chicago Sun-Times called “staggering” cuts of $6.7 billion to the state’s budget.
Most notably, he also wants $1.5 billion in Medicaid cuts, and $82 billion in mental-health services, and the elimination of a slew of programs for those people living with special needs.
Also on the table: $600 million in cuts to local governments, and for a state that is trying to attract, and maintain new business, an ironic proposal for $387 million in cuts to higher education, that would negatively impact the education and training of the state workforce.
The biggest highlight of the budget presentation was Rauner’s attempt to address the pension deficit for the state, currently $111 billion, the largest in the nation, with a $2.2 billion dollars in savings, by putting current pension holders in the “same pool as new hires, lowering benefits,” according to the Sun-Times, a move which would surely face a legal challenge.
Running on a campaign of lowering taxes to address the dilemma, Rauner is, in effect, meeting a campaign pledge. But, the powerful Speaker of the House, Michael Madigan (D-Chicago), questioned how this could be done on legislation that has yet to be enacted. Calling Rauner’s actions “reckless,” he noted that no one has factored in the savings from last year’s pension reform, now itself the subject of a legal challenge.
His own idea? A 3 percent tax on incomes that are greater than $1 million, a suggestion straight out of the Democratic national playbook., this time localized for school districts. Unable to resist a comeback, and saying that it would take an amendment to the state constitution, he faulted Republican lawmakers for failing to secure votes in the last session.
Rauner’s plan is to spend $31.5 billion, with an estimated $32 billion in revenue, and the balance of $500 million to pay the state’s bills.
Standing outside of his idea for reduced benefits for existing pension holders, by shifting them into lower tiers, Rauner has wisely left police and firefighters out of that mix.
Opposition to the governor’s proposals were swift and immediate, with most talking about the effect on “real people,” and the impact on social capital, with such items as the complete elimination of homeless youth services, child care services for children over the age of 6, and services for wards of the state, who are 18 to 21 years old.
The Community Renewal Society, a “progressive, faith-based organization that works to eliminate race and class barriers,”commented on its website that, “If we indeed are to take some responsibility for the well-being of our sisters and brothers, we must recognize that the state’s budget crisis is a call to justice. The only responsible approach is to generate the revenue we need to put all of the families of Illinois on a path to sustainable prosperity.”
Also, on the table are a proposed reduction of $27.5 million from the Division of Alcohol and Substance Abuse, a cut that Kathleen Kane-Willis, Project Director for the Illinois Consortium on Drug Policy, and Interim Director of Roosevelt University’s Institute of Metropolitan Affairs opposes. In an emailed statement, she told me, “It’s a sad day when treatment funding is cut in the midst of an heroin and opioid crisis. This budget is penny wise and pound foolish – we need to be expanding treatment to save money. Methadone returns $12 to taxpayers for each dollar invested in terms of reduced health care and reduced crime.” Finally, she stressed, “Instead of cutting treatment funding we should be expanding it.”
Chicago Mayor Rahm Emanuel, in a turnabout from his friendship with Rauner, said that the budget proposals would deeply affect the welfare of the city. With the mayoral election around the corner, he can’t afford to be seen as weak in the eyes of the electorate, and has chastised the new governor for trying to balance the state budget “on the backs of families, children . . . and the local government,” according to the Sun-Times.
Chicago is poised to pay $550 million to the state treasury, in December, to pay for police and fire pensions, Emanuel is now becoming even more anxious that he might appear weak, and lose votes with many who see him as an inevitable win.
With so much on the table and such opposition from from so many people, placing it in proper perspective is vital, and Kent Redfield, an emeritus professor of Political Science at the University of Illinois at Springfield, emphasizes “this is a budget proposal that takes current revenue estimates and propose spending within that estimate. People differ as to what specific numbers are, but the Fiscal Futures Project at the U of I, the Civic Federation, and Center for Tax and Budget Accountability all agree that balancing the FY16 budget with just cuts would require a 20% cut in spending.” But, Redfield also notes, “this does not include paying down $6 billion in unpaid bills.”
And, to make matters worse the state is in the hole to the tune of $3.7 billion, because of the temporary tax cuts that expired at the beginning of this year, plus $1.3 billion in borrowed dollars to make increased pension payments..
Predicting the economic future will be hard, because if “the Governor does not get his pension plan, he has a $2 billion dollar hole in a budget that already makes cuts to core services, but we will not know until early June at the earliest, and many believe that the final budget will include both new revenue and drastic cuts.”
One prominent feature of the Democratic national strategy is to increase funding for K-12 education, and one which Rauner has omitted from the proposed cuts, but as Redfield says, “It is also important to note that by exempting K-12 from budget cuts ($6 billion) you are taking close to 25% of the general fund spending off the table. This requires biggest cuts (31% for higher ed) of everything else to get to a balanced budget.”
Supporting Emanuel’s concern, he also remarked, “The $600 million dollar cut in the share that Cities and Counties receive from the income tax would be very harmful. Most cities and counties in Illinois are in severe financial stress. In a bare bones budget for a city the biggest cost is for police and firemen. The proposed cuts to mass transit would put increased pressure on urban economies. If the Governor also got his proposed freeze on property taxes, you are talk about serious reductions in local government services. This is balancing the state budget by shifting cost to the local level.”
We’ve already seen the social costs on the macro level associated with this budget, but with the proposed reductions to human services, Redfield stressed that “if you cut services in the mental health area, the potential fallout is more pressure on local health facilities, and more people ending up in the criminal justice system.”
With many Illinois families struggling to send their children to college, “The higher education cuts will result in cuts in faculty and staff and increases in tuition. Higher education has lost almost $300 million in state funding since 2009 and these cuts would double that.”
As Redfield concluded, “It is going to be a long spring in Springfield.”