Senate Week in Review: Despite Income Tax Hike, State Still Could See $8.3 Billion Shortfall Next Year

Please note: The Week in Review is written by a staff member of the Illinois Senate Republican Caucus and approved by legislators. It is meant to provide constituents with information about legislative action and activities during the week

Springfield, Ill. – This week, a report from The Civic Federation on Illinois’ Fiscal Year 2012 (FY12) budget confirms what State Sen. Ron Sandack (R-Downers Grove) and Senate Republicans have been saying for months— despite the Democrats’ January tax hike, the state’s deficit and bill backlog continues to grow.

While Illinois taxpayers were sold a tax increase as a way to solve the state’s financial problems, the FY12 deficit still exceeds the state’s FY11 deficit. Senate GOP lawmakers have consistently said that the tax increase will not solve Illinois’ fiscal problems unless there are major changes in the state’s spending habits.  The Civic Federation backs up Senate Republican warnings, noting that despite the $7 billion in new revenue associated with the income tax increase, the FY12 budget is still approximately $455 million out of balance.

Echoing Senate Republicans’ criticism of the spending plan, the Civic Federation stresses the only reason there is any semblance of a balanced budget is due to the deferral of Medicaid payments. The budget plan failed to include revenue for a projected FY12 Medicaid liability of at least $11 billion, pushing off payment of $1.7 billion needed to cover the state’s entire FY12 Medicaid obligations.

The Civic Federation says that when combining the state’s operating deficit with the accumulated deficit from previous years, Illinois could see an $8.3 billion shortfall by the end of FY12. The Civic Federation noted that unpaid bills are anticipated to reach $5.5 billion, in addition to $2.8 billion in deferred tax obligations to corporations and Medicaid and employee health insurance payments.

The report acknowledged that while the FYI2 budget does reduce funding for state agencies, the state’s hefty pension and debt repayment obligations offset those savings. In FY12, more than 17 percent of the state’s General Funds budget is dedicated to pension-related expenditures. In fact, the state’s bond and pension debt has grown from $54 billion in 2003, to today’s current debt obligations totaling $119 billion—a 120 percent increase. On a percentage basis, Illinois has the worst-funded pensions in the country.

Despite the state’s serious problems, Senate Republicans say that it’s not too late to change course; Illinois is a great state with an abundance of assets, and many natural and human resources. Senate Republicans have consistently advocated for reduced spending and caps on spending growth, in conjunction with comprehensive reforms to state government, and targeted efforts to foster economic expansion and job growth.

“There is no switch to flip to makes things right in the state automatically, unfortunately, but a new policy direction is needed,” Sen. Sandack said.  “The current economic malaise continues and seems to go on unabated.  There are solutions, and they need to be implemented.”

Last spring, Senate GOP lawmakers introduced a common sense budget proposal based on these principles. Saying Illinois needs a “Reality Check,” the plan would have allowed Illinois to pay its bills, roll back the tax increase, and get the state on the pathway to fiscal health. You can find out more at www.illinoisrealitycheck.com.

In other news, the state continues to respond to Gov. Pat Quinn’s proposal to shutter seven state mental health, developmentally disabled, and correctional facilities.

The State Facilities Closure Act prevents the Governor from unilaterally closing state facilities, and outlines a process for public and legislative review of a proposed facility closures. Impact studies show that there are serious safety and economic concerns associated with the closures sought by Quinn.

The Quinn Administration has announced closures of seven sites including:

•    Tinley Park Mental Health Center;
•    Singer Mental Health Center in Rockford;
•    Chester Mental Health Center;
•    Jacksonville Developmental Center;
•    Mabley Developmental Center in Dixon;
•    Logan Correctional Center in Lincoln; and
•    Murphysboro Youth Correctional Center

Community leaders, facility employees and the public have expressed concerns over how the closures would not only impact their local economies, but impact the residents and staff at the facilities. As the facility closure process proceeds, news reports speculate that the state may face legal impediments that could delay or stop the proposed closures. Opponents say that in order to legally close the facilities, several current state laws must first be changed.

While there is opposition to the closures, Sen. Sandack said that some of them can likely be a good thing for the people who receive the care, citing examples of both our state and others. 

“Other states have demonstrated that institutionalized state-run care lags and is far more expensive than the care often provided by private, not-for-profits serving the developmentally disabled community,” he said.  “We have seen this locally and throughout our state, too.  After having met with leaders and families within the disabled community, I am convinced we need to phase out the institutionalized model and go with community care model. I am hopeful the governor and other leaders agree.”

Sen. Sandack also commented that resources have been diverted away from properly supporting human services in the state, including how the disabled in the state are funded.

“This area is important," he said. "Human services, including funding for the developmentally disabled community, is a critical front-line state obligation. Resources have been constantly diverted away from supporting human services in the way they should be, including how the disabled in our state get funded.  Moving away in a smart, systematic and phased-in manner from the state institutions model is a step in the right direction.”

Additionally, the American Federation of State, County and Municipal Employees (AFSCME) has been closely monitoring the facility closure process. The union recently criticized the Commission on Government Forecasting and Accountability (COGFA), the state entity charged with conducting the facility closure hearings, for proceeding too quickly with the public hearing process. The Director of COGFA explained the Commission is given limited time in state law to schedule the public hearings; he does not believe the schedule is unreasonable.