The General Assembly may have left Springfield, but concerns over the state's fiscal crisis are only growing.
A news roundup for all the state budget wonks out there:
Medicaid Matching Rates
Gov. Pat Quinn may be prepared to sign it, but Illinois' FY 2011 spending plan is unbalanced and does not adequately fund the state's starving human service providers or education system. Frighteningly, it could contain an additional hole that neither the governor's office nor legislators anticipated when they left Springfield in May.
Like 20 other states, Illinois finalized its budget fully expecting Congress to extend, for six months, the enhanced Medicaid matching fund rate included in last year’s stimulus bill. But just as they've put off action on an estate tax reauthorization, lawmakers in Washington have shown very little interest in paying for additional stimulus. U.S. House leaders were forced to strip $24 billion in aid to states from its jobs bill in May to satisfy Blue Dogs worried about future deficits. The Senate, meanwhile, is trying to reinsert the aid into its version of the tax extenders legislation, but there are no assurances the bill will pass or that the Medicaid provision will survive a concurrence vote in the lower chamber.
If Congress ignores ailing statehouses, the Sun-Times says Illinois could lose $750 million in public health resources. Voices for Illinois Children's Larry Joseph pegged the figure at $454 million in his budget analysis earlier this year. Either way, it's a lot of money. And if Illinois reduces coverage or puts off more provider payments as a result, it's going to have an adverse effect on both patients and the broader economy. "The purpose of the stimulus package was to keep people working until the economy rebounds," the Sun-Times writes in an editorial this morning. "Cutting Medicaid reimbursement rates while states are reeling from the recession would have precisely the opposite effect."
Not all federal lawmakers think states should be forced to deal with the ongoing recession on their own. Challenging the White House to take a stronger stance on a stalled spending plan to prevent massive teacher layoffs, House Appropriations Committee Chairman Rep. Dave Obey (D-WI) has said he will consider directing unspent stimulus funds towards schools. The administration, which doesn't want its budget priorities gutted, says very little of the $68 billion that's still available from the Recovery Act remains uncommitted. But using that threat may be the only way Obey can get any money flowing to state governments.
While Democrats had hoped to spend $23 billion so that school districts could cope with declining tax revenues, Obey is now only requesting $10 billion. That reflects the intense deficit hysteria that's currently sweeping Washington. Unfortunately, those opinions aren't supported by sound macroeconomics.
Pension Reforms and The Bond Rating
Be sure to read this new post from Chris Wetterich at the State Journal-Register's Boiler Room blog. He makes an observation that should further anger those public employee unions already fed up with their treatment from the Quinn administration. As the pension reform package was rushed through the General Assembly last March, the governor's office justified the move by arguing it would protect the state from a bond rating downgrade. But Quinn spokesperson Kelly Kraft tells Wetterich that the budget office expected interest rates for their pension borrowing scheme to increase -- regardless of whether the pension cuts were signed into law. "I wonder whether they oversold how helpful the pension changes would be to the bond rating," Wetterich writes, "given that they were planning for a downgrade all along." That's a good question that deserves an honest answer.
Republicans' Borrowing Objections
Back home, statehouse Republicans continue to blast the Democrats for relying too much on borrowing. But the opposition party's stated position -- that they would perhaps support further borrowing or even a tax increase if Democrats took up "fundamental economic reforms" -- still rings a bit hollow. Take, for instance, this op-ed penned by Senate Minority Leader Christine Radogno (R-Lemont) in the State Journal-Register earlier this week:
For years, Republicans pushed for spending reductions. We’ve asked the majority to reform Medicaid. We’ve pushed for workers’ compensation reforms to reduce the cost of doing business, without affecting benefits. The majority declined. As a result, Senate and House committees are littered with stalled proposals to cut spending and reform programs.
Of the spending cuts the legislature considered in May, Medicaid was actually one program that did see its budget sliced -- a move that frustrated health care advocates. And while Illinois' Medicaid program is not a perfect model by any means, it is holding down costs and providing real economic security to millions of working class people. Meanwhile, Radogno seems to forget that the General Assembly passed a major workers' comp reform package in 2005 ... with the assistance of Republicans! House Minority Leader Tom Cross (R-Oswego) even highlights his support for "landmark workers’ compensation reforms" on his own website. Premiums are still larger than in some neighboring states -- a virtue for workers hurt on the job -- but the GOP leaders are being disingenuous when they cite that system as a major job killer.
Republicans and anti-tax Democrats like Rep. Jack Franks (D-Marengo) might also want to take a look at some recent remarks by Georgia Gov. Jim Perdue (R). On Wednesday, he vetoed a bill that would have implemented a "zero-based budgeting system," which would force legislators to essentially write their annual budgets from scratch, reviewing and renewing each contract or appropriation included in the previous budget. That's an idea that's gained favor with conservatives in Illinois, but it's one Perdue says has not made a noticeable difference in the states where its been tried:
Georgia first attempted this budget methodology in the 1970s under Governor Jimmy Carter and has abandoned it since that time. A survey of states finds that of the states that currently maintain this methodology in their statutes all have effectively abandoned the practice because of the additional bureaucratic process and overhead while producing few identifiable results.