If GOP gubernatorial nominee Bill Brady won't release a comprehensive budget plan, we thought we'd try to do it for him. The result? There's no way he can balance Illinois' budget in one year.
In March, State Sen. Bill Brady officially won the Republican gubernatorial primary in Illinois. Since he was nominated nearly six months ago, Brady has tried to drive home the message to both voters and the media that he can fix Illinois' broken budget without raising the state's income tax. Just this week, speaking at a campaign event in Quincy, Brady told a group of supporters that he has "an obligation as governor to live within our means." He continued:
"I will balance the state’s budget in the first year. Let me say that again because most people don’t believe it. I will balance the state’s budget in the first year, because I have a fiduciary obligation to the people of Illinois, to the Constitution, to do that.”
This statement would be encouraging if Brady had released anything close to a detailed budget plan after winning his party's nod. Instead, he's touted a series of economic reforms he'd like to see enacted while ducking and diving every serious question about taxes and spending asked of him. In essence, he's forcing potential voters to trust that he has a workable economic solution to Illinois' payroll problem.
If Brady won't release a comprehensive budget roadmap, a criticism the Quinn campaign continues to lob at its opponent, we thought we'd try our best to do it for him. Using some drips and drabs from the campaign trail and some information gleaned from Brady's campaign website, here's a brief glimpse of what Illinois' finances might look like under the stewardship of a Gov. Bill Brady.
Brady has taken the no-tax pledge, promising to veto any increase in the state's income tax or sales tax. (He even supports legislation similar to Prop 13 in California that would require a two-thirds majority to pass any state tax hike.) He also wants to implement a new 10 percent tax credit (up to $2,100) for businesses of any size that create new jobs in Illinois. While that might persuade some small businesses on the margins to take on additional staff, it also means that employers like Walmart could qualify for huge subsides at the state's expense. If the Arkansas-based retailer hires roughly 300 workers at its two newly-approved Chicago locations, for example, Illinois would have to dish out roughly $1.26 million in unnecessary tax credits.
On top of those giveways, the Bloomington Republican wants to eliminate both the state estate tax, which applies only to hyper-wealthy Illinois residents, and the sales tax applied to gasoline purchases, a move former Gov. George Ryan called the biggest policy mistake of his tenure. Combined, that would cost Illinois roughly $600 million per year.
Brady is a supply-sider through and through, so he expects the state to take in additional resources because of these targeted cuts. But the revenue projections wouldn't be realized for several years. Even if we're charitable and say that the tax changes will attract 700,000 jobs as he hopes and the infusion will arrive in full next year, he only expects his plan to generate $3 billion annually. That's on par with Gov. Quinn's tiny income tax increase proposal.
The most controversial plank of Brady's candidacy is his proposal for a 10 percent across-the-board cut in every state government agency. This directive, while starving departments that are already hurting badly, would save roughly $2.5 billion in taxpayer dollars.
Brady also intends to make targeted administrative cuts, such as trimming the budget for the Illinois State Board of Education in half, saving $40 million. On the other hand, he has promised to restore funding cuts to Illinois' higher education system and invest in the state's infrastructure, both of which have degraded because of state disinvestment. Brady has not made clear exactly how much those expenditures will cost, so we will have to declare the administrative cuts and new spending initiatives a net wash in our analysis.
To restore Illinois' fiscal health, Brady is keen on shepherding through the General Assembly a series of "business-friendly" regulatory reforms he says will save the state money in the short-term while drawing in businesses (and the tax revenue they create) in the long-term.
Tops on the list is a structural overhaul of Illinois' Medicaid system, which Brady has (incorrectly) called "one of the worst in the world." He's short on details, but it's safe to assume that Brady wants to force all Medicaid enrollees into a private managed care system, which Republicans say will save Illinois $1 billion immediately. This is bad public policy; it will undercut two public managed care programs that saved $320 million in 2009 while forcing people into HMOs that have a history of "significant failures, abuses, and outright fraud." But for the sake of argument, let's assume the Republican's cost estimate is correct.
Workers comp and medical malpractice reform are issues Brady has harped on, as well. It's true that Illinois pays out more in workers comp benefits than some neighboring states, but the General Assembly approved just four years ago a sweeping, bipartisan reform package that modernized benefits, implemented a medical fee schedule for job injuries, and established a successful fraud investigation unit. Businesses, labor unions, and even Bill Brady approved that legislation. The state is saving money and won't revisit that issue anytime soon.
The same goes for medical malpractice reform. While Republicans are insistent that imposing caps on the amount of non-economic damages a plaintiff can receive are necessary to hold down costs, which the Illinois Supreme Court has ruled unconstitutional, the state insurance department proved that a series of alterations to the Illinois Insurance Code were the primary reason malpractice premiums for doctors and hospitals had dropped in recent years. When a bill to restore those rules came up in the Senate this year, Brady ignored it.
Finally, Brady has proposed to do away with pensions for new state employees and offer them 401Ks instead (with no employer contribution). Budget experts like Ralph Martire think that plan would actually cost Illinois more than paying out its current pension obligations.
Let's assume that Illinois' outstanding deficit is roughly $10 billion to $11 billion dollars entering 2012. That figure could shrink if the General Assembly approves an income tax hike in January. It could also grow if tax receipts continue to stagnate. But it's a fair estimate off which to work. Let's also give Brady the most extreme benefit of the doubt imaginable. If the General Assembly approves his tax plan and regulatory changes, thus magically drawing 700,000 new jobs to the state overnight, we can expect $3 billion in new revenue. The Medicaid "changes" will save $1 billion. And the spending cuts will save another $2.5 billion. That's $6.5 billion in total savings.
From that number, we must subtract $600 million in lost estate tax and gas tax revenue. That means the most revenue Brady's loose budget proposal could generate in one year is around $6 billion, which is at least $4 billion short of what's needed. And Brady has ruled any borrowing out of the question entirely.
Back in the real world, Illinois' short-term deficit hole would likely grow during Brady's first year in office. Why? The state would lose billions in revenue to pay for his tax breaks and giveaways. The Medicaid reforms won't pass. The spending cuts, deep as they may be, won't cover that hole.
In short, Bill Brady will make it literally impossible to pay the state's annual appropriations, pension payments, and its backlog of bills in one year.