Illinois At Fiscal Crossroads

Reducing benefits, raising taxes among proposed pension fixes

Experts agree that this article is correct about the options: either we have to limit benefits to existing workers going ahead or bite the bullet and start paying down our debt and meeting our obligations.

Reducing state employee benefits would be a long and expensive path requiring legislative agreement and action which would then certainly be legally challenged in court because those benefits are constitutionally guaranteed to the workers and by law cannot be “diminished.” So just reducing state employee benefits would not be simple or quick to do, and it would ultimately penalize and demoralize state workers who are not responsible for decades of legislator irresponsibility. How many state workers would continue to work for the state after that?

Paying down our debt and beginning to meet our obligations is the surest and quickest way to way to stop our fiscal bleeding and return to stability and it is what the state will have to do at some point if it wants to exist. The problem is that doing this will inflict pain upon every taxpayer in the state, because revenue sources whether from fees or taxes have to increase. Even a drastic increase in our tax rate may not be enough to help turn the corner at this point. It will also take some ingenuity and creativity to develop new industries and products for the state. Too bad that taxpayers can’t go after every politician  directly responsible for our predicament.  By that, I refer to each of them who voted year-after-year for state borrowing time after time and postponed the problem so they could be safely re-elected rather than doing their jobs and doing what was unpopular, but necessary; raising state taxes when they should have done so.

In Illinois, late payments fray the safety net

“…During the recession and its aftermath, of course, almost every state has had to make deep budget cuts, and those cuts have taken a toll on services. What Illinois is experiencing is different. The turmoil at the Youth Service Project is not a result of policy choices made by political leaders to cut back on youth violence prevention. Rather, it’s a result of choices they haven’t made.

By failing to balance revenues with expenditures, lawmakers have turned their budget problem into a cash-flow problem, pushing decisions of how to spread the state’s fiscal pain to the governor’s budget office, which prioritizes payments, and to state Comptroller Dan Hynes, who writes the checks…So the state is essentially taking out low-interest loans from groups like the Youth Service Project…”

Illinois Stops Paying Its Bills, but Can’t Stop Digging Hole

If you live in Illinois and you haven’t read the above article, you need to read it now!

It takes an impartial observer like the New York Times to put the clues together and tell us what the reality is about Illinois and the fiscal calamity we face.

To be blunt, read the article and you will understand more than our politicians understand: Illinois is broke and it will not get better. Illinois is now the worst state in the county in terms of debt and the possibility of pulling out of it. Why? Because for the past decade, our politicians have lacked the guts to pay our pension debt as they should have and to raise our taxes. As the article states:

“The state’s income tax burden is not terribly high — Illinois ranks in the bottom half of states — and its government is not terribly large. (The budgets in New York and California, per capita, are much larger).” Yet, “…every major rating agency has downgraded the state; Illinois now pays millions of dollars more to insure its debt than any other state in the nation.”

“…Only the most delusional people think you can solve this without raising taxes,” according to Dan Hynes, the State Comptroller.“…Everything is triage now,”… “We work to avoid outright disaster.”

The result is that anyone young, skilled, or intelligent sees the writing on the wall and will soon be moving out of Illinois. Our politicians are collective idiot cowards; only Governor Quinn has been left to grapple with attempting to make cuts no one else wants to step forward and take responsibility for. Even the cuts he announced yesterday will have little relative effect on the State’s debt, but he deserves some credit for stepping up to the plate.

Quinn released his budget cuts Thursday here, but even these cuts are based upon an over-optimistic assumption that the feds will pitch in with $750 million to help pay for medical coverage for the poor and that the IL senate will relent and allow another $3.7 billion borrowing spree for pension costs.

“…the biggest reason the state faces a big deficit in the next budget is because the new budget is loaded with one-time revenues that do not address overall problems.

Read, again, no tax increase so no regular on-going revenue source increase, so back to square one budget crisis next year!

Just how many times does it take politicians and the public to understand that however unpopular a tax increase is, it has to be done? At some point even a tax increase and years of pain may not be enough to save the state.

Highlights of the cuts that Gov. Pat Quinn said Thursday that he’ll make in order to trim state spending by $1.4 billion.

EDUCATION

$7.067 billion (down $241 million, or 3.3 percent)

Cuts include:

$16 million in “hold harmless” funds for schools with declining enrollment

$2.1 million in operations at State Board of Education

$68.5 million from reading improvement block grants

$70.5 million from “other grant programs”

$84 million from student transportation

HIGHER EDUCATION

$2.120 billion (down $100 million, or 4.5 percent)

Cuts include:

$14 million from community college “student success” grants

$86 million from universities

AGING

$638.8 million (down $17.4 million, or 2.7 percent)

Cuts include:

Eligibility changes in the Community Care Program

HUMAN SERVICES

$3.734 billion (down $312.6 billion, or 7.7 percent)

Cuts include:

$49.8 million from operations at local offices and state hospitals

$262.8 million from grants affecting mental health and developmental disabilities

HEALTHCARE AND FAMILY SERVICES

$7.971 billion (increase of $162 million, or 2.1 percent)

Increases include:

Quicker payments to hospitals, nursing homes and doctors, as required by federal government

PUBLIC HEALTH

$137.4 million (down $17 million, or 11 percent)

Cuts include:

Community health center expansion

Women’s health promotion grants

Rural health grants

Medical student scholarships

Family practice residency grants

Prostate cancer awareness

Immunization outreach grants

CHILDREN AND FAMILY SERVICES

$859 million (down $6 million, or 0.69 percent)

Cuts include:

$3 million in institution and group home beds

$3 million from slow down in hiring staff

STATE POLICE

$272 million (down $15.4 million or 5.4 percent)

Cuts include:

Whatever union concessions possible

CORRECTIONS

$1.135 billion (down $41.9 million, or 3.6 percent)

Cuts include:

Better management of overtime and other operational costs – reducing inmate   costs

Whatever you do in November 2010, don’t vote for Bill Brady, the Republican candidate for Governor.

The guy is the one worst thing for our state budget crisis that we voters can exercise control over and prevent from happening. I love two Chicago Sun-Times blog articles focusing upon the utter stupidity of Brady’s vision of fiscal management for IL: read here and here.
 
 

Like a businessman, Brady is all business myopia. Brady can’t even manage to get his own business into the black, yet he wants us to trust him with the State coffers! Read here. Naturally, when he incurs a loss, he is quick to advantage himself with Federal Stimulus tax loopholes to avoid paying taxes. Does this show he’d use a different methodology to fix the state budget crisis than the shipshod methods already applied? Hardly.

You want to reduce business expenses, then raise taxes and you get to eliminate some of the paperwork and high fees Blago packed on while attempting to raise money. Don’t penalize families that are barely scraping by with reducing the minimum wage when they will already have to face higher taxes. And, exactly what does Brady expect will happen if the State “privatizes” the pensions of state employees? Does he really imagine that anyone is going to be happy working for the State of Illinois?

State pension amounts for the majority of the state’s working stiffs are already low in comparison to the payout of most other states. It is only the appointed bureaucratic patronage positions awarded by politicians themselves to their friends and family which draw down the big, and in some cases, multiple retirement pays. I’m sure ways to reduce these pensions could be worked out if there was the political will to do so.

Absent the state contribution to their 401 (k)s, any front-line critical state employees in dangerous occupations, such as police, fire, and other emergency workers, would have to seriously consider abandoning the state and moving elsewhere to serve. They simply could not afford to do otherwise. Even your embattled average state worker who has had to deal with staff cutbacks and burgeoning workloads in recent years, have to think twice now about remaining in a state where there is no longer any expectation about financial stability. Heck, thanks to the past decade of political work, we should all be thinking about relocation these days.

Fiscal Budget Effects are

Beginning to Be Felt All Over IL

The budget shortages are starting to effect more than just state vendors. Even though the poor are a priority to be helped by the state, the lack of money means that changes are coming very soon to medical programs affecting the poor. Blago went and significantly expanded medicaid eligibility to kids and middle-class parents in the attempt to win populist votes for himself. Now, the cost of this expansion cannot be afforded and the medicaid program will take some hits. When Quinn released his budget cuts, Illinois Department of Healthcare and Family Services boss Julie Hamos announced several changes the agency will try, including applying managed care to medicaid recipients. (See here)

IDHFS wants to use managed care to contain costs because it pays more than necessary every time a medicaid recipient goes to the emergency room instead of a doctor. Medicaid recipients tend to use emergency room care a lot more often than most individuals because of the ease of getting the care without having to deal with the headache of first finding a doctor willing to accept a state medical card for payment. Most doctors have cut back significantly on accepting medicaid patients due to the State’s poor payment record and low reimbursement rates. Managed care would require recipients to be assigned to a primary care physician who would be responsible for trying to apply preventive care to the recipient and cutting back on emergency approvals.

Managed care to contain costs sounds good but it is a headache to implement in reality. Doctors already have gotten to hate the medicaid system and will not be more happy to have to deal with recipients who are more likely to be non-compliant and troublesome. Recipients are not used to taking responsibility for following directives and more complicated steps to receive care.

Now, IDHFS tried to apply managed care to medicaid recipients before a few years ago and abandoned the attempt when it proved to be too difficult.

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