Weekly Review

Governor's Vetoes Will Stand Unless Senate Takes Action

House Votes to Override

$480 million of Governor's Vetoes,
Meaningless if Senate Takes No Action

Entire Session Proves the Need for Fiscal Reform

Last Wednesday the House voted to restore about $480 million of the Governor's vetoes to the Fiscal Year 2009 budget.

The House took 33 votes in total. Six of the 33 motions passed. Those six now go to the Senate for consideration.

Senate President Jones has stated that he does not plan on coming back to the Capitol unless the House passes revenue generating legislation. The House did not take up any revenue bills.

If the Senate fails to act on the six motions that passed the House, those cuts will stand.

You can access all 33 House motions and votes here

The Governor's vetoes hit almost every budget item including social services and higher education. Additionally, constitutional officers, such as the Attorney General and Treasurer saw their budgets significantly reduced.

Health Care
Health care was significantly cut, including a $350 million cut to hospitals that provide Medicaid services. The $350 million was intended to pay down Medicaid liability (right now the Medicaid liability stands at about $1billion) the funding was not for an expansion of any program.

The Illinois Hospital Association (IHA) finds that because of the veto, the payment cycle for hospitals, on average, will go from about 100 days to six months or longer.

According to the IHA, many hospitals now have cash flows of only a few days, some are forced to borrow just to make payroll or meet other basic operating expenses, and some are postponing critically needed projects to update their facilities, equipment and technology. The IHA calls extending the Medicaid payment cycle, "onerous and unworkable."

Medicaid Deferment
Under 30 ILCS 105/25, the state is legally able to defer Medicaid payments to health care providers from one fiscal year to the next.

Utilized by state government to varying degrees for decades, this budgetary loophole has allowed the state to maintain public service levels that it does not have the fiscal capacity to afford.

Illinois Auditor General Holland reports that during the last three fiscal years, on average $1.5 billion in medical claims went unpaid in the same year the services were provided. This results in health care providers being paid months after services are rendered and the state incurring interest costs that could have otherwise gone to funding public services.

Due to the late payments, the agency accrued $81 million in interest costs since FY2000.

Illinois Comptroller Hynes reports that in the current fiscal year alone the state has paid out more than $20 million in late-payment interest for healthcare-related bills.

What Else Was Cut

Social Services - $210 Million in cuts including:

$55 million for substance abuse programs
$5 million for developmentally disabled programs
$4.6 million for physically disabled programs
$36 million for mental health services
$4 million for HIV/AIDS programs
$3 million for domestic and youth shelters
$30 million decrease for DCFS resulting in an increased caseload of five children for each caseworker

Senior and Veterans Services - $100 million in cuts including:

$25 million cut to homecare workers that provide essential services to seniors

Economic Development and Transit - $240 million in cuts including:

$37 million in state support for transit fares for students and people with disabilities
$5 million cut to laptop for schools
$3 million cut to grants for parks and museums
$25 million in job training cuts

Education: $100 million in cuts including:

$18 million in higher ed financial assistance for low-income students
$22 million in grants for health care education services
$5.6 million in higher education tuition support
$10 million for community colleges

Public Safety - $9 million in cuts including:

$9 million for inmate transition programs

State Government Operations - $153 million in cuts including:

$153 million cut in state government operations

Session Proves Need For Fiscal Reform
During the later part of this session, much time was spent discussing possible revenue options like expanding casinos, selling the lottery, issuing pension obligation bonds and sweeping funds. These options, however, are short term gimmicks.

Issuing pension obligation bonds simply refinances the state's required payment this year into future debt.
It would take many years to realize revenues from casino expansions (they would have to be built) and almost every report on casinos today shows that revenues are down (see Illinois Commission on Government Forecasting and Accountability).
A sale of the lottery is questionable because there is no guarantee the money for schools would increase every year, like it does now. That means schools could actually lose funding. Not to mention the impact on low-income people. The University of Georgia reviewed studies across the nation and found that low income people play the lottery at greater rates than their wealthy counterparts.
Since 2003, fund sweeps has been used as a one-time revenue to plug budget holes (as was the intention again this year). Fund sweeps are simply an accounting measure, moving funding from one fund to another and require legislative approval each year.

Lawmakers need to address the state's dire fiscal situation and implement true reforms. That means looking to tax based revenues that grow with the economy, not one time gimmicks. Until the Illinois fiscal system is revamped, initiatives like school funding reform, or even paying our health care bills on time will not come to fruition.

The final FY 2008 revenue figures show that again, Illinois' revenue system underperformed inflation, this time by $155 million. The simple reason is the state has an outdated way of taxing to raise revenues.

For example, sales tax revenues were dismal last year. One of the reasons is that Illinois taxes goods and not services. Services are the largest and fastest growing part of the economy, while the sale of goods has decreased. Illinois is taxing a shrinking base! Think about it this way, how many people now use lawn care companies to cut their grass instead of going out and buying a lawn mower. There isn't a tax on the law care, but there is on the lawn mower.

The sales tax rate could even decrease if the base was expanded to include services.

In many news articles, advocates across the state have expressed their anger and concerns because of decreased or stagnant funding. However, the state is required to have a balanced budget, so without new revenues, lawmakers cannot increase funding. That means for FY 2009 workers that help the developmentally disabled will not see a pay increase, Medicaid debt will continue to rise and mental health services will be cut. Until the state implements true revenue reforms, like those proposed in SB 2288 (Cullerton, Meeks) this will continue.

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FY 2009 Budget Analysis
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