Senate Democrats say they are optimistic about Medicaid reform as they release a budget plan

By Jamey Dunn

Senate Democrats say they are confident that a proposal to address $1.7 billion in Medicaid growth will emerge soon, and they released a rough outline of their budget plan today based on that assumption.

“This is a budget that represents our commitment of the Senate Democratic caucus to have a budget that balances, that shows how we’re living within our means in the state, and that we’re funding programs based on priorities and that we have a commitment to paying off bills. So it represents the kind of budget that we think taxpayers want to see,” said Sen. Dan Kotowski, a Park Ridge Democrat. “We’re completely staying within the line of revenue [expected to come in next fiscal year]; we’re not going above it. We’re making significant cuts across the board. We’re also funding key priorities.”

The Senate Democrats are working from the same $33.7 billion revenue estimate that the House approved. Under the proposal, before state officials could consider how much to spend on operations, they would have to make the pension payment, which is $5.1 billion plus $11 million for the Chicago Teacher Pension Fund, the group health insurance payment, which is $1.17 billion, factor in Medicaid spending, which is $6.6 billion, and use $1.3 billion to pay down old bills. That would leave $16.85 billion for day-to-day costs. That would mean that the Senate Democrats are proposing more than $500 million in operational spending above the House’s numbers, which were approved in a resolution.

However, Senate Democrats said their proposal spends $317 million less on state operations than the current fiscal year’s budget and $248 million less than Quinn’s proposal for fiscal year 2013. The plan would hold K-12 education spending flat but would cut virtually all other areas of state spending:

• General services would see a $68 million reduction.
• Higher education would be cut by $48.5 million. 
• Human services would be reduced $44.9 million. 
• Public safety would take the biggest hit with a $156 million reduction. 

The Democrats said their plan relies on the closure of some state institutions, but they said that they are still negotiating over which facilities should be closed. Democrats working on the budget acknowledged that the amount of cuts in public safety would imply that they are considering prison closures, but they would not name any specific facility. They also noted that the Gov. Pat Quinn has the final decision when it comes to closures. A legislative panel voted against the closure of several state facilities. However, the panel’s vote was advisory, so Quinn could move forward with closures that he says are needed to balance the budget.

But one Senate Republican said the plan would spend too much and would not put the state on track for fiscal security when the income tax increase is scheduled to roll back in 2015. Sen. Matt Murphy, a Palatine Republican, said members of his party want to base the budget off of projections of what revenue would be after the tax increase is reduced. Murphy said that would be between $31.5 billion and $31.7 billion. “This [plan] is spending significantly above the House resolution. It’s above the governor[‘s plan]. It’s the highest proposal of spending anywhere under this dome right now. So this will not get us on the path to reducing the tax increase. It will put us on the path for, frankly, needing another,” Murphy said.

While the Senate Democrats call for less operational spending than Quinn, they are proposing that more money to go toward paying off old bills.  “We’re setting aside a lot more dollars [than Quinn] to pay down unpaid bill,” Chicago Democratic Sen. Heather Steans said. “And that was a real priority for our caucus. We have a lot of nonprofits and other vendors out there who are not getting paid — school districts, all sorts of local governments. And we felt strongly that we really need to start bringing down those unpaid bill levels. So we’ve made that a priority.”

Democrats said their budget does not spend more than what the state would bring in. Steans said Medicaid reform, pension reform and the backlog all need to be tackled to ensure the state’s budget is in good shape when the tax increase rolls back. “It is this three-legged stool here to get us in that position. … I think we’re going to have to see how that all comes together,” she said.

The Senate Democrats' proposal would draw money from areas of the state’s budget outside of the General Revenue Fund. In addition to the money being set aside to pay down the backlog, Senate Democrats are calling for more than $400 million be taken from special funds to pay overdue bills. Democrats say the fund sweeps they are proposing would be a one-time move to pay off old bills and would leave enough money in the funds to ensure that they are operational for their original purposes.

They are also proposing that less money be transferred out of GRF. More than $1 billion is automatically transferred out of GRF and into other funds each year. Those transfers are traditionally not a part of the debate over the annual budget. Kotowski said that under the Democrats’ plan, about $110 million of those transfers would instead be used for GRF spending. For example, in the proposal there would be no growth to the Local Distributive Fund, which funnels money — some of it automatically transferred from GRF — to local governments. Steans said holding the transfer flat would mean that $26 million could be spent elsewhere. “There’s numbers of items that really don’t usually get scrutinized, so we’re looking at those and making reductions to a number of the other ones,” she said. (For more on special funds and statutory transfers and how they play into the budgeting process, see Illinois Issues April 2012.)

Steans, who is also working on Medicaid negotiations, said she is optimistic that a deal to stave off $2.7 billion in Medicaid growth may be reached by next week. She did not give specifics on a proposal, but she did say that a cigarette tax increase is still on the table. “We are diligently working towards an agreement on [Medicaid], and I think we will hopefully make progress on that next week.”

Senate Democrats say they hope to have budget bills based on their plan filed and moving through the legislative process next week.