By Jamey Dunn
If one of the Republican primary candidates ultimately wins the race for governor, he will face some challenging budget conditions.
The temporary income tax increase, which was approved in 2011, will begin to sunset during the last half of next fiscal year. Projections from Gov. Pat Quinn’s budget office estimate that Illinois will have a $2 billion budget deficit by the end of Fiscal Year 2015 and $7.5 billion in unpaid bills.
During the Republican debate last week, GOP candidates shared some of the ideas and qualifications they would bring to the table when looking to address the state budget.
Sen. Kirk Dillard touted his experience working under former Republican Gov. Jim Edgar. “We inherited a $1 billion deficit in a recession and left a $1.5 billion surplus, all without an income tax increase,” Dillard said. He noted that during Edgar’s time in office, the state’s credit rating went up and the backlog of overdue bills was paid down.
It is true that Edgar’s administration started off with a budget deficit and left office with a budget surplus and paying the state’s bills on time. Edgar made some difficult budget choices, including cuts to Medicaid. The income tax did not increase.
However, after being elected in 1990, Edgar made a temporary income tax hike permanent. He told Illinois Issues at the time that the cuts that would be needed to allow the increase to sunset would have been too deep. “There's no way you can make that amount of cuts without cutting into programs that I think everyone agrees are necessary.” Making the increase permanent was part of the platform Edgar ran on. "I won with everybody knowing my position. Nobody can be surprised on that one,” he said.
The budget recovery was also helped along by the economic boom of the mid-1990s. When Edgar took office, the country was in recession and Gross Domestic Product growth was nonexistent. By the time he left in 1999, GDP growth was almost 5 percent. Over the same period, the federal government went from a $269.3 billion deficit to a $125.6 billion surplus. Economic growth could go a long way toward improving the state’s current fiscal condition, but the kind of economic bubble the country experienced in the '90s is not likely to reoccur in the foreseeable future.
State Treasurer Dan Rutherford said he plans to conduct a performance review of all state agencies, similar to one he did when he entered his current office. Rutherford pointed to budget cuts he has made as treasurer. “I cut the budget of the state treasurer’s office by 2 percent, next fiscal year 3 percent and then 5 percent — a total of 10 percent. I’ve got the experience to do that,” he said.
Rutherford has not yet made that 5 percent cut but plans to call for it under his budget for next fiscal year. He has managed to cut his office’s budget over the last few years. Some of the substantial reductions include closing the treasurer’s satellite offices throughout the state, reducing staff through attrition, cutting the vehicle fleet and reducing phone lines.
The general fund budget for the treasurer's office in the current fiscal year is about $9 million. To call it a drop in the bucket of the overall General Revenue Funds budget would be an overstatement. While Rutherford’s cost-saving measures do seem to be effective for his office, many state agencies have made similar moves to cut costs. There are only so many cars, phone lines and employees you can get rid of and still do the business of state government. Agencies that provide social programs, such as Medicaid, must have offices throughout the state that applicants can reach. To bridge the revenue gap that will follow the sunset of the tax increase, it will take more than such nibbling around the edges of the budget.
Sen. Bill Brady pointed to recent pension reform legislation as a good start on tackling Illinois’ budget troubles. “It will save the taxpayers $190 billion,” he said.
Brady has his savings number wrong. In reality, the plan was originally estimated to save about $160 billion over 30 years. But new estimates from the retirement systems now peg the savings at about $145 billion. The new law will have to survive a court challenge to produce any savings.
Brady also said he would eliminate the Illinois State Board of Education.
Again, ISBE’s spending makes up a small fraction of overall education costs. Brady said he would create a department under the governor’s office to oversee education. Such a department would presumably have staff, need office space, phone lines, even a travel budget. So the spending now going to ISBE would not be totally eliminated. When former Gov. Rod Blagojevich proposed a similar idea, his department of education would have cost about 80 percent as much as ISBE did at the time. Brady said his idea is not just about the savings but would “end the bureaucratic red tape that harms our children’s educational opportunities every day.”
He failed to mention however, that most of the mandates imposed on schools are voted into law by the Illinois General Assembly.
Bruce Rauner said he would focus on fighting union bosses, who he says are driving up the cost of government operations. He said he wants to use creative negotiating tactics, such as those employed by former Indiana Republican Gov. Mitch Daniels.
Daniels put a merit pay system in place in Indiana and effectively ended collective bargaining for public employees through an executive order in 2005. He was able to do that because the collective bargaining provisions were originally put in place through a previous executive order in 1989. Indiana lawmakers voted to codify Daniels' move in 2011, so future governors would not be able to restore collective bargaining with their executive power. Daniels signed that legislation into law.
“He used executive order and the power of the government office to stand up to the power of the government union bosses that control the state governments around the nation and are driving up costs and driving down productivity,” Rauner said. Since collective bargaining rights are written into Illinois law, such a move may not be so simple, or even possible, here.
Rauner, along with the other candidates, said he would find savings in the state’s Medicaid program, which he called “broken” and “corrupt”
“Based on studies that have come to light recently, it looks like close to half of the enrollees in our Medicaid system aren’t entitled to receive the benefits they’re getting, based on the report so far.” As part of sweeping Medicaid changes passed last year, the state is checking on Medicaid recipients to make sure they are eligible to receive benefits. So far, 315,000 cases have been reviewed, and 40 percent of those were found to be ineligible. But the first cases being tested were ones that were suspected of not being qualified for benefits. The benefits in most of these cases were canceled because there was no response to the requests for verification. The department does not expect the number to remain that high as it continues the verification process. “The cancellation rate is expected to come down because the reviews started with cases that had been flagged for having a discrepancy,” said a statement from the department.
While much of what the Republican candidates said about the budget during last week's debate was true, or mostly true, none of the candidates has offered a comprehensive plan for how he would address the budget shortfalls that will come as the tax increase steps down.
To be fair, neither has presumptive Democratic candidate, Gov. Pat Quinn. So far, Quinn has refused to talk about whether he would support an extension of the tax increase. By law, Quinn is required to propose an FY 2015 budget that is based on current revenues. His budget address is scheduled for February 19.