The 2010 budget has numerous unresolved challenges including:
- Borrowing $3.5 billion in pension obligation notes (PON) to cover the State’s contribution to the pension systems.
- Appropriating $26 billion to fund state operations and grant programs in FY10. This is about $2.2 billion less than the FY09 appropriation level and includes the dollars freed up from the pension obligation notes. About $9 billion of the $26 billion is appropriated for grant programs (compared to about $10.5 billion in FY09).
- Appropriating funds for service providers and state operations in lump sums so that the Governor alone decides how to cut spending.
I voted no on this budget. It is financially irresponsible, with the state essentially borrowing to fund operating costs, thus delaying, and increasing the size of our deficit. The budget cuts authorized by this inadequate budget also are undetermined because we did not provide the Governor with specific line items for individual programs. Finally, we further delay payments for critical social services programs and in effect, both reduce their budget with smaller appropriations and require these same under-funded agencies to incur borrowing costs for their own operating expenses.
I could not support such an abdication of our responsibility to Illinois residents for needed services and basic financial responsibility to balance our budget. Illinois has a structural budget deficit that has been growing over the last 10 years. Rather than continuing with “financial gimmicks” such as fund sweeps, debt restructuring, sale of assets, or more borrowing, I believe we need a comprehensive solution that includes:
- Spending reforms (e.g. medicaid and pension system improvements) to restore long-term financial stability;
- Prudent reductions (these will need to be implemented within this budget given it is $2.2 billion less than last year);
- Improvements in the manner in which we make budgeting decisions (e.g. more transparent budgeting process with public access to information and a performance measurement system to prioritize dollars spent); and
- Additional revenues.
I believe citizens throughout Illinois crave a responsible budget and desire elected officials to make the difficult decisions that are needed. I look forward to working toward a more comprehensive solution in partnership with many interested parties.
Property Tax Relief and the State Budget
Illinois is facing a structural budget deficit, where expenses are growing more rapidly than revenues. Our health care costs – like the rest of the country – are continuing to soar, the State is only funding about 34% of education while it is constitutionally mandated to be the primary funder, and we have a growing unfunded pension liability. If the State does not now address our budget challenge we will place an undue burden on future generations. Our current crisis is already forcing the state to divert resources from its core mission. Local school districts and municipalities are also forced to raise property taxes to fill in holes left by the State.
As a former State agency budget director, I will re-examine current spending and make needed reductions. However, I do not believe the State can – or will – reduce costs enough to cover our growing expenses. I thus endorse the need to provide for a new, permanent, stable source of revenue like a modest increase in the state income tax and/or expansion of the sales tax base. Both the state income tax and sales tax are highly regressive, however. In the absence of a Constitutional amendment to allow a progressive income tax, we must provide mechanisms (such as expanded exemptions and earned income tax credits) to ensure we do not unduly burden our low-income and working poor families, and that all residents and business owners contribute equitably to solve this problem. Finally, increases in state-based income tax and sales tax revenues must be partially offset by reductions in regressive local property taxes.