Budget

Dear Friend,

It seems that the citizens of Illinois are being presented with only two choices in terms of state budget policy: massive tax increases or draconian cuts that close schools and toss the developmentally disabled out on their ear. I reject, categorically, the notion that these are the only options available – to accept that premise ignores what we Americans are all about: using creativity, hard work, and good old fashioned Yankee ingenuity to solve the unsolvable!

In that vein, over the last year and a half I’ve kept a list of every idea put forward by citizens, elected democrats and republicans, business groups, trade unions – anyone who had an idea that could help solve the problem (including several of my own).  In May, I put all of these into a presentation on the state budget that I’ve delivered throughout the summer and into the fall everywhere from school districts, town halls, and Rotaries, to groups traditionally on the left (like campus faculty) and the Tea parties on the right.

While the presentation takes about 45 minutes, I’ve collapsed the details into broad categories and provide specific examples of each below.  But, first, we need to define terms as there is a HUGE difference between debt (unpaid bills for services already rendered) and deficits (projected future expenses exceeding projected revenues). For convenience, these are often combined together; however, they are two fundamentally and functionally different things. Back in the early spring, the Governor’s budget director estimated a $7 billion anticipated deficit for the next fiscal year and ending the current year with $6 billion in unpaid bills (combining these is where you get the $13 billion figured reported in the media).  Since then, however, the numbers have moved a little bit with a new target for the deficit of $6 billion.

Understanding the debt/deficit difference is critical because by “dividing the question” and eliminating the true deficit first, you immediately gain two advantages:  first, you stop adding to the backlog of unpaid bills (debt) – you’ve got to stop digging the hole before you can climb out.  Second, once you solve the deficit, state vendors, schools, universities, etc. will start receiving regular payments again – helping to stabilize their cash positions.

So here are some options to fix the mess:

  1. Stop digging the hole – no new spending!  Seems simple right? When you’re broke you don’t buy a new car.  Amazingly, Springfield can’t get this right.  The same week school districts laid off 15,000 teachers because Illinois doesn’t pay its bills, almost $65 million on NEW programs were authorized (like $3.5 million to, I kid you not, “Grow Our Own Teachers” in Illinois).  Conservatively, the “nothing new” approach shaves $300 million off the deficit.
  2. Eliminate fraud and waste in welfare.  A recent whitepaper suggests that anywhere from 10-30% of welfare is fraudulent – splitting the difference at 20% would save the taxpayers $1.5 billion!  Importantly, in a bad economy by eliminating those who “game” the system, we preserve our ability to actually help those who are truly down on their luck. These changes don’t have to be hard to implement or expensive: here are a few that I introduced in the spring session:
    1. HB 6137 – would require a Photo ID of the authorized user to be on Linkcards (food stamps) – so they can’t be traded for drugs/cash.
    2. HB 6146 – would suspend welfare for those with POSITIVE drug tests and are not in drug treatment. Stop and think about this for a minute: enabling addiction by providing a steady stream of taxpayer cash with which to buy drugs is neither good for the taxpayer nor healthy for the person caught in a cycle of addiction. Moreover, the money that is being fraudulently wasted on getting the addict’s “next fix” would be far better spent paying our state’s drug treatment providers who are trying to help individuals break their own cycle of addiction.
    3. HB 6139/6140 – would suspend the Link cards and drivers licenses of those with outstanding criminal warrants.  Why should you as a taxpayer be subsidizing a fugitive as he flees the sheriff?
    4. Managed Care for Medicaid – this has the potential to save $300 million or more.  It is important that this be done right, however, as some population groups, like the developmentally disabled, should not be included as this model does not adequately address their lifetime continuity of care and therapy related issues.
  3. A forensic audit of our state’s books provides another opportunity for savings. Yes, an audit is expensive. It works, however, because you are paying someone with a “c.p.a.” behind their name (as opposed to a “r” or “d”) to go through every last penny of state expenditures rooting out waste. Consider this: Kansas saved $1 billion using this strategy and we are 4.58 times the size of Kansas. Just half our proportionate share of Kansas’ success would save $2.3 billion!
  4. The term “new revenues” seems to be used a lot these days as code for “tax increases.” Academic studies indicate that there is $1/2 billion in tax that is already due but is currently going uncollected by the state. Shouldn’t the government collect what is already due before asking for more? Second, cracking down on “off-shore” tax haven schemes would yield $57 million according to the Civic Federation. Finally, for the first time in several years the Commission on Government Forecasting (COGFA – the non-partisan number crunchers in Springfield) are projecting a $460 million increase in tax collections from a reviving (although obviously sputtering) economy. Now before you think I’m crazy, this number is in line with recent news accounts of growth in tax receipts for the month of August – up $47 million.  All total, my budget plan includes over $1 billion in new funds – but not from raising new taxes on the people of Illinois!
  5. I have $560 million in specific cuts and one time revenues in amounts ranging anywhere from $72,000 to $37 million. Examples include:
    1. Selling the state aircraft fleet (raises $25 million).
    2. Means testing the Blagojevich “Free Rides for Seniors” on public transportation by limiting the “free rides” to only poor seniors – saves $37 million.
    3. Cut all Constitutional officer’s internal budgets and legislative budgets 10% saves $60 million.
    4. Cancelling former Senate President Emil Jones’ Cook County Extension $4.8 million earmark from 4 years ago that continues today in the budget base. Putting aside the obvious – that Chicago hasn’t exactly been an agrarian community since Mrs. O’Leary’s cow burned the place down – this year Extension for the rest of Illinois was cut $5.1 million.  This puts things perfectly in perspective, something that didn’t exist four years ago (the Cook County earmark) has now crowded out an important way of life for downstate Illinois for almost a century!

If the state actually did all these things, the $6 billion deficit would be erased and you’d be up $94.1 million cash positive in a single year! This leaves us the unpaid bills (debt) to deal with. To tackle this, you start by applying the positive funds.  Next, part of my deficit reduction would pay off a $1/2 billion short term note which, in turn, allows these funds to be applied in year two.  Additionally, you continue to have the new revenues mentioned above. Finally, by applying a 30 day payment cycle strategy and refinancing some of the debt currently being paid at 8% interest to current market rates (around 4%) the state is left $1 billion cash positive to begin year three – AFTER amortizing debt service on the refinance!

My plan takes two years: year one erases the deficit. Of course, our state Constitution requires this anyway notwithstanding the fact that the last two years’ budgets were both woefully out of whack – I voted against both. Year two finishes off the unpaid bills. Importantly, my plan does both without a tax increase on the people of Illinois and I didn’t make substantive cuts to K-12 classrooms (I did cut bureaucracy at the State Board by 10%) and higher education. Nor did I devastate the mentally ill or developmentally disabled as Governor Quinn threatened last year.

You don’t like some of these ideas? Here’s another: you could refinance a portion of the state pension debt currently being paid at 8.5%. In so doing, our annual payments would decrease which helps the deficit and the resulting cash infusion to the pension systems would help stabilize them – an idea that is good for the taxpayers and the annuitants.

Others suggest the state just “raise taxes.” Such a strategy ignores a couple of things. First, the simple fact is that according to COGFA numbers we would still be at least $3.75 billion in the hole after the largest of the tax increase proposals. Second, it innately implies that government can’t be bothered to actually manage the funds it does have, be disciplined in its prioritization of those dollars, and cut out waste. In a sense: it rewards waste and inefficiency.

By the way, I am not “Johnny come lately” on this either – all of the above ideas were proposed in the spring session and virtually all were rejected by the current one party-dominant ruling class in Springfield.  As an example, last spring when I questioned the sponsor of legislation that would allocate up to $60 million on NEW programming, how much the state owed his home school district, the point was lost on him. He just stared back blankly and asked, “what does that have to do with anything?”.

Bottom line: like NASA overcoming the impossible to save the Apollo 13 astronauts, the state budget can be fixed without massive new taxes or draconian cuts…indeed, the alternatives are plentiful.  But it starts with no new spending, not borrowing funds without a plan for repayment, and the discipline to actually “manage” and prioritize the budget. I hear people say all the time, “what’s your plan” or “gives us details” – well, I’ve spent the entire summer and fall taking this plan with specific details to the people of the 110th district and I would be happy to share it with you, too. I can be easily contacted through my Facebook page, “State Representative Chapin Rose.”

Sincerely,

Chapin Rose

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