It's time for a reality check. The solutions Governor Quinn offers in his 2012 fiscal year budget don’t come close to confronting Illinois’ dire economic circumstances. The governor has already gotten his tax increases, but he has yet to exhibit the fiscal restraint that must follow.
At long last, this is the year the General Assembly is expected to get honest about the state’s budget. Yet, Governor Quinn has proposed that the legislature appropriate nearly $2 billion more than is expected from revenues.
Hopefully, the General Assembly will reject this proposal while demonstrating the restraint needed to bridge the gap between revenues and spending. The proper budgetary attitude should be: no borrowing, no inter-fund shell games, no false hope.
» QUICK FACTS
$170 billion: total debt for the State of Illinois.
$140 billion: debt and unfunded obligations of pension and retiree healthcare plans for public employees.
$15 billion: projected budget deficit for FY2011.
$25,000: each Illinois household’s share of the debt.
I think the taxpaying public would be far happier if the FY2012 budget is actually less than the prior year’s, and the legislature demonstrates they are on a path to restore balanced budgets and solid fiscal practices, such as paying bills on time.
The governor wants a debt consolidation loan, but the payback schedule is pricey. Such a loan would have primarily two benefits: it would pay off the state’s existing creditors quickly and make life a lot easier for the governor and his budget people.
Debt is not an asset, however, and the need for responsible budgeting far outweighs the benefits of buying short-term peace with vendors. In the end, the governor’s desire for more bonds is just another attempt to defer decisions and pass the burden along to the next person who occupies the chief executive office.
The fact is the governor’s term is going to be full of hard decisions. He sought the office, and this is his reality. The measure of a man is his ability to step up and confront the circumstances he’s dealt. For some, that’s a war; for others, it’s a hurricane or an oil spill. For Governor Quinn, it’s a fiscal disaster.
He should not be looking for a one-time, one-year, quick-fix solution. The governor and his team must put in place a plan to get us on track to fiscal solvency and sustainability by the end of his term.
The responsible options are tough options. Every program and line-item that gets cut has a constituency. Everything that gets eliminated or reduced is going to hurt somebody. But the reality is that the state has overextended its treasury, and overpromised its citizens. The answer is not to simply give a “haircut” to existing programs. The gap is so large that entire programs must go, and bold, creative and innovative approaches should be considered.
To affect real change, we must reduce the number of people dependent on government services. Thus, the focus of our efforts has to be on private-sector job growth, successful educational outcomes, effective job training, more efficient healthcare, reduced substance abuse and fewer incarcerations.
The long-term goal should be to ensure that every Illinois citizen is an educated, trained and productive contributor to society. In the meantime, let’s tackle the four highest cost components of state finances.
Just weeks ago, the legislature made progress toward better managing healthcare costs. It was a good start, but they need to go further to deal with Illinois’ skyrocketing Medicaid costs. Medicaid represents the biggest and fastest-growing component of the state’s budget. If the budget is to be controlled, healthcare costs must be controlled.
In his budget, the governor proposes reducing Medicaid reimbursement rates. However, I think Medicaid providers are already underpaid, and the schedule the state currently uses doesn’t come anywhere near meeting the actual cost of delivering services. The state needs to get “right” with its healthcare providers.
To achieve real savings, we need to move a Medicaid-dependent population into the workforce so their healthcare expenses are covered in the private sector. There must be an intense effort to gain control of medical costs generated by those who are not prospects for private-sector employment. In exchange for higher reimbursement rates and prompt payment, some services will have to be completely eliminated.
Others can be rethought. Community and home-based services, for instance, may be a cheaper and more effective approach than sustaining state facilities for those with developmental disabilities.
Just as is true for the private sector, state employees and retirees must assume more responsibility for their healthcare plans. Currently, more than 90 percent of retirees and survivors pay no premiums; meanwhile, the program costs the state nearly $500 million per year.
Another sacred cow that merits review is the state’s education system. The governor suggested eliminating some transportation money and consolidating a number of smaller school districts, but again, these gestures are not bold enough.
Illinois is one of the highest spenders on K-12 education in the nation, but something’s not adding up. We’re spending $20 billion each year, yet we’re still not satisfied with the results. We have to focus on the outcomes of education spending, instead of only looking at the amount we put into the system.
Let me propose a radical solution, and suggest that it’s time to blow up the decades-old, patchwork school aid formula and start over with a clean slate and a simple distribution program that everyone can understand. We should let go of historical spending patterns in favor of simpler funding streams, fewer mandates, less overhead and quality outcomes.
Illinois’ correctional system is another area begging for drastic reform. Feeding, clothing and housing a prisoner is prohibitively expensive, and to enact any meaningful budget reform we need to reduce the number of people incarcerated in Illinois.
I propose a summit that brings together the major leaders—judges, law enforcement officials, state's attorneys—to discuss this issue and determine how we can effectively reduce the prison population. It may require a review of our sentencing laws to recalculate what offenses merit a prison sentence. We must ask ourselves if there is a less costly way to address our drug problems than incarceration. For instance, can drug treatment be more cost-effective and yield better outcomes than a prison sentence?
Providing treatment as an alternative to incarceration for just half of the nonviolent drug offenders sent to prison each year would save Illinois taxpayers nearly $167 million per year, according to Treatment Alternatives for Safe Communities (TASC), a nonprofit that works with individuals with substance abuse problems here in Illinois.
We should entertain the possibility that reducing the prison population by focusing on education, drugs and job-readiness may be a better long-term budget choice for taxpayers than Governor Quinn’s solution to hire 950 additional corrections officers.
Public Employee Pensions
The legislature has already taken a step in the right direction by instituting a two-tier pension system for state workers, but to truly address Illinois’ budget problems, the time has come to restructure the pension system for existing workers as well. Private-sector employers have done it. So, too, should public employers.
Whether that involves changing benefits, instituting 401(k)-type offerings or requiring workers to pay more into their retirement accounts, some additional action needs to be taken. Illinois has the highest unfunded pension obligations in the nation. The current system and financial obligation is unsustainable. Illinois taxpayers are currently on the hook for billions in public retiree pension and healthcare benefits that must be changed for the sake of the next generation of taxpayers.
If modifying existing pension plans proves to be unconstitutional, so be it. Let the legislature pass the bill and let the court rule. The private sector has been far more aggressive about confronting rising healthcare and retirement costs. Most employers started facing these management challenges decades ago. It is time our elected officials accepted the responsibilities we expect from them and deliver more efficient and cost- effective government.
Deficit spending is no longer acceptable at the federal, state or local government level. These are difficult times, but America’s strength is dependent upon our ability to confront reality and ultimately do the right thing, even if that means making tough choices. iBi
Doug Whitley is president and CEO of the Illinois Chamber of Commerce.