fiscal integrity and social responsibility confronting the state budget crisis august 3, 2010 kathy...
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Fiscal Integrity andSocial ResponsibilityConfronting the State Budget Crisis
August 3, 2010Kathy Ryg
Overview
• Landscape – crisis of confidence in government
and budget collapse
• Roots of the fiscal crisis
• Impact: businesses, families and communities
pay the price
• Opportunities for change
Estimated General Funds Budget Deficit for FY 2011
FY 2011 operating deficit $3.8 BCarryover deficit from FY 2010 $7.5 B
Cumulative deficit $11.3 B
Legislative Mandates: 25% of General Funds Budget in FY 2011
Other debt service, $0.8
billion
Pension contributions,
$3.7 billion
Statutory transfers, $1.8
billion
Pension-related debt service, $1.8
billion
State agency appropriations,
$24.9 billion
Total: $33 billion
General Funds Appropriations Excluding Pensions (in $ billions)
$23.6$24.6
$25.9$27.9
$26.3$24.9
$0
$5
$10
$15
$20
$25
$30
FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011
$ bi
llion
s
FY 2011 GF Budget Cuts After Governor’s AllocationsState Board of Education $241 M3.3%
Higher education $96 M4.4%
Dept. of Human Services $313 M 7.7%
Dept. of Agriculture $4 M 11.1%
State Police $15 M 5.2%
DCEO $5M 10.0%
Dept. of Aging $17M 2.6%
GF Backlog of Unpaid Bills and Transfers as of June 30, 2010
PreK-12 education $1.30 B
Higher education agencies .56 B
Human service agencies .70 B
Health care .63 B
Inter-fund transfers .96 B
All other .56 B
Total 4.71 B
Hidden Spending Cuts
• Even more significant than enacted spending cuts: long delays in payments
• At end of FY 2010, State Comptroller reported $4.7 billion backlog of unpaid bills
• Another $2.6 billion in FY10 appropriations not yet processed
• Some service providers have shut down programs
Projected General Funds Budget Deficit for FY 2012
FY 2012 operating deficit $6.2 BCarryover deficit from FY 2011 $11.3 B
Cumulative deficit $17.5 B
Projected FY 2012 Deficit as Pct. of FY 2011 Budget, 10 Largest States
26%
10% 11%
52%
6%
27%
16%
11%9%
12%
0%
10%
20%
30%
40%
50%
60%
CA FL GA IL MI NY NC OH PA TX
Broken Budget Process
• Legislators place unprecedented budget decision-making responsibility on the Governor
• Most state agencies given lump-sum funding rather than line-item appropriations – exacerbating uncertainty
• Additional $3.5 billion appropriated to Governor’s Office to allocate
• Governor given emergency budget powers to control spending
• Nothing done to address structural deficit or reduce backlog of unpaid bills
“Moody’s downgrades state Bonds, revenues continue to slide”
“Illinois Stops Paying Its Bills, but Can’t Stop Digging Hole”
Headlines tell the story
Headlines tell the story
Bloomington: Could state budget woes boost crime?
Bloomington: State hiring freeze leaves community center in limbo
Bloomington: Universities brace for funding uncertainty
Springfield: Cities struggling as state funding lags
Quincy: Adams County Health Dept. decides ‘not to do business with the state,’ will discontinue seven programs
Peoria: Early childhood cuts slash deeper than just education
Jeopardizing Quality & Accountability
•Lack of accountability or transparency
•Jobs left undone & resources sacrificed
Roots of State Fiscal Crisis
• Cyclical deficit
– Effects of recession
– Declining revenue combined with increasing need
• Structural deficit
– Gap between revenue generated by tax system and underlying economic growth
– Revenue structure can’t support established service levels and other ongoing obligations
General Funds Revenue from State Sources (in $ billions)
Magnitude of Budget Deficit
Deficit CAN’T be closed by:– Waiting for economic recovery– Efficiencies alone– Spending cuts alone– New revenue/tax increases alone
Need for Balanced Approach to Responsible Budget
• Reform
• Strategic spending restraints
• Modernization
• New, recurring revenue
Reform Measures – a start
• Pensions
• Medicaid
• Government purchasing
• Campaign finance
• Ethics
• Greater openness in government
• Transparent budget process
The Heckman Equation
Invest +
Develop+
Sustain = Gain
Kids & the Recession
• The most visible signs of recession don’t reveal full impact on children
• Children are hidden casualties of the economic crisis
• Recessions have lasting effects on child poverty
Effects of Unemployment
One in seven children in U.S. lived with unemployed parent at the end of 2009
When parents lose a job, children are more likely to:
• Struggle in school
• Repeat a grade
• Have behavior problems
Long-Term Effects of Child Poverty
Children growing up in poverty are likely to have:
• Lower levels of educational attainment
• Diminished employment prospects
• Greater health problems
• Children in poverty: 530,000
• Child poverty rate: 17% (18% in U.S.)
• Children as share of Illinois residents: 25%
• Children as share of poverty population: 35%
Child Poverty in Illinois, 2008 (before recession)
Recession and Child Poverty
• Poverty rates will be higher for 2009
• Poverty expected to continue rising even after economy begins to recover
• Child poverty in U.S. projected to reach 24% in 2012
• Expected rate in Illinois: 22%
(more than 650,000 children)
Kathy Ryg
President
Voices for Illinois Children
www.voices4kids.org
312-516-5550
For more information