NATIONAL REPORT ECHOES GOP CONCERNS
A new national report that dissects Illinois’ dismal fiscal outlook echoes concerns that my Republican colleagues and I have been raising for years.
The Illinois report of the State Budget Crisis Task Force warns that Illinois has dug itself into a deep financial hole, largely over the past decade. “Illinois’ budget is not fiscally sustainable,” the report bluntly states and later adds, “Illinois has been doing backflips on a high wire, without a net.”
While the report is long on details when it comes to Illinois’ financial mismanagement, it is short on specific solutions. Instead, the authors say they hope that by highlighting the serious problems facing Illinois, it will spur the public to insist on reforms.
Neither the findings, nor the call for reforms, are news to me or my Republican colleagues in the Senate. It is unfortunate that our warnings have gone largely unheeded throughout the Blagojevich and Quinn administrations.
Most of the report’s findings will be familiar to anyone who has followed Illinois’ financial crisis in recent years. For example, the report states:
• “Illinois has the worst unfunded pension liability of any state, an estimated $85 billion.”
• “Medicaid enrollment and expenditures in Illinois doubled between 2000 and 2011, growing far more rapidly than tax revenue.”
• “Illinois’ debt is crowding out the budget...The result of pension borrowing is that Illinois’ debt per capita is one of the highest of any state.”
• “Illinois has compounded its challenges with poor fiscal management and opaque budgeting.”
• “Illinois’ infrastructure needs will likely exceed $300 billion, yet the state does not have a comprehensive plan to address this critical need.”
• “The culture of budget gimmickry and short-sightedness pushes costs off to the future, but eventually that will be impossible...”
MEDICAID REFORMS CITED, BUT ARE THEY ENOUGH?
In the area of Medicaid spending, the report does credit the state with adopting important cost-cutting reforms in 2012. (Most of those reforms were first proposed in a Senate Republican Caucus “Reality Check” plan in 2011).
However, the Quinn administration has come under criticism of late for apparent delays in implementing those reforms and the new study warns that even those changes are unlikely to bring Medicaid spending down to manageable levels. The report says that under the federal Affordable Care Act (Obamacare), up to one million new persons could be added to the Medicaid rolls in Illinois. Even though the federal government will be on the hook for most of the new Medicaid costs, the state’s costs could still rise by 10 to 20 percent by 2020.
‘MISUSES OF STATE BORROWING’
The report also devotes a significant section to “uses and misuses of state borrowing.” The report criticizes the use of debt to “plug budget gaps and borrow to finance current cash deficits. Financing deficits, particularly using debt as if it were an element of revenue, is bad financial and budgetary practice.”
Blagojevich and Quinn, along with their legislative allies, have consistently used or sought to use borrowing to avoid tough budget decisions. In fact, Quinn’s plans for massive new borrowing have been blocked only because it requires a supermajority vote in the legislature and Republican lawmakers have refused to authorize the added debt.
ILLINOIS DEBT PER PERSON AT $9,624
According to the report, Illinois ranks second in the nation in debt per person, at $9,624 in state and local debt for every man, woman and child in Illinois. Only New York is deeper in debt, at $13,840 per person. However, of the 10 states with the highest debt per person, Illinois actually has a higher percentage of state debt (vs. local government debt) than any of the other states.
State debt has skyrocketed under one-party control of the legislature and the governor’s office and Illinois has the worst record of any state in the nation for credit downgrades during the past decade.
“Illinois’ high levels of debt have contributed to its deteriorating bond rating,” the report states. It also declares, “Illinois’ heavy reliance on debt is unsustainable.”
The State Budget Crisis Task Force is co-chaired by former Federal Reserve Chief Paul Volcker and Richard Ravitch. While the report offered no simple solutions, it did reflect many of the recommendations that Republican senators have long argued for: more honest and open budgeting and making tough decisions sooner, rather than later.
TRIBUNE REVEALS QUESTIONABLE PAYMENTS
Even as state leaders struggle to pay the bills during the worst fiscal crisis in Illinois history, an investigation by the Chicago Tribune reveals the state has doled out $23 million in questionable administrative leave payments.
One recent example of budget mismanagement was recently highlighted by the Chicago Tribune, which reported the state has given out $23 million in questionable administrative leave payments to state employees. According to the Tribune investigation, more than 2,000 state workers continued to receive salary and benefits while at home during the past five years.
Most were sent home during an investigation into wrongdoing and were banned from returning to work until they were either fired or cleared.
The Tribune documented one state employee who collected paid leave for more than three years while being investigated for misconduct. Although she was eventually fired, during her time on leave she received four raises that bumped her salary up to nearly $75,000. Other employees also received raises while on administrative leave.
Although paid administrative leave is intended as serious disciplinary action, and is meant to be used only while an investigation into wrongdoing is underway, the Tribune found that the standards used by the state are lax. In one case, the newspaper found an employee was placed on leave because her supervisor thought she was driving too fast in the parking lot. The employee later successfully appealed the suspension.
Additionally, even though leaves are supposed to be limited to 60 days, some investigations can drag on for months or years. The Tribune found 740 employees whose leaves had been extended beyond the 60-day limit. Out of 91 persons the Tribune found currently on leave, four had been out for more than a year.
While the alleged wrongdoing is supposed to be quickly investigated, the Tribune learned many employees are left in the dark for months or even years as their cases wait to be investigated. In one case cited by the Tribune, a former corrections office was on paid leave for 11 months before she was interviewed by state police investigators and learned what she had been accused of.
The lack of urgency to resolve administrative cases leave employees in limbo, and forces taxpayers to pick up the tab for employees who aren’t doing any work.
ILLINOIS IN TOP 10 FOR ENTREPRENEURSHIP
Despite Illinois’ well-documented economic woes, there is one area where the state excels. A research study from the University of Nebraska-Lincoln (UNL) has ranked each state according to their entrepreneurial activity, showing in the recently released 2011 rankings Illinois not only moved up in rankings, but was ranked in the top 10.
Illinois was ranked as the ninth top state for entrepreneurship for 2011, up three positions from number 12 in 2010. Economists at UNL’s Bureau of Business Research and Department of Economics developed the annual State Entrepreneurship Index by combining five key components – a state’s percentage growth, per capita growth of business establishments, its business formation rate, the number of patents per thousand residents, and income per non-farm proprietor in each state.
Topping the list for a second year in a row was Massachusetts followed by North Dakota, California, New York, and Minnesota. States ranking at the bottom of the index include Kentucky, Mississippi, South Carolina, Michigan, and Louisiana.
Earlier this year, lawmakers passed bipartisan legislation extending Illinois’ enterprise zones, which are valued economic development incentives for municipal and county governments. According to statistics released by the Governor’s Office, more than 354,000 jobs have been created over the life of the program, while more than 536,000 jobs have been retained and more than 42,000 businesses have participated in the program.
Other recent Illinois legislation encouraging entrepreneurship includes House Bill 1876, which creates the Higher Education Technology Entrepreneur Center Act. The new law is designed to cultivate entrepreneurship in college students by authorizing the board of trustees of each public university and community college to create a technology entrepreneur center.