State budget needs responsible management

State budget needs responsible management

By Daniel W. Hynes

State budget needs responsible management

Note: This column was dated June 5, 2001.

Last week marked the end of the legislative session and the passage of the FY 2002 state budget. This budget contains several laudable items such as an increase in education funding, a pay increase for human service providers, and an estimated $20 million investment in the Rainy Day Fund. The governor and the General Assembly should be commended for these and other achievements in what was a very difficult session.

Unfortunately, underneath these legislative accomplishments lie some fiscal problems that were not addressed in this budget, and in fact, some were exacerbated. Faced with cash flow difficulties, growing deficits, slowing revenues and a Medicaid shortfall, the state faced the challenge of restructuring its budget and imposing fiscal discipline in order to brace for an economic slowdown. We missed the opportunity once again to meet this challenge head-on and change the way fiscal matters are approached in Illinois. For example:

Rosy Revenue Estimates. Conflicting revenue estimates were given by the General Assembly’s Economic & Fiscal Commission and the Governor’s Bureau of the Budget. This budget adopted the higher numbers, which allows for more spending. If revenues fall short for projections, the state could face budget cuts, deficit spending or tax increases.

Medicaid. Rising health care costs created a $270 million hole in Medicaid. This hole was partially funded by diverting money from the School Infrastructure Fund and by delaying payments to health care providers. The hope is that the rest of the hole will be filled in later by the federal government.

Debt. Illinois will go deeper into debt in order to pay for capital projects and member initiatives. “Buy now and pay later” is becoming the new slogan for Illinois. In just the last two fiscal years, the state has issued over $2.5 billion in new debt as part of the $12 billion Illinois FIRST program. This budget authorizes nearly $2 billion in additional debt, separate and apart from the Illinois FIRST program.

Tobacco. Once again, money from the tobacco settlement was used to balance the budget—with more than $70 million going to non-health-related capital projects such as statewide tuckpointing and building demolition.

Deferring Liabilities. Faced with declining revenue growth, this budget resorted to the practice of deferring current year expenditures into future years’ budgets, a practice that intensified the fiscal crisis of the early 1990s. Examples include shifting health care costs to next year by increasing the payment cycle for providers in the Medicaid and state employee group health insurance programs; delaying prison openings so that the full cost of operations is put off until next year; and delaying the COLA for social service providers until April, diverting the full cost of this move until FY 2003.

Some of these practices may come back to haunt us, especially if our underlying assumptions are incorrect, i.e., the federal government not providing additional Medicaid dollars or revenues falling short of projections. In any event, it appears we have left some of the toughest decisions for another day.

If the state of Illinois is to avoid fiscal crises in the future, we must change our approach to budgeting today. Throughout the budget debate, I, as well as many members of the General Assembly, have advocated adopting a few simple, yet sound, principles to help us avoid overspending now, and worse, painful budget cuts or tax increases in the future. We failed to implement these principles. Not until we adopt fiscal restraint and use realistic, conservative revenue forecasts will Illinois finally make financial stability the norm and budgetary crises a thing of the past.

Daniel Hynes, a Democrat, is the Illinois State Comptroller.

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