The budget — if you can call it that — which passed the General Assembly last week has as much as a $5 billion hole in it, borrows over $7 billion from Wall Street and state vendors, disguises huge cuts to some private social service agencies with 87 percent funding for others and sets up the state for a surefire disaster next fiscal year.
Break out the party hats.
There is just no way on Earth that you can call that budget “balanced,” or “serious-minded.” It is, at best, a punt until next year. Actually, it’s more like a blocked punt with a big loss of yardage.
Senate President John Cullerton said last week that he wants to help balance the budget by renewing a push for a tax increase in January, when a simple majority will again be required to pass it. But a tax hike midway through the fiscal year won’t provide nearly enough revenues to heal this budget’s gaping hole unless the increase is far larger than anything proposed to date.
The governor held a press conference shortly after the budget passed to tout his alleged success. He surrounded himself with employees of his budget office and praised their work, but he refused to directly answer reporters’ questions about any budget details.
How many state employee layoffs would be required? No answer. What sort of cuts was he planning to make to manage his way through this gaping hole? No answer. Instead, every question was addressed with a meandering, filibustering, non-answering style. He wanted to project an upbeat mood, but this budget is as close to a fiscal nightmare as one can get.
Quinn did finally say that he was issuing 2,500 layoff notices, which is 100 less than the number of layoffs he said would be required even if a tax hike passed. He wouldn’t say if more were on the way, but said he wanted to talk with the unions about freezing their pay and taking furloughs. That’s just not facing reality. If he truly believes that AFSCME will roll over and play dead, he ought to look at Chicago, where the union has been standing firm against give-backs.
Quinn’s office privately guesstimates the hole in this budget to be somewhere between
$4 billion and $5 billion, which goes to show just how little anybody really
knows about the bills that passed. It relies on about $3.5 billion in borrowing
to cover the state’s payment to the pension systems, and does not even touch the $3.6 billion in
debt owed to vendors and providers. From what I was told last week, the state
will actually extend the time it takes to pay back those vendors and providers,
making their situations even worse.
If you count the hole in the current budget, the new debt which hides base spending obligations, the debt service payment for next fiscal year (somewhere around $800 million), the $500 million increased pension payment for next year, the one-time federal stimulus cash that won’t be replenished and other one-off items (like debt restructuring), you are looking at a starting deficit for Fiscal Year 2011 of maybe $10 billion. Or maybe more. And that doesn’t even include unforeseeable problems like continued revenue troubles.
Some private social services agencies were frantic last week because they were unable to counter the spin from the governor and the legislative leaders that their programs would be funded at 87 percent of last fiscal year. Some programs, including community-based health services for things like rape treatment, battered spouses, etc., were already looking at steep cuts in Gov. Quinn’s original budget. The “50 percent” budget proposal from several weeks ago actually slashed their funding by 75 percent. As of late last week, they still had no idea how bad the final damage would be, but they weren’t optimistic.
And now the credit rating agencies are starting to move against Illinois the way they have against California. Moody’s lowered its California general obligation bond rating to just two steps above junk status last week, then announced they were putting Illinois’ debt under review.
“The state has essentially kicked the can down the road in terms of making decisions,” a Moody’s analyst told Bloomberg News. That’s pretty much exactly what Moody’s decreed about California before whacking its debt rating.
If Illinois gets the California treatment, another big hole will be punched in