Tuesday, February 28, 2006

Show Me the Money

At the request of a reader, consider this to be an open post on the topic of potential new revenue streams. Be it for education funding reform, or simply to offset the increasing burden of pension payment obligations, it is pretty clear that additional revenues will be needed in excess of any savings that can be realized from additional cost-cutting and efficiencies that can (and should) be implemented.

The one-time moves are pretty well tapped out, booking future savings today can only go so far, so...how do we go about generating additional revenues? And does that job get easier if the funds are dedicated for specific purposes? Does the public believe those representations in any event?

You asked for it. Have at it.


At February 28, 2006 at 4:41 PM, Anonymous Anonymous said...

Rep. Fritchey, it is extremely disingenuous to allocate funds for special purposes. For one thing, I know you guys like to roll special funds into general revenue every now and then. For another, allocating revenue from a particular fee or tax to pay for one type of service frees up general revenue for other, non-related purposes. Finally, isn't it unconstitutional under the IL Const'n to raise administrative fees above the costs for administering the industries/groups from which they are raised? That kind of puts a damper on sneaky sources of add'l revenue.

Efficiencies never work unless they involve firing a lot of gov't workers, because that's really where the bulk of the costs come in state agency spending lines. And I don't think IL has ever really cut the number of state workers except through attrition, not even in crisis periods, because of the strength of AFSCME and the local constituencies that rely on patronage and civil service jobs. Though I guess Blago did shuffle around the agency names and functions, so perhaps it looked like there were some cuts.

That leaves you with the option to tax more, borrow, or defy my political predictions and cut the growth of state spending. I am all in favor of cutting spending, though to be honest, IL has a pretty reasonable level of state spending and taxes compared to out east where I live now.

At February 28, 2006 at 8:56 PM, Anonymous Anonymous said...

What about eliminating campaign cash? For instance the reports of huge campaign cash donations being made by folks who do business with the state. Is anyone silly enough to believe that if a business or individual with a contract who donates $100,000 to a campaign that they are not going to increase the cost of their services to cover that amount and then some? I believe Hynes, White, L. Madigan on the democrat side do not accept campaign cash from those who do business with the state. We could start saving a lot of money right there. Eliminate the campaign cash from contractors doing business with the state. They don't have to pay to play, thus the price for their goods and services goes down. This won't cure all of our fiscal problems but it would be a start.

At February 28, 2006 at 9:44 PM, Blogger steve schnorf said...

Oh, for Christ's sake! State emloyees wages and beefits make up about $4b of the State's approx $57b budget; hardly "the bulk of costs". The number of State employees is down by about 20% over 4 years ago (approx 13,000 fewer employees).

The Governor has raised about $15m in campaign contributions in 3 years, let's say $5m/year. Let's also say the other Constitutionals raise $5m/year among them (they don't, but lets be generous). Let's also say each house of the GA raises $5m/year (they don't, but what the hell). OK, that's $20m/year. To be sure we're being fair, let's double it-$40m.

Now let's assume that every penny of that is saved in State contracting costs (it obviously won't be).

So, State expenses go down by $40m/year; less than 1/10 of one percent of State Government annual spending. Guys, if this problem was that easy to solve, someone would have done it already.

The sad but very real problem the State faces will require massive funding cuts in some combination of education, health care, public safety, and human services. For all practical purposes, you could eliminate all the rest of State government and not come up with enough money spendable as General Funds to solve the problem we're in, and that ain't going to happen.

At February 28, 2006 at 10:13 PM, Anonymous Anonymous said...

I love Schnorff especially when he's right.

At March 1, 2006 at 11:20 AM, Anonymous Anonymous said...

steve schnorf, I ought to defer to your expertise on the personal line aggregate amt. But I still think that the only way to save a meaningful amt of money by cutting programs is to attrite (to use the polite term) the employees that are running that program. If you just cut down on levels across the board, or go for "efficiencies", you don't come up with much.

At March 1, 2006 at 10:34 PM, Anonymous Budget Watcher said...

Ralph Martire recently wrote a pretty concise and accurate article on the state of Illinois finances. Simply put, we have a Governor who believes state government should provide more healthcare, pre-school, and other human services. At the same time Illinois has a revenue structure that cannot even support current spending needs without borrowing. The two are simply not compatible. If you fired 3 out of 4 state employees, you'd still only break even in the next budget cycle (FY2008).

So what are the options? Steve Schnorf is correct - cut expenditures/investments in education, healthcare, and human services. Signficantly reform government pensions. Increase taxes. Sell or lease public assets. Borrow. Or some combination of all of these options. None are very appealing.

The state simply cannot save a whole lot more by way of fewer employees. It cannot round up enough by way of consolidation of special funds to fix the structural deficit. The truth is that the state's liability and revenue slopes diverged several years ago, and the Governor's been doing everything he can to mask the deficit. There are some tough fiscal conditions awaiting the next Governor, so voters better consider which candidate they think will best handle these problems.

One parting shot - I've participated first-hand with the fiscal managers of the last three governors, and this one easily has the least trustworthy team.

At March 2, 2006 at 12:50 PM, Blogger Bill said...

Budget watcher freely admits that he participated with the last three administartions as they spent the state into oblivion. Now, it is the current governor's team that is dishonest. How many years did BW and his cronies short the pension fund causing the tremendous shortfall that we have today?
Fortunately, we now have a governor of the people who will seek solutions to all of the problems caused by past administrations and cause as little pain to the average citizen as posible. Why weren't Schnorf and BW advocating tax swaps during their time in gov't.?
I guess it all depends on whose payroll they are on at the time.

At March 3, 2006 at 1:19 PM, Anonymous southernilrepub said...

As I earlier stated the Cubs losing tax.

The Bulls losing tax.

Works on the same principle, except $1 mil per game lost. Once they reach the 40-50 million dollar range. State takes over the UC and sells it French investors, like was done with the first round of bonds Blago purchased for the state. We then penalize Reinsdorf for breaking up the greatest team ever by banishing him to Newfoundland.

At March 3, 2006 at 1:41 PM, Anonymous Budget Watcher said...


If I offended you with the comment about the lack of trust issues with the current Governor's team, I'm sorry. Although, the comment is accurate, in the future I will keep these editorial statements to myself.

For the record, I was never on the BOB/GOMB staff of any of the previous three Governors. I have participated in the budget processes spanning three administrations, having worked with the BOB (now GOMB) staff since 1993, and having observed the develpoment of state budgets at a high level. I have never, however, been an insider when it comes to fiscal policy formation. I simply did analytical work.

You know, until you pointed it out, I was blissfully unaware that I had cronies, and that I was probably was a crony to others. It took someone of your insight, someone who obviously knows me better than most, to shed light on my cronyism. Thanks.

My last comments. Jim Edgar assumed a pretty staggering budget situation in his first term, and yet by the end of his term, the state was running a surplus. Geo Ryan, however, didn't have the same fiscal discipline that Edgar did. He accelerated the structural deficit dynamic in Illinois by dramatically expanding Medicaid eligibility to seniors and disabled populations in phases during his first three years. In fact, from a fiscal viewpoint, Ryan expanded healthcare significantly more than Blagojevich has. He simply was a little less subdued in promoting that fact.

Kind of ironic, though, that in your words he "spent the state into oblivion" while we have a sitting governor who has continued the same trend.


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