PI Original Ellyn Fortino Thursday June 5th, 2014, 5:50pm

Social Service Advocates Warn Of 'Significant' Cuts In Flat Illinois Budget

Child welfare and human services advocates say the the $35.7 billion 'flat' budget approved last week by the Illinois General Assembly includes significant cuts to critical programs.

The $35.7 billion spending plan state lawmakers sent last week to Gov. Pat Quinn has been referred to as a "flat" budget, meaning it keeps many programs funded at their current levels. But calling the legislatively-passed budget "flat" is a misnomer, stressed child welfare and human services advocates.

"Flat funding is essentially a cut, because you have cost increases, you have wages needing to keep up with the cost of living. In effect, this is a cut even though it is flat funded," stressed Heather O'Donnell, vice president of public policy and advocacy at Thresholds, a service provider in Illinois that assists people with mental illness.

The budget approved by the Illinois General Assembly for the 2015 fiscal year, which starts July 1, does not extend the 2011 temporary personal income tax hike, which is set to rollback from its current 5 percent to 3.75 percent in January. The corporate income tax will also drop from 7 percent to 5.25 percent. Expiration of the higher tax rates midway through next fiscal year will mean a revenue loss of approximately $1.8 billion and more than $4 billion the following fiscal year.

Quinn, who says the budget passed by the Illinois General Assembly is "incomplete" and "postpones the tough decisions," had urged state legislators to make the temporary income tax hike permanent. Democrats in the House, however, lacked the votes to do so.

In an effort to avert "doomsday cuts," the spending plan sent to Quinn's desk relies on short-term revenue sources, including "deferrals, borrowing and increasing our backlog of bills," Senate President John Cullerton said in a statement after the budget passed May 30. 

The budget plan would divert $650 million allocated to paying down the existing backlog of unpaid bills, which totaled $4.17 billion as of last month. The budget package also proposes borrowing $650 million from accounts designated for specific purposes and repaying that money later with interest. Another $380 would come from putting off group health insurance payments for state workers. Additionally, funds to pay negotiated wage increases for state employees are not included in the budget.

"This budget is funded on IOUs, which the state has a pretty substantial record of funding things either with IOUs or promises to pay things later. That's exactly how we got into the mess that we got into with pensions," stressed Emily Miller, director of policy and advocacy at Voices for Illinois Children. "IOUs have to get paid back, and they have to get paid back with interest ... and we're going to have to do that without the current tax rates, theoretically ... The math doesn't work out without some sort of revenue maintenance in the coming years. It just doesn't work."

Moody's Investors Service warned on Tuesday that Illinois' financial rating, which is already the worst in the nation, could suffer if the temporary tax increase is allowed to sunset. The lost revenue, Moody's said, could force the "state to rely on credit negative practices" and reverse the state's financial "progress of recent years."

Earlier this week, Quinn reiterated that there is still "work to be done" on the budget, explaining that the fiscal plan could see some tweaks. The governor's office has not responded to Progress Illinois' request for comment on what those tweaks might be. 

Quinn's Republican gubernatorial challenger Bruce Rauner wants to see the tax hike sunset as planned in January. Rauner has yet to explain how to make up for the revenue shortfall. A spokesperson for Rauner's campaign could not be reached for comment. 

Judith Gethner, executive director at Illinois Partners for Human Service, a state-wide organization of more than 800 non-profits across the state, noted that state human services providers, who are already in "a very, very shaky place," are concerned about the budget package awaiting action from Quinn.

The human service sector has "been taking the brunt of the budget problems in Illinois," for some time now, Gethner added.

Over the past four years, state funding for human services has been slashed by 24 percent. On top of that, providers have had to deal with delayed payments from the state.

"How are we even able to keep our employees (with) a flat budget," she asked. "We still have incurring costs." 

The people most in need of crucial services will be hurt the most if providers cannot keep their doors open, she explained.

"The General Assembly needs to go back during the veto session, and they need to be able to right the wrong," Gethner stressed. "They need to be able to find adequate revenue, and they cannot afford to wait."

Unless revenue is stabilized, critical state services will be dealt "a huge blow," Miller said.

"It may not look like a big deal right now, but $4 billion [in fiscal year 2016] plus all of the money that we're borrowing to get through the fiscal year that's about to start — that's all money that's not going to go to kids, to families, to really helping Illinois recover from the recession," she stressed. "This is just a huge step backwards." 

Because it is an election year, the flat budget plan is being viewed by some as nothing more than a fiscal Band-aid the legislature is using to keep the state financed, postponing final decisions on the difficult items — like extending the state income tax hike, until after the November election.   

Nonethless, Miller says that although some have dubbed the spending plan as a "maintenance" budget, it really contains "significant cuts that are being pushed under the rug."

For example, funding for the Child Care Assistance Program, which provides low-income families access to affordable child care, would be slashed by $84 million compared with current levels, according to Voices for Illinois Children. That cut jeopardizes child care access for some 17,000 kids in Illinois, Miller said.

Although the child care assistance line item in the new budget is reduced by $24 million, that does not reflect the true cut, Miller explained. The program budget also needs to cover operational costs for SEIU*, the union representing family child care providers. And those operational costs have "grown by $60 million," she said.

"In order to actually maintain the programs that we have currently, we would have needed an additional $60 [million], but instead, we got $24 million less," Miller said. "It's a hidden loss, because lawmakers say it's only $24 million. The impact is actually $84 million."  

Meanwhile, the Teen REACH afterschool program faces a $5 million cut, Miller said.

Teen REACH was "only an $18.9 million program anyway, so a $5 million loss is a pretty substantial loss to that program," she said.

Funding for the Early Childhood Education Block Grant remains the same at $300 million. For K-12 education, the new budget appropriates $6.8 billion, a $118 million increase, according to the Illinois State Board of Election. This increase, however, will simply allow General State Aid to remain prorated at 89 percent, according to ISBE. Under the new budget, school districts will continue to receive 89 percent of the funding they would normally be entitled to under current law. However, Miller said she questions whether the $118 million increase will actually be enough to keep General State Aid prorated at 89 percent. She projects an increase of $300 million would be necessary to keep the current proration level in place.

For higher education and related programs, the budget includes about $2 billion in flat funding, according to the Illinois Board of Higher Education (IBHE). In his recommended 2015 spending proposal, the governor called for a $50 million investment in the Monetary Award Program, which helps low-income Illinois college students get scholarships. Those additional MAP funds are not included in the legislatively-passed budget.

Meanwhile, elderly care programs at the Department on Aging face a $137 million cut, while in-home care programs for people with disabilities would be reduced by $7.8 million.

The 2015 budget does include $474 million for mental health services, or an increase of $4 million, O'Donnell said. But that increase, she explained, is not enough to keep up with inflation, meaning mental heath services will essentially experience a cut.

Supportive housing services, which help people with mental illness remain out of institutions, received a $2 million increase in the new budget. But those additional funds are mainly for the development of supportive housing projects that are already in the works, O'Donnell explained.

"The mental health safety net is in all honesty pretty weak," she stressed. "A lot of people, literally thousands of people across the state who have serious mental illness, ... will not get the services they need. The state historically has not invested in community treatment services and has invested in institutional care for this population, which is not appropriate for the vast majority of people who have a serious mental illness and is also far more expensive than community treatment services, and this just furthers this problem." 

Over the past few years, state mental health funding has been "devastated," she said, noting that the state slashed about $113 million from the community mental health budget between fiscal year 2009 and fiscal year 2011. That $113 million cut cost the state about $131 million in increased hospitalization and institutionalization costs for people with mental illness who were not able to access community mental health services, O'Donnell said.

Fiscal year "2016 will be disastrous, because what saved us this year from enormous cuts were one-time revenue sources. That's clearly one-time," she added. "We're going to need to address this really in January to either maintain the 5 percent tax rate and prevent cuts or find another revenue source (that is) sustainable over the long-run." 

In the upcoming weeks, Miller said Voices for Illinois Children will work with human service providers to come up with a plan to educate the public about the budget.

"Lawmakers have done a really good job of ... pretending these budgets are based on something sound, when really it's all smoke and mirrors," Miller said. "We've got to go out in districts and educate constituents and lawmakers about what this budget really is and what we have to do to prevent chaos."

*The SEIU Illinois Council sponsors this website.

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