The state’s Democrat legislative leaders have once again deferred tough decisions on Illinois’ pressing fiscal issues, passing a $35.4 billion budget on May 30 that increases spending by raiding special purpose funds, underfunding the state’s real obligations and using one-time revenues to pay for ongoing programs.
While the state’s budget woes continue to dominate as the most critical policy issue facing Illinois, the dialogue on the state’s education funding formula and Governor Pat Quinn’s Neighborhood Recovery Initiative scandal will likely continue throughout the summer and into the fall.
Governor to sign ‘Cupcake Girl’ legislation
The story about Chloe Stirling, the “Cupcake Girl” from southern Illinois whose entrepreneurial spirit was stifled by burdensome government regulations, caught the media’s attention this spring. The Legislature eventually passed a bill to ease regulations for baking in home kitchens despite efforts by the Quinn Administration to impose even stricter regulations for home baking.
The House passed House Bill 5354, a good compromise that exempted those selling less than $1,000 per month. That bill then headed to the Senate, where it was “Illinois-ized”—loaded down with “red tape,” fees and regulations that undermine any initiative or entrepreneurial spirit. My Senate Republican colleagues and I raised this issue during debate on the floor and the compromise bill was eventually passed without the amendment.
The Governor supported going back to the House version after his favored amendments failed, and has indicated he will sign the bill.
Budget gimmicks allow for increased state spending, foreshadow a lame-duck tax hike
The budget was passed without an extension of the 2011 income tax hike, despite the effort on the part of Governor Quinn and his legislative allies who spent much of the spring building their case for an extension of their “temporary” tax hike by warning of draconian, even dangerous, cuts that would place education, human services and public safety in jeopardy.
Yet when it became obvious during the final days of the legislative session that there was not sufficient support to pass a tax increase, the Democrat leaders didn’t focus on core state obligations or reducing state spending. Instead they pieced together a budget that continues to fund failed programs, offers special earmarks and increases spending on new and expanded programs. They also deferred payment of bills, underfunded state insurance payments and reversed certain Medicaid reforms intended to reduce state expenditures. The end result was the permanent addition of millions of dollars in spending pressures with no funds to cover those costs.
While Republicans successfully fought the extension of the 67 percent income tax increase, as well as efforts to implement a graduated tax system, Democrats have indicated they plan to revive calls for an extension of the tax increase following the November election. Their stop-gap budget signals a post-election tax hike is imminent, and further brings into question Illinois’ financial status among investors and rating agencies.
Illinois already has the lowest credit rating in the nation and on June 3, Moody’s Investors Service released a statement expressing concerns over the revenue hole resulting from the Democrats’ inability to plan for the phase-out of the tax increase. Additionally, the use of one-time cash infusions to pay for permanent programs and the deferral of paying state obligations—gimmicks used in this most recent budget—have contributed to the state’s bond downgrades in the past.
Debate on education funding reform continues
After drawing attention to the inequities in the state’s school funding formula in their March 2012 report, “School Funding in Illinois: An Examination,” Senate Republicans have continued to offer specific suggestions on how to infuse greater parity into the system.
Using a “back-to-basics” approach, Senate GOP lawmakers have suggested fully funding the Foundation Level grant at 100 percent, increasing the equitability of the state’s Poverty Grant, providing mandate relief for Illinois schools, eliminating the Chicago Block grant and instilling greater transparency into education funding.
Despite these suggestions, a massive and controversial rewrite of the state’s system of allocating education funding was pushed through the Senate in late May without input from Senate Republicans. However, it failed to advance in the House of Representatives.
Senate Bill 16 would radically redistribute state school aid, with some school districts—particularly in suburban Illinois—losing more than 80 percent of their state funding under the plan, while others would receive significantly more.
Additionally, the bill continued the controversial practice of “pro-rating” school funding. The state currently has established a “Foundation Level” of $6,119 per student; this has been determined to be the base amount that schools should have to educate a student. However, in recent years Illinois has “pro-rated” that base, providing school districts with less than the minimum needed. Not only did Senate Bill 16 continue to pro-rate school funding, it was viewed by some as making the situation even worse by allowing the Foundation Level to be reduced even further at the discretion of the State Board of Education.
And rather than address the wide disparities in how low-income students are treated across school districts, Senate Bill 16 further exacerbates the funding gap. In fact, under the legislation some school districts would receive as little as $13 for each student in poverty, while others would receive as much as $3,900 per poverty student.
The bill also continued to offer special benefits to Chicago Public Schools that are not available to other school districts in the state in the areas of special education private tuition, special education transportation funding and the Early Childhood Education Block Grant. The bill also created a special credit for teacher pension costs available only to Chicago.
Figures provided by the Illinois State Board of Education show the impact Senate Bill 16 would have on local school districts: Batavia Unit School District 101 would receive $3,976,604 less; Community High School District 94 would receive $1,976,969 less; West Chicago School District 33 would receive $2,154,580 more; Yorkville Community Unit School District 115 would receive $1,408,833 less.
Neighborhood Recovery Initiative Scandal
Another issue that will continue to receive attention in the coming months is the mismanagement and abuse of taxpayer funds in the Governor’s Neighborhood Recovery Initiative (NRI).
Despite multiple ongoing investigations and continued controversy, the budget once again includes a $20 million lump sum for grants to community providers for at-risk community support programs, after school programs and youth employment opportunities. Reminiscent of previous funding for the failed NRI program, the grants would be administered by the Department of Labor. However, Department officials did not request the funds and could not confirm what the money was to be used for.
The long-criticized program became front-page news this spring when the Auditor General released a scathing report that not only criticized the implementation and management of the program, but found that Governor Quinn likely broke state law by shuffling funds among various accounts in order to circumvent the legislature’s authority to annually appropriate General Fund dollars. In the months since the audit was released there has been a steady stream of stories detailing problems with the program, and by May it was revealed that both the Cook County State’s Attorney’s office and the U.S. Attorney’s office had launched criminal probes into the program. More recently the Legislative Audit Commission has pursued its own investigation of the NRI.