Ted Dabrowski, Illinois Policy Institute Jun. 7, 2016, 7:52am


The budget crisis is wreaking havoc on Illinois’ social service providers:

Dabrowski
Dabrowski

“[T]he Community Crisis Center in Elgin, a domestic abuse program that relies on Illinois for half of its funding….[has] maxed out a line of credit this year while waiting for funding, leaving employees to take four weeks of unpaid furlough days …” – Daily Herald

“The shortfall will force some smaller nonprofit home healthcare agencies to close, trigger layoffs at others and leave thousands of elderly people scrambling for alternatives to in-home care…” – HuffPost Chicago

“[I]t’s ‘preposterous’ that funding is being cut from the students who are most in need of support. Not only is it inhumane, it’s also economically irresponsible …” – Progress Illinois

While the above headlines might read like something ripped from today’s newspapers, they’re not. The first headline is from late 2011, while the second two are from 2013.

The 2016 budget crisis has made it easy to forget just how poorly Illinois’ state government has treated social service providers over the past decade, even when Illinois had yearly budgets, billions more in tax revenues and relative harmony under one-party rule.

Funding for social services isn’t a problem that arose in 2016 just because Illinois doesn’t have a budget. People dependent on social services have been harmed for more than a decade because the state’s spending priorities haven’t included them. The state’s real priority has been to keep increasing spending on government-worker salaries, benefits and pensions at the expense of nearly everything else.

History lesson: Illinois has been a bad partner for social service agencies for years

In 2009, an Urban Institute study ranked Illinois worst in the nation in paying its nonprofit vendors on a timely basis, according to the (suburban Chicago) Daily Herald. “Eighty-three percent [of nonprofits] said late payments from state and local governments were a problem in Illinois, compared to a nationwide average of 53 percent,” the Daily Herald reported.

Part of the problem is that, even though Illinois was passing annual budgets, politicians were using gimmicks to underfund programs and push off debt into the future, rather than being honest about how much the state could afford. Beginning in 2002 – a year after Illinois’ last balanced budget – Illinois started the habit of not paying all of its bills the year they were incurred. Since then, the problem has only worsened.

By 2010, the state’s unpaid bill backlog reached $8 billion, affecting not only social service agencies, but many different providers of state services. The Daily Herald chronicled how social service agencies were being affected in an article titled “Deadbeat state: Illinois owes billions in unpaid bills.”

To attempt to remedy the problem in 2011, then-Gov. Pat Quinn and proponents of more revenue passed a record state income-tax hike that brought Illinois more than $31 billion in extra revenues. They promised that Illinois’ unpaid bills, totaling $8.5 billion at the time of the tax hike, would be paid down by the end of 2015 when the temporary tax would partially sunset.

Predictably, the state’s unpaid bills were not paid down.

In fact, the unpaid bill problem in 2013 got so bad that private-sector companies tried to come to the rescue. A company called Vendor Assistance Program offered to step in and advance money to social service agencies and other vendors waiting for payment from the state.

The unpaid bill balance totaled more than $6 billion as of December 2014. Social service agencies were still going unpaid.

Illinois’ misplaced spending priorities

There’s a reason the state has racked up a backlog of unpaid bills and why even $31 billion in additional tax dollars – the new revenues generated from the state’s record income-tax hike from 2011 through 2014 – didn’t improve the situation for social service agencies and other vendors. It’s because the General Assembly, under House Speaker Mike Madigan, has done nothing to change the state’s funding priorities. And those priorities favor government-worker pay and benefits over nearly everything else.

Lawmakers didn’t enact comprehensive reforms of state-worker pensions or health care benefits. Instead, they kept growing those expenditures at rates that ensured everything else would be crowded out.

A comparison of spending growth from 2000, one of that last years Illinois had a balanced budget, with 2015 gives the picture of who’s been first in line when it comes to getting state funds:

-Contributions to state-worker pension funds: up 586 percent, or $6.6 billion

-State-worker health insurance costs: up 166 percent, or $1 billion

 Compare that growth with the items that have been crowded out:

-Higher education: down 8 percent, or $175 million

-Human services: up 10 percent, or $498 million

-K-12 education: up 35 percent, or $1.7 billion

The state’s total revenues grew 57 percent during that time period, faster than the 38 percent total growth in inflation.

For further proof of legislators’ favoring state employees, look at workers’ current pay and benefits. Illinois state workers are now the highest-paid in the nation when adjusted for cost of living. Career workers also receive Cadillac health insurance benefits, free retiree health insurance, and an average of $1.6 million in pension benefits over the course of their retirement.

The bottom line is, unless the state significantly changes the way it operates, funding social services will always be a struggle. Total expenses will outpace the incomes of Illinois taxpayers, while core spending drivers such as state-employee compensation will crowd out funding for other services.

But tax hikes aren’t the solution. Any tax increases will only put additional pressure on overburdened taxpayers and encourage more residents to seek opportunities in other states.’

Lawmakers concerned about the needy should reprioritize spending and enact economic reforms to bring back jobs and growth to Illinois.

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