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Fiscal Integrity and Social Responsibility

Fiscal Integrity and Social Responsibility. Confronting the State Budget Crisis. Kathy Ryg. August 3, 2010. Overview. Landscape – crisis of confidence in government and budget collapse Roots of the fiscal crisis Impact: businesses, families and communities pay the price

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Fiscal Integrity and Social Responsibility

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  1. Fiscal Integrity andSocial Responsibility Confronting the State Budget Crisis Kathy Ryg August 3, 2010

  2. Overview • Landscape – crisis of confidence in government and budget collapse • Roots of the fiscal crisis • Impact: businesses, families and communities pay the price • Opportunities for change

  3. Estimated General Funds Budget Deficit for FY 2011 FY 2011 operating deficit $3.8 B Carryover deficit from FY 2010 $7.5 B Cumulative deficit $11.3 B

  4. Legislative Mandates: 25% of General Funds Budget in FY 2011

  5. General Funds Appropriations Excluding Pensions (in $ billions)

  6. FY 2011 GF Budget Cuts After Governor’s Allocations State Board of Education $241 M 3.3% Higher education $96 M 4.4% Dept. of Human Services $313 M 7.7% Dept. of Agriculture $4 M 11.1% State Police $15 M 5.2% DCEO $5M 10.0% Dept. of Aging $17M 2.6%

  7. GF Backlog of Unpaid Bills and Transfers as of June 30, 2010 PreK-12 education $1.30 B Higher education agencies .56 B Human service agencies .70 B Health care .63 B Inter-fund transfers .96 B All other .56 B Total 4.71 B

  8. Hidden Spending Cuts • Even more significant than enacted spending cuts: long delays in payments • At end of FY 2010, State Comptroller reported $4.7 billion backlog of unpaid bills • Another $2.6 billion in FY10 appropriations not yet processed • Some service providers have shut down programs

  9. Projected General Funds Budget Deficit for FY 2012 FY 2012 operating deficit $6.2 B Carryover deficit from FY 2011 $11.3 B Cumulative deficit $17.5 B

  10. Projected FY 2012 Deficit as Pct. of FY 2011 Budget, 10 Largest States

  11. Broken Budget Process • Legislators place unprecedented budget decision-making responsibility on the Governor • Most state agencies given lump-sum funding rather than line-item appropriations – exacerbating uncertainty • Additional $3.5 billion appropriated to Governor’s Office to allocate • Governor given emergency budget powers to control spending • Nothing done to address structural deficit or reduce backlog of unpaid bills

  12. Headlines tell the story “Moody’s downgrades state Bonds, revenues continue to slide” “Illinois Stops Paying Its Bills, but Can’t Stop Digging Hole”

  13. Headlines tell the story Bloomington: Could state budget woes boost crime? Bloomington: State hiring freeze leaves community center in limbo Bloomington: Universities brace for funding uncertainty Springfield: Cities struggling as state funding lags Quincy: Adams County Health Dept. decides ‘not to do business with the state,’ will discontinue seven programs Peoria: Early childhood cuts slash deeper than just education

  14. Jeopardizing Quality & Accountability • Lack of accountability or transparency • Jobs left undone & resources sacrificed

  15. Roots of State Fiscal Crisis Cyclical deficit Effects of recession Declining revenue combined with increasing need Structural deficit Gap between revenue generated by tax system and underlying economic growth Revenue structure can’t support established service levels and other ongoing obligations

  16. General Funds Revenue from State Sources (in $ billions)

  17. Magnitude of Budget Deficit Deficit CAN’T be closed by: • Waiting for economic recovery • Efficiencies alone • Spending cuts alone • New revenue/tax increases alone

  18. Need for Balanced Approach to Responsible Budget • Reform • Strategic spending restraints • Modernization • New, recurring revenue

  19. Reform Measures – a start • Pensions • Medicaid • Government purchasing • Campaign finance • Ethics • Greater openness in government • Transparent budget process

  20. The Heckman Equation Invest + Develop + Sustain = Gain

  21. ILLINOIS KIDS COUNT SYMPOSIUM

  22. Kids & the Recession • The most visible signs of recession don’t reveal full impact on children • Children are hidden casualties of the economic crisis • Recessions have lasting effects on child poverty

  23. Effects of Unemployment One in seven children in U.S. lived with unemployed parent at the end of 2009 When parents lose a job, children are more likely to: • Struggle in school • Repeat a grade • Have behavior problems

  24. Long-Term Effects of Child Poverty Children growing up in poverty are likely to have: • Lower levels of educational attainment • Diminished employment prospects • Greater health problems

  25. Child Poverty in Illinois, 2008 (before recession) • Children in poverty: 530,000 • Child poverty rate: 17% (18% in U.S.) • Children as share of Illinois residents: 25% • Children as share of poverty population: 35%

  26. Recession and Child Poverty • Poverty rates will be higher for 2009 • Poverty expected to continue rising even after economy begins to recover • Child poverty in U.S. projected to reach 24% in 2012 • Expected rate in Illinois: 22% (more than 650,000 children)

  27. For more information Kathy Ryg President Voices for Illinois Children www.voices4kids.org 312-516-5550 kryg@voices4kids.org

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