I mention this because we are in the middle of a deficit crisis here in Illinois. Both raising taxes and cutting spending will be disastrous for the Illinois economy. Now granted, the notion of the Illinois economy is a bit artificial. We are part of a national economy. Economic units are determined by where the money comes from. Illinois is not sovereign because we do not have our own money.
So if we can neither cut nor tax, are we doomed? Well, not if we can borrow. Borrowing would not be disastrous to our local current economy. It may or may not be bad for a future economy, but not the current one.
But there are limits to borrowing or running deficits in other words. The constitution is one of the limiters of deficits. The easiest answer would be to borrow from the federal government. But they would have to agree to a loan. Actually we'd prefer a hand out. It would help us and them.
There is another outside the box approach. Create our own money. We would call it vouchers. We would make vouchers local legal tender for paying things like license fees and taxes. It could free up the other kind of money for the rest of the economy. It might need some additional complexities, but it could work. It would probably work best if we had a state bank like North Dakota, but that's another discussion.
Sovereign governments whose debts are paid in its own currency, are not like you and me. They are not fiscally constrained or required to balance their checkbook. Nor should they if it weakens the economy or increases unemployment. The government can spend without risk of going broke because the debt is owed to itself. Yes, this can create inflation when unemployment is low and there is too much money chasing too few goods. But that should not deter government from stimulating the economy when unemployment is 10 per cent, underemployment is 20 per cent, manufacturing is slow, housing is in a shambles, core CPI is below 1 per cent, and the economy is teetering towards outright deflation. Deficits should be increased and sustained at a high level until unemployment and overcapacity begin to retreat. Economists know that consumer deleveraging is a long-term project, which means that government stimulus will be required for a very long time. Get used to it.
State Sen. Toi Hutchinson gave an impassioned speech yesterday for ending Illinois' budget crisis that has paralyzed Illinois' economy, paralyzed Illinois' social agencies, and paralyzed Illinois' future.
"We are in a crisis," Hutchinson says. "We're in a crisis right now."
Governor Quinn has put together a board of citizens that are volunteering their time to see if they can help with the budget crisis by looking into state spending. I was honored to be asked to be a part of this board. I think it is an interesting process and wanted to share my impressions with you.
The caveat here is that these are in fact my impressions and not that of the Governor or the members of the committee. Any opinions that are expressed should be taken as mine and only mine. In praise of the process it was noted that the Governor did not see any of these proceedings as being confidential in nature and that there should be transparency.
The mission of the board is to look at state spending and to make recommendations on where money can be saved both in the short term as well as long term savings. There are different sub-committees dealing with different issues. I have been assigned to a sub-committee that is looking at various government agencies that are as diverse as Department of Corrections to Department of Natural Resources. Some of the agencies that we have been asked to look at have very small budgets to begin with and so we will not be concentrating on them at all.
Here's an email I got from State Senator Heather Steans:
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Dear Neighbor,
Last week Governor Quinn proposed a budget to address the state's $11.6 billion budget deficit. The state's total proposed budget is $53.1 billion, with a little over $28 billion in general revenue funds (GRF). It is GRF funds, rather than federal funds or state funds collected for specific purposes, that provide spending flexibility and are thus the focus of where adjustments must be made to fill our deficit. Spending from GRF breaks down as follows:
Education 38.2% Healthcare & Family Services 30.8% Human Services 21.3% Public Safety 5.2% Government Services 3.7% Economic dev't and infrastructure .6% Environment $ Business regulation .3%
Former Paul Simon Public Policy Institute director Mike Lawrence has another guest editorial about state finances in the SJR today. Once again he completely ignores the most fair tax solution that's favored by most Illinoisans: a progressive income tax increase on high income earners.
In a book club discussion this week, the subject of the Erie Canal came up. Wikipedia has an excellent article with photos and a bibliography. There are two books listed, and I checked both by clicking on their ISBN numbers, then scrolling down to the "Find this book" in the Chicago Public Library. For Wedding of the Waters," there are 47 copies and none are checked out! Wouldn't one wonder if patrons could simply request by interlibrary loan if they wanted to read it? Maybe there's no good way to decide how to allocate them if the library board were to order a smaller number: that is, who gets the book on their shelf and who does not. Anyway, I was stunned to see so many copies of one book.
Finding this new look-up tool was amazing! More than libraries are on this sources page, Google and Yahoo but not Amazon, B&N or Borders, so that indicates something, I imagine.
Being on multiple legislative e-mail lists, I received alerts yesterday advising me that the enormous hole in the state budget had been patched, again, through the practice of "fund sweeps." This phrase, one of those like "credit default swaps" that makes ordinary taxpayers' eyes glaze over, means that money sitting in various "special funds," instead of being used for the purposes for which it was intended and collected, will instead be diverted into the General Funds pool. Think of it as if you'd set up a special savings account for your childrens' education, or had a cookie jar in the kitchen where you put pin money to save for an upcoming wedding, but instead, when things are tight, you dip into it to pay your electric bill.
Interestingly, not one of the e-mails I got detailed which funds were being raided. So I checked. The bill itself, which got completely amended about a dozen times, is online. As a public service I am listing the funds, the amounts diverted, and a link to the bill at the end of this post (below the fold).
The list is mind-boggling. First, the total: $224 million in raided funds. That's a lot of lettuce.
Second, the sources. Probably you had no idea that we had 300 different funds to plunder, with opaque monikers such as the "Auction Regulation Administration Fund" from which we're plucking half a million bucks, the "Professions Indirect Cost Fund" from which we're diverting $2 million, or the "Subtitle D Management Fund" that will involuntarily donate a quarter-million dollars to this year's spending. Probably you also have no idea what all those funds do. I wonder if our legislators do.
(Happy to promote this.
BTW, Heather, please give your constituents a new website, so they can contact you in off hours. - promoted by BobB)
A basic Democratic take on the Illinois Budget that arrived in my Inbox:
Dear Neighbor,
While we ended the legislative session on time by passing a budget on May 31st, members of the Illinois General Assembly cannot claim real victories this session because our budget is not balanced and we failed to pass a capital infrastructure program. I know that many committed legislators on both sides of the political aisle in the House and Senate share my frustration with these incomplete results. Nonetheless, we must join together to have our frustrations produce better outcomes in the future.
This email gives you background on the limited progress we made this session on an operating budget and a capital plan for Illinois. In future emails I will update you on substantive legislation we passed and my thoughts for an agenda moving forward. As always, I very much welcome your feedback and suggestions. A true highlight for me has been the number of constituents who have taken the time to inform me about issues of concern in Springfield and/or ways in which our State laws can be improved.
Budget Highlights
The FY09 budget passed by the House and Senate is close to $59 billion, an $8 billion (nearly 16%) increase over the final FY08 budget. Unfortunately, revenue sources to fund this budget are about $2 billion short. The Governor will need to cut spending or the Governor and Legislature will need to develop additional revenue sources to balance the budget. As the budget currently stands, it includes increases for most state agencies. Highlights are provided below. For complete budgets you can go to www.ilga.gov and look for bills SB1102 and HB5701. I will keep you posted on changes to the budget as we come to some resolution.
A $225 per pupil increase to the education foundation level ($141.2 million increase).
An additional $32.4 million for early childhood education programs.
A $500,000 increase for the Grow Your Own Teachers program.
$116 million increase for the community care program.
Over $600 million increase to keep medicaid payment schedules at the current 72 day average payment.
A $6 million increase for the Supportive Living facilities.
9% benefit increases for the TANF program.
$45.2 million increase for child care services.
$51 million increase for Developmental Disabilities programs.
$4 million increase for supportive MI housing.
Over $3 million increase for addiction and substance abuse programs.
$18 million increase for the Monetary Awards Program (MAP) grants.
$2.2 million increase for immigrant integration services.
$2 million increase for HIV AIDS Education and other HIV programs.
Restoration of the current fiscal year cuts made to the Illinois Arts Council ($3.5 million increase).
$1 million increase for community health centers.
$6 million increase for IHDA housing support programs and $20 million increase for Illinois Affordable Housing Trust Fund grants
$22 million increase for programs providing assistance to Illinois veterans.
Capital Program for Infrastructure
As you may have read in the papers, Dennis Hastert and Glenn Poshard headed up the bi-partisan Illinois Works Coalition to develop a capital plan for the State. Illinois is in dire need of a capital plan to fund mass transit, road and school construction, affordable housing, healthcare facilities, and numerous other capital projects throught the state because we have gone without these vital investments for almost 10 years. The capital plan will also maximize federal funds for these programs with state matching dollars.
The final capital plan totalled more than $33 billion, with funding for it from proposed leasing of the Illinois State Lottery and a large gaming expansion. The capital plan and funding proposals all passed the Senate, but did not pass the House. I voted for the capital plan but against expanded gaming. I have serious reservations about the proposed size of the gaming expansion and the control mechanisms given the pervasive corruption issues facing Illinois right now. I will continue to work toward passing a capital plan with reliable revenue sources this year. I am optimistic that we have not seen an end to these discussions.
I attended the hearing on the proposed budget cuts last night in Skokie. There must have been close to 1000 people in the room and over 120 people came to testify. Several of the commissioners were there but Todd Stroger was notably absent.
As you know there is a call to cut 17% across the board in Cook County because we are faced with a $500 million budget deficit. These cuts will affect the poorest of the poor the most directly. As one woman testified imagine if your child woke you in the middle of the night with a tooth ache and you see that his/her face is swollen from an abscess but you have no money what do you do? Where do you go?
For the second time in a week, the Bush Administration will deliver a major address to the nation's largest veterans' group the day after the Associated Press revealed drastic cuts to veterans' benefits in the President's budget. Vice President Dick Cheney addressed the American Legion's annual convention today, one day after the Associated Press reported that "draconian" cuts in the Bush budget will mean that "at least tens of thousands of veterans" will face "delayed or even denied care" in coming years. (Associated Press, 2/27/06)
Howard Dean checks the administration, and hits it out of the park. See Howard swing...
The Bush administration released its budget request for fiscal year 2007 on February
According the the National Priorites Project: It proposes the elimination or significant reduction of 141 programs and deep cuts in domestic spending. Non-security domestic discretionary spending would be cut by $15 billion, or 4.4%, after taking inflation into account. Many of the administration’s proposals would reduce funding in grants to state and local governments across a range of areas. See how the amount of income tax you paid will be spent.
Will this budget reduce deficits?
The administration claims that domestic
spending cuts are necessary to reduce
the deficit. The budget request projects
a budget deficit of $354 billion which is
$69 billion less than the projection for
FY2006.
However:
* The budget proposes to make the
2001-2003 tax cuts permanent which
would reduce revenues by $1.7 trillion
over the next decade.
* The budget for FY2007 does not
include complete funding for the Iraq or
Afghanistan wars, which could add
another $70 billion to the deficit.
Food & nutrition: The budget proposal would eliminate the Commodity Supplemental Food Program, cutting off at least 400,000 senior citizens from nutritious, packaged meals. The budget also proposes to cut funding for the Special Supplemental Nutrition Program for Women, Infants and Children (WIC) by $200 million, after taking inflation into account. Illinois would lose $6.4 million in WIC funding, while 9.0% of the state’s residents currently experience food insecurity.
Community development: The budget proposes once again to cut Community Development Block Grants(CDBG), which help cities and towns
ensure affordable housing, provide services and create jobs. Illinois would lose $40.5 million in CDBG funds under the budget proposal. The
loss to Chicago would total $19.6 million and East St Louis would lose $434,037.
(Excellent work, Ilona, good to see the details, specifics and facts presented so clearly. Our Vets and their families should always be a non-partisan Top Priority across the boards. - promoted by SAldrich)
Let's take a look at the War President's budget through the veteran lens.
Does Bush put his money where his mouth is? Does his budget support our troops when they're done fighting his wars? List of veteran and force cuts below the fold...
