Again, please remember to tell us first which item you voted to cut yesterday. Then ID the other $3 billion.
Explain your answers, please.
VanillaMan
· 10 months ago
Yesterday's QOTD and today's are excellent introductions to our current situation.
Cut a billion. Now cut three billion more.
BTW - My answer yesterday was to cut $1B from each, with explainations.
Anders Lindall
· 10 months ago
Also remember that TOTAL STATE EMPLOYEE PAYROLL for FY08 was $3.5 billion. So if yesterday you chose to cut $1 billion from payroll (throwing 20,000 people out of work), you don't have $3 billion left to cut from payroll today.
And even if you cut elsewhere yesterday, understand that cutting $3 billion from payroll means nearly zeroing out state government. In other words, it's impossible.
The end my friend
· 10 months ago
I skipped the 1 billion increase for my first 1 billion.
The next 2 billion was across-the-board agency cuts. That includes payroll, cutting grant programs, etc. that drives the "tax eaters" mad.
For the remaining 3 billion, I would: -keep the payment cycle where it is ($600 million). -Not ignore the $500 million or so the state will get in FMAP increase this year that counts toward next year's 9 billion. - Eliminate the hold harmless provision in the education funding formula that sends state money to wealthy districts ($250 million). - eliminate the local share of the PPRT that is distributed to local governments that is based on a 30 year old formula - put it in GRF or common school fund to maintain education funding level(600 million)
That leaves me with 1 billion left to cut. I would roll back all rate increases the general assembly passed in the last 2 years without a funding source (long term care, home care workers, AFSCME, etc) ($250 - $300 million).
Then I would cut $700 million from the pension contribution.
Why? That is the state's only borrowing mechanism for deficit spending. Do that for one year only.
It is painful, yes. The question is whether we want this type of government.
The end my friend
· 10 months ago
That was supposed to say:" I skipped the 1 billion increase in pensions for my first 1 billion."
Irish
· 10 months ago
One comment to go along with the QOTD. Cuts to payroll might not have the impact desired. Example; A site I know well was recently closed, one staff person was lost as others were able to fill positions elsewhere. The closure means that the campground is closed which generated $82,000.00 in revenues last year from June to October alone. Savings on utilities, other costs might be in the neighborhood of $12,000.00. Bottomline, the closure did not have the savings affect of reducing the overall budget by that one staff person's salary.
Concerned Observer
· 10 months ago
I'm gonna make an assumption before tackling this: that cutting $3B from any one of the above items is impossible. It would have to come from a combination of the five.
Okay. I already cut $1B from medicaid benefits to participants. The first thing I do is slice another $1B from that. Reasoning: The Obama Administration has made it a goal to offer health insurance for anyone who wants it. Some, but not all, of the lost benefits will (hopefully) be restored by the federal government.
I work to cut $500M from the state payroll. Easier said than done, I know, but that's my target. I'd start with a hiring freeze, then by trimming middle management (if possible). Then I'd offer early retirement packages. Then I'd ask the unions for concessions. If that doesn't work, I'd start laying people off. These are, as they say, tough times.
Halfway there. I slice education funding by $600M. I'd start with forced consolidation of several smaller districts across the state, combining elementary schools with high schools and tiny districts with each other. Cap administrative salaries at, say, $130K.
$900B left, and we're into the legally-required stuff. Must pay bills, must support pensions. If I have to choose one over the other, I pay private and not-for-profits, and stiff the pension system, because that buys some time.
(Note: What I'd really like to do is only pay providers about 60-70 percent of what they are owed, but since I don't have any numbers to see what that might save me, I can't take that into consideration).
So, in sum:
$2B from Medicaid benefits. $900M from Pensions $600M from Education. $500M from Payroll.
Total: $4B (includes the $1B from yesterday). Ugh. Thanks, Rod.
Bill
· 10 months ago
PES, Excellent idea! That will add up to a 3 Billion cut for sure. Yesterday I declined to cut. Today, same way.
You Go Boy
· 10 months ago
The stern schoolmaster speaks after smacking the desk for order! Answer: Move to Alaska where you can still shoot wildlife from your helicopter.
wordslinger
· 10 months ago
Yesterday, I cut $1 billion in pension contributions.
I don't think you can cut another $3 billion from the remaining.
I'll say a draconian $1 billion split evenly between K-12 and Medicaid services.
Although, I you cut payment to Medicaid vendors, I suppose enough might drop out that you wouldn't have to offer the services. Last I checked, the cost of medical services isn't going down.
Cynic
· 10 months ago
Anders - How did you come up with the calculation that $1B in cuts would equate to a loss of $20,000 jobs?
Assuming your numbers are right for FY08 (and they are undoubtedly higher in FY09), this would mean that each job = $50,000. Of course, when you do the math, it would mean that there are 70,000 state employees. That's nowhere near accurate, meaning that the average payroll cost per state worker is significantly higher (in other words, $1B in cuts would result in fewer job losses).
Moreover, does this factor in benefits like pension and healthcare savings? Theoretically there would be other savings as well, such as overhead costs, but the State would not see any real savings unless it could extricate itself from leases, etc.
Rich Miller
· 10 months ago
Also, if I believe that your savings won't add up to $4 billion (including your $1B from yesterday), I'm gonna delete your post. Several have been jettisoned so far.
Anders Lindall
· 10 months ago
According to recently released US Census data for 2007, Illinois had 68,849 state employees (non-educational, full-time equivalent).
For context, in a state with 12.8 million people, this figures to just 54 state employees per 10,000 residents.
The national average is 85 state employees per 10,000 residents.
Also of note, the Illinois state workforce has been slashed by nearly a quarter in just the last five years – by 23.6% since 2002. No other state has cut its workforce by anywhere close to this amount.
That huge reduction came from a state workforce that was already bare-bones – in 2002, Illinois had just 70 state employees per 10,000 residents, the nation's 7th-lowest mark.
Further, economies of scale do not explain the state's dire understaffing crisis. Of the 10 largest states by population, Illinois badly trails those states with next lowest numbers of state employees per capita: Ohio has 15% more, California 22% more. The state most comparable to Illinois by population, Pennsylvania, has 46% more state employees per capita.
What are the consequences of this understaffing crisis? Costly and crushing reliance on forced overtime, huge caseloads and long waits for even basic services in almost every agency of state government.
Cassandra
· 10 months ago
OK, can I vote for Concerned Observer's plan, with the flexibility coming from the amount you borrow from the pension system. Borrow more from the pension money, cut less elsewhere.
By The Numbers
· 10 months ago
Why go with census numbers to find out the number of state employees when we have a real actual hard count of around 55,000?
Macbeth
· 10 months ago
++++++ I work to cut $500M from the state payroll. Easier said than done, I know, but that’s my target. I’d start with a hiring freeze, then by trimming middle management (if possible). Then I’d offer early retirement packages. Then I’d ask the unions for concessions. If that doesn’t work, I’d start laying people off. These are, as they say, tough times. ++++++++++++
But this is exactly what Blago did, no? Ryan's early retirement packages decimated the ranks, and the Blago had a hiring freeze. It was a weird freeze, though, because for as long I was in state government during the Blago years, folks kept getting hired.
But from first-hand experience, I know that while the early retirement incentives did thin the ranks (considerably) they also began what was (essentially) a four year brain drain among most every agency in the state.
And what Blagojevich didn't realize -- or Ryan, perhaps -- is that the brain drain was astoundingly ineffective. I'd guess that this brain drain of old-timers *cost* the state more than it saved.
Only now -- in this past, say, two years -- are folks (finally) getting up to speed.
My opinion, I know -- but the cutting agency staff doesn't seem a viable option *at all*. The staff's been cut. Now is the time to cut elsewhere and start thinking about *building back* select sections of agency staff in order to save money in the long run.
Rich Miller
· 10 months ago
Answer the question, please.
Vote Quimby!
· 10 months ago
I cut a bill from payroll yesterday. The only alternative as I see it is to cut the next $2 bills from the pension obligation. I know it delays the pain, as they say, but I think cuts in education would hurt more in the long run (underperforming kids = unprepared adults) and Medicaid is just barely a maintenance plan for keeping people alive, not even healthy. By cutting the pension contribution (again), it hastens the day when a court steps in and orders the state to pay.
Jechislo
· 10 months ago
Rich - what percentage of the annual budget is State payroll?
Concerned Observer
· 10 months ago
MacBeth, I don't doubt that a 'brain drain' problem would result from my proposed cuts. But the cuts have to come from somewhere, under the terms of this question (and really, the terms of our current state fiscal situation).
I certainly don't claim to have the RIGHT answer to this question, but I did come up with AN answer. And state payroll got a $500M axe in my world because I think that's preferable to losing doctors and social service agencies. YMMV.
Cynic
· 10 months ago
Anders - do you have any links to your numbers? They seem to be out of whack with what several people who work in the personnel departments of various state agencies have told me.
This link suggests that the number of state employees in FY08 was over 10,000 fewer than you suggested (just over 58k total).
Yesterday, I cut $1 billion from state payroll. I did read most of those comments, and was left with the impression that the biggest push-back came in that area, presumably from state employees.
And, since I didn't see any rich doctors and hospitals coming on here throwing a fit over the prospect of their medicaid payments getting cut, I'm going to cut the next $2 billion from that category.
For my other billion, I'm going to split it evenly between K-12 education and pension funding.
For a total of $4 billion. This is too easy. Not.
Ghost
· 10 months ago
I would cut the pension payment. This has the least negative impact on people an the economy. ll of the other areas cuts would ipact various individulas and reduce cash flow in our economy. Also the other cuts generally can not be corrected at a later date. lost education opportunities, lost medical treatments, the effects on lives of reducing famliy income in struggling households etc. The one area that has th least direct effect on our econmy (at a time when we need to encourage spending) and can be repaired or made up hen the State is in financialy better shaope, is the pension contribution.
cover
· 10 months ago
The federal stimulus, at least in the form that passed the House, includes "strings" that may prevent or limit how much states may cut from both Medicaid and education. So those big $ cut options might not even be available, unless Illinois chooses to give up a big chunk of its share of the federal bailout.
Rich, if this is true, three of the five options you listed are off the table. Then where do we go?
I can only assume the Civic Fed excluded some folks who the Census Bureau counted. Both are FTE.
At any rate, the Civic Fed's 10-year chart at the link you provided shows the terrible reductions that have left us in such a state of crisis on the frontlines today.
However you measure it, we are desperately understaffed, and everyone is suffering: Those who depend on good state services, those who provide them, and those whose taxes underwrite them.
anon
· 10 months ago
look at the last page of this CoGFA publication for state employees covered by SERS (not sure if FTE). difference in #s is probably "agencies under the governor" vs. "all state employees" http://www.ilga.gov/commission/cgfa2006/Upload/...
Anon II
· 10 months ago
Not all state employees belong to SERS - University anon-teaching positions belong to SURS.
eastern illinoisan
· 10 months ago
Remembering that to get the stimulus money and so therefore to get the deficit down by $2.3-2.9 billion over the time period oct 08 to dec 10, you have to do two things: 1. not cut Medicaid eligibility 2. pay docs, dentists, fqhcs, nursing homes on a 30 day cycle according to the senate stimulus bill So whacking a large amount from Medicaid is not possible. There isn't a billion that you could cut from rates, let alone two or three billion. Maybe we could cut enough to get $100-200 million ie $50-100 million net in Medicaid savings from a few targeted rate cuts and eliminating the HMO contracts. Pension reform going forward is a good idea but it won't save us in FY10. Requiring state employee retirees to pay some premiums for healthcare makes sense. But the reality is that increased revenues are the only way out.
South Side Mike
· 10 months ago
Yesterday I took my pounds of flesh and bone from K-12 education. Today's $3B:
1) Medicaid beneficiaries- cut back eligibility to federal minimum for all programs, including children (ie, no triple the poverty rate): Short-term savings??? Don't know, but must be at least $1 billion, or else Rich would have listed it as an option. 2) State employees: cut $750 million, but through RIFs, not buyouts. Buyouts require cash, and IL doesn't have it. Very painful, but no other choice. 3) Pension: remaining $1.25 billion
I don't touch Medicaid payments, because as I said, too many doctors and practices refuse to take Medicaid already. If all docs end up refusing Medicaid, then the only way the indigent will get care is through the ERs, which are already packed to the gills. Ugly...
In reality, I expect the pensions to bear as much as the pain as legally allowed, even if the contribution gets completely zeroed out.
Please Rich, tell us that tomorrow will bring some revenue suggestions, and then next week will be a compilation of cuts and revenue. As it is, this is painful and sobering.
Rich Miller
· 10 months ago
===Remembering that to get the stimulus money===
Stimulus money is looking less and less likely. Maybe another round of cuts tomorrow for QOTD?
@SSM, this is an exercise designed to show how difficult the cuts are. We had over 150 comments yesterday about cutting $1 billion. Notice the numbers today? Too many people are all talk.
Cynic
· 10 months ago
To answer today's question, I would vote for cutting equired state payments to the pension funds. I'm not an expert on the state's pension system, but I believe it's not as easy to do in "real-life" as it is to vote for it as part of a blog quiz. For example, I am sure that the unions would need to buy in to the plan.
Anders - since you are the public affairs director for AFSCME Council 31, can you tell us whether the union be willing to make any sacrifices (pay, benefits, etc.) and, if so, have you discussed any of them with Gov. Quinn or the legislature?
Lefty Lefty
· 10 months ago
As always, thanks for the trenchant info.
I cut a billion from the pension payments yesterday. I don't have all of the actual numbers at hand, but I'll go ahead anyway. I'd cut $1.5B from payments to providers and hope (that's what he got elected for!) DC comes up with the money. Then the rest from schools, but selectively, as described by some above. For example, my school district has over $30M in the bank for tough times. I think this meets the requirement for them to dip further into it so that the state budget can be balanced while less-off districts don't get hammered as hard.
Anders Lindall
· 10 months ago
Payments to the pension funds are a statutory requirement and can be changed by law.
Changes to pay and benefits for employees covered by collective-bargaining agreements would require negotiations with the respective unions.
If there's one thing Rich's exercise has shown, it's that payroll is a very small part of the overall budget. Snipping a couple percent from that very small part will make no discernible progress toward filling the huge shortfall.
Jake from Elwood
· 10 months ago
Yesterday, I yanked a cool billion from the Medicare recipients. If possible, I will limit Medicare by another $500M. Next, I will now use my fiscal scalpel and remove $750M from the State payrolls, remove $750M in education payments. Medicaid providers will be offered 65 cents on the dollar in exchange for being paid in full immediately...and hopefully that will close the gap on the remaining $1B. I cannot bring myself to borrow from the oppressive pension obligation when equities can be purchased at such discounted rates. I would rather raise taxes.
Anonymous
· 10 months ago
I don't have an answer, but I have some questions -
1) if you cut Medicaid beneficiaries, they will still get sick; they just won't get care. that's OK with you? they won't necessarily get care in an emergency room - that's just for emergencies. cancer treatment isn't an emergency. chronic disease medications aren't an emergency. those people, left untreated, just die. that's ok with you?
2) if you want to cut $1 or .5 Billion from payroll, please describe what activities that the state currently does that you want it to stop doing that totals up to $1 or .5 Billion. It's too easy to just say "cut" - say "what"!
Concerned Observer
· 10 months ago
Hey, Rich, I've changed my mind. These questions of the day are terrible, since people can't actually answer them. They're really good about complaining about other peoples' answers, though....
Anyway, this is a theoretical exercise, kids. Any guidelines that may or may not be included in the federal stimulus package can't be thrown into the mix, since we don't know if they'll be in the final package. Working with the restrictions given above is apparently hard enough for us meager folks who patronize CapFax, since I think there are fewer than ten actual proposals above.
And let me play Rich for a second. Anon 2:42, answer the question or take it to another thread. And come up with a nickname so I'm not timestamping responses!
Cynic
· 10 months ago
Respectfully Anders, I understand that changes to pay and benefits would have to be negotiated with the unions. I was specifically asking whether AFSCME has/would considered making any sacrifices and, if so, whether it has been communicated to the Governor or the legislature.
I will agree, however, that focusing only on cutting the number of state employees and/or their pay will not solve this problem. Realistically, it needs to be a multi-tiered solution with everyone feeling some pain.
Six Degrees of Separation
· 10 months ago
Yesterday I cut $1 bil from payroll.
Today, I reluctantly skip a pension interest payment - what is it, about $2 bil this year? As others mention, avoids pain today for more pain tomorrow. Halfway there.
The other $3 bil has to come equally from the remaining 3 items - Medicaid reimbursements to private and not-for-profit providers, Medicaid benefits to participants, and K-12 education (state portion of state/federal/local funding mix).
Schools and property tax payers will feel the K-12 cut. Some doctors will just refuse more Medicaid patients, but there will always be physicians who carry out their Hippocratic oath regardless of their finances, which generally are generous. The hardest cut is the bennies to recipients, cause its gonna discourage some from seeking medical attention when they need it.
Such is the lot of an imaginary budgeteer, who makes the hard decisions and whose pain is felt by many.
steve schnorf
· 10 months ago
Yesterday, I cut a billion by taking bits and pieces from different places, the largest chunk from education (assuming I would be able to find a way to use the [non-existent] stimulus money to replace it).
Today I say nothing significant additional can be cut.
So Rich has flushed out all the bit____s who have derided the state for shorting the pensions who are now doing exactly what Govs did in tough budgets, short the pensions. Hypocrites.
The battle we are fighting here, one in which we had some chance of victory, was lost when the Blagojevich administration paid its first pension payment out of one-time revenues. There was no way to recover after that. They needed to freeze spending (effectively, cut it) for at least two and probably three years except for pension contributions and Medicaid payment cycle. With 3 years of a billion +/- in revenue growth we would have gone into this current downturn in decent shape.
But that was predictably not possible for a D Gov with 2 D houses in the GA to do. Who was going to be the bad guy who said "no"? No one.
More than five years ago I told a group of eaters,"The good news is we are going to have an income tax increase in the future. The bad news is all the new money will already be spent." Here we are.
steve schnorf
· 10 months ago
six degrees, the interest payment on pensions in '10 would be more than 4 billion. Most people don't understand that we are not even paying the full interest payment yet, much less cutting into the principal.
47th Ward
· 10 months ago
Well said Steve Schnorf. I'd normally object to your characterization of this being the fault of Democrats in control, except it's mostly true.
From Full Metal Jacket: "What we have here is a big (deleted) sandwich, and we're all gonna have to take a bite."
TaxMeMore
· 10 months ago
Hmmm, if only we could get a detailed item by item lists of every expenditure budgeted and everything spent over the past few years in order to try to answer that question with any real knowledge.
How much would we save if we went through the campaign donor lists and found everyone getting state government money and then we stopped giving them state government money? Lets do that.
steve schnorf
· 10 months ago
47th, I'm not blaming Ds, its just the nature of things. Unlike under previous Govs, there was no equivalent of Pate to say "no". How is a D going to say no to expanded healthcare for children and working poor families? How is a D going to say no to expanded early childhood education? I am an R, but I liked most of Blago's agenda, he just sometimes went about it poorly, and at that point in time we couldn't afford it.
Think about Edgar: he spent three years saying no to things, many of which he would have liked to do. He took dental care away from Medicaid adults. Think that was fun?
But, when the state got back on its feet financially, he started kid-care, expanded early intervention programs, started subsidized child care for the working poor, doubled funding for DCFS, etc. And, he left the state with a 16 day Medicaid payment cycle and a billion and a half in the bank.
That's the difference.
47th Ward
· 10 months ago
Thanks Steve, we agree. As bad as Pate could be, especially to an eater like me, he kept the state disciplined financially. I think Madigan attempted to play that role, but the nature of my party got in the way too many times.
I admire the role you played in the Edgar admin as well. And I know it was difficult to say no, so I am thankful that you and your boss had the (deleted) to do it.
Anon3
· 10 months ago
47th and Steve I dont believe there is much will in the General Assembly on both sides to make the cuts. The whole sale elmination of entire programs and reduction of benefits would take the kind of courage which does not exist in Springfield and Chicago. 10% here and 5% there does not take care of it. Really who of this group is going to lead the state in that discussion? Lets face it there are many downstate Repulicicans who receive lots of state benefits and don't even realize it and when they are withdrawn they will have a fit. Entire agencies like DNR and AG should be closed. And DHS would really have to start rationing benefits. And to all the people who think that just laying off over paid middle managers in state agencies will do the trick they live in an universe disconnected from reality. The state employee unions, who is going to confront them? I have never seen any inclination from them to even consider surrendering any of their hard faught for benefits. Sorry Rich I may be off the topic.
Budget Watcher
· 10 months ago
I couldn't even get to a $1 billion in cuts yesterday. I think through reduction in high-end agency reductions, maybe on the order of 300 - 400 "at-will" staff, you could get $50 million and if you push hard, enough furloughs & staff reductions to add to another $250 million. That's $300 million in payroll.
There's probably $200 million in non-entitlement grant dollars out there that could be trimmed, but you have to be careful with federal maintenance of effort issues. $200 million is pretty ambitious, but let's say it's possible.
Elimination of agencies, boards, and commissions...I don't know...maybe $250 million.
Medicaid is tough because you only get $0.50 in state savings for every dollar you cut and there's not much more you can do with rates. Mandatory managed care might save some dollars, but not right away. I don't see any way to cut eligibility groups, but maybe we could eliminate some optional services. HFS has been good at Medicaid cost containment, but actual savings would be hard to accomplish.
I would never advocate short-funding pensions. It's been bad policy everytime it's been done. I do, however, think the rule of 85 needs to be reconsidered.
Bottom line, I can get close to $1 billion, but I can't see how you cut $4 billion. Therefore, I expect to be deleted.
Six Degrees of Separation
· 10 months ago
IMHO-
There are really only 2 ways out of this mess I can see. One, to somehow dramatically grow the state's economy so that revenues are humming along with that growth. Two, to hike fees and taxes to a level commensurate with keeping one's head barely above the water. Of course, there is a point of diminishing returns where you're going to kill new sources of revenue by going to the well one too many times, and finding a dry hole there.
Is Quinn going to turn into a rah-rah developer to try to accomplish #1? Or is he going to turn into a tax raising, big government manager to try to accomplish #2? Somehow, he doesn't seem to fit either mold.
I'm sure there are also cuts to be made, but how far can we go, and what do we want our government to look like as a result? These are the tough questions.
Jechislo
· 10 months ago
Someone help me out here - but didn't the Illinois Supreme Court rule that the State had to catch up on the Pension payments that Edgar/Thompson (and other past Governors)let get in arrears? Wouldn't the legislature be going against the courts if they didn't live up to their paying their mandated pension obligations?
Six Degrees of Separation
· 10 months ago
It was in the middle of Edgar's admin that the GA passed the "catch up" bill to make the pensions 90% funded in 45 or so years. And it was during Blago's admin that the law was written to sidestep it for a few years. Not aware of an IL SC mandate.
steve schnorf
· 10 months ago
and the pension catch-up bill was an Edgar initiative, along with AFSCME
Abu Jibril
· 10 months ago
Structure a long-term (99 year) lease between UIUC and Beijing University (Baida) that would earn the state $25b upfront and $500b per annum (50% premium above total state approps). Take $3b to the current deficit, lockbox the rest in a trust solely for pre-K-20 education capital investments.
(If $25b sounds high to value UIUC, University of Phoenix has a market cap of $13.5b--without a real "campus".)
Maybe look at a 3% discount for holding on to license income from tech transfers (though this may be a sticking point).
Follow up with raising personal and corporate income taxes to 4 and 6.4% respectively, but have graduated levels of standard deduction to introduce progressiveness into the tax system. Increasing income taxes shows bond markets political stability and maturity--leading to lower interest costs.
Don't look at it as selling a treasured asset--look at gaining a landlord who can offer free language lessons.
(Hey, Daley said think "outside the box")
Six Degrees of Separation
· 10 months ago
Don’t look at it as selling a treasured asset–look at gaining a landlord who can offer free language lessons.
Ah, so.
jimbo
· 10 months ago
Well folks, looks like we are going to have to raise taxes.
Six Degrees of Separation
· 10 months ago
I do, however, think the rule of 85 needs to be reconsidered.
This, the rule that allows a state employee to retire when his/her age and years of service total 85. Let's say a law is passed that affects 5,000 employees who coud've retired at 55 with an average pension of $3,000 per month under Rule of 85. Now, they will have to take a cut in their retirement if they retire at the same age, some with a penalty, so their collective pension will average $2,500 per month. $500 per month diminishment. Class action suit. IL Constitution. Game, set, match.
You might be able to eliminate this rule for new hires, or at best employees who aren't yet vested in the state pension. Doesn't do much for this year's budget, or 2019's.
Six Degrees of Separation
· 10 months ago
Once a pension benefit is given, it cannot be taken away. It can only remain the same, or enhanced, under our state constitution which was resoundingly re-ratified by the voters last year, other federal protections notwithstanding.
Bruno Behrend
· 10 months ago
First, we may be operating in a more constrained atmosphere than truly exists, but this is an excellent intellectual exercise.
Since I missed yesterday's post, I'll start with first $1 billion.
Education hands down. Here is how to cut that billion.
1. The money should be cut from any and all state funding to building projects. (Start them again when you have some money)
2. No district that spends more than the state average (per child) should get a dime of state money. Cut it.
3. Calculate the HONEST Administration Budget. Any District spending over 3-5% Admin gets a haircut. (using honest numbers, that is most districts)
For the next three billion...
$1 Billion from state payroll, starting with elected officials and the top of the pay grade. Offer them 75% percent of pay (until things improve) or leaving. Remind them that they still get their pension.
$.5 billion from pensions, but NOT to reduce what is already promised. Merely abolish ALL end-of-career bumps from pension calculations (all bumps already need to be gone - they are immoral). Reduce benefits for all those not yet vested.
The remaining 1.5 Billion. Hack education again, starting with district EAV calculations. The higher the EAV of the district the less state money. As an aside, let's do FOIA and see just how deeply the IL taxpayer subsidizes the Chicago Teacher's Pension fund. Cut it. Mayor Daley can sell Wacker Drive or Grant Park to some Australians.
Next, send the entire State Board of Ed bureaucracy home, save a skeleton crew to determine the poorest served kids in Illinois. Re-apportion the remaining ed dollars as a scholarship to each child and tell every district left receiving money to cut even more payroll. Offer them a choice of steep cuts in pay or going home.
Marianne North
· 10 months ago
I would cut the Healthy Women program and the Health Benefits for Disabled Workers programs. The feds are expanding Medicaid to cover single adults with no children as part of the stimulus package. I would cut all Medicaid programs that could be covered by the feds.
Arthur Andersen
· 10 months ago
AA cut payroll, focusing on higher ed and K-12 admin.
I'm stuck.
From reading comments, seems like the more real experience a blogger has with the state budget, the harder it is for them to identify viable cuts.
steve schnorf
· 10 months ago
Not bad, Bruno. However, I think you would like to do most of those things whether or not there was a budget crisis.
RJW
· 10 months ago
Bruno:
You don't come close to cutting anything significant in your budget cuts. Most districts are foundation districts, which means that they spend less than the state guaranteed level. I agree that those above should be cut, but that only saves you $20-$30 million. Sending home the State Board of Education staff is also a red herring. That will get you about $15 million in general funds. So, you've only cut about $45 million. School districts are already limited to a 5% admin cap, so you don't get any savings there. As for EAV calculations, the formula already discounts districts as their EAV increases. Again, no savings.
jerry 101
· 10 months ago
This is a really good exercise...I got nothing beyond what I originally prescribed.
I would like to engage this process a bit deeper though. So, I downloaded the fiscal 2009 budget to read through over the weekend (if I have time...)
Good points. Let me approach it from another direction then.
The state spends about $7 bn on k-12. Cut $2.5 bn. Apportion the remaining to the most needy children - again, focusing on getting money directly to those children, and not Bus companies, architects, builders, Adminisitrators (any title with coordinator, assistant, director, should go)
If you are correct (and it sounds like you are close to the target), then what DO they spend the money on? I can tell you from my experience pulling data on districts that most easily avoid the 5% cap by hiding such spending the labyrinth of mandates and regulations that they carp about to the electorate even as they lobby for them in Springfield.
Here is my definition of "administration." If it doesn't put a kid in classroom, outfit that room, and then put a teacher in that room, it's "admin."
I realize that it is over broad, but it's time we focused in a little bit. Your critique, while valid, only begs the question...
"Is there ANY real accounting of that $7,000,000,000?
You all know my view. Abolish the district, convert every school district to a charter, and raise state taxes by about $9 billion and cut education property taxes by about $12 bn. (zero them out)
Steve,
"Not bad" coming from you is quite the "compliment". You are, of course correct about me arguing for my solution whether a crisis or not, but these are the folks who caused the larger part of this crisis, so it is only fair they bear the largest brunt.
All Comments
Explain your answers, please.
Cut a billion.
Now cut three billion more.
BTW - My answer yesterday was to cut $1B from each, with explainations.
And even if you cut elsewhere yesterday, understand that cutting $3 billion from payroll means nearly zeroing out state government. In other words, it's impossible.
The next 2 billion was across-the-board agency cuts. That includes payroll, cutting grant programs, etc. that drives the "tax eaters" mad.
For the remaining 3 billion, I would:
-keep the payment cycle where it is ($600 million).
-Not ignore the $500 million or so the state will get in FMAP increase this year that counts toward next year's 9 billion.
- Eliminate the hold harmless provision in the education funding formula that sends state money to wealthy districts ($250 million).
- eliminate the local share of the PPRT that is distributed to local governments that is based on a 30 year old formula - put it in GRF or common school fund to maintain education funding level(600 million)
That leaves me with 1 billion left to cut. I would roll back all rate increases the general assembly passed in the last 2 years without a funding source (long term care, home care workers, AFSCME, etc) ($250 - $300 million).
Then I would cut $700 million from the pension contribution.
Why? That is the state's only borrowing mechanism for deficit spending. Do that for one year only.
It is painful, yes. The question is whether we want this type of government.
Okay. I already cut $1B from medicaid benefits to participants. The first thing I do is slice another $1B from that. Reasoning: The Obama Administration has made it a goal to offer health insurance for anyone who wants it. Some, but not all, of the lost benefits will (hopefully) be restored by the federal government.
I work to cut $500M from the state payroll. Easier said than done, I know, but that's my target. I'd start with a hiring freeze, then by trimming middle management (if possible). Then I'd offer early retirement packages. Then I'd ask the unions for concessions. If that doesn't work, I'd start laying people off. These are, as they say, tough times.
Halfway there. I slice education funding by $600M. I'd start with forced consolidation of several smaller districts across the state, combining elementary schools with high schools and tiny districts with each other. Cap administrative salaries at, say, $130K.
$900B left, and we're into the legally-required stuff. Must pay bills, must support pensions. If I have to choose one over the other, I pay private and not-for-profits, and stiff the pension system, because that buys some time.
(Note: What I'd really like to do is only pay providers about 60-70 percent of what they are owed, but since I don't have any numbers to see what that might save me, I can't take that into consideration).
So, in sum:
$2B from Medicaid benefits.
$900M from Pensions
$600M from Education.
$500M from Payroll.
Total: $4B (includes the $1B from yesterday).
Ugh. Thanks, Rod.
Excellent idea! That will add up to a 3 Billion cut for sure.
Yesterday I declined to cut. Today, same way.
I don't think you can cut another $3 billion from the remaining.
I'll say a draconian $1 billion split evenly between K-12 and Medicaid services.
Although, I you cut payment to Medicaid vendors, I suppose enough might drop out that you wouldn't have to offer the services. Last I checked, the cost of medical services isn't going down.
Assuming your numbers are right for FY08 (and they are undoubtedly higher in FY09), this would mean that each job = $50,000. Of course, when you do the math, it would mean that there are 70,000 state employees. That's nowhere near accurate, meaning that the average payroll cost per state worker is significantly higher (in other words, $1B in cuts would result in fewer job losses).
Moreover, does this factor in benefits like pension and healthcare savings? Theoretically there would be other savings as well, such as overhead costs, but the State would not see any real savings unless it could extricate itself from leases, etc.
For context, in a state with 12.8 million people, this figures to just 54 state employees per 10,000 residents.
The national average is 85 state employees per 10,000 residents.
Also of note, the Illinois state workforce has been slashed by nearly a quarter in just the last five years – by 23.6% since 2002. No other state has cut its workforce by anywhere close to this amount.
That huge reduction came from a state workforce that was already bare-bones – in 2002, Illinois had just 70 state employees per 10,000 residents, the nation's 7th-lowest mark.
Further, economies of scale do not explain the state's dire understaffing crisis. Of the 10 largest states by population, Illinois badly trails those states with next lowest numbers of state employees per capita: Ohio has 15% more, California 22% more. The state most comparable to Illinois by population, Pennsylvania, has 46% more state employees per capita.
What are the consequences of this understaffing crisis? Costly and crushing reliance on forced overtime, huge caseloads and long waits for even basic services in almost every agency of state government.
I work to cut $500M from the state payroll. Easier said than done, I know, but that’s my target. I’d start with a hiring freeze, then by trimming middle management (if possible). Then I’d offer early retirement packages. Then I’d ask the unions for concessions. If that doesn’t work, I’d start laying people off. These are, as they say, tough times.
++++++++++++
But this is exactly what Blago did, no? Ryan's early retirement packages decimated the ranks, and the Blago had a hiring freeze. It was a weird freeze, though, because for as long I was in state government during the Blago years, folks kept getting hired.
But from first-hand experience, I know that while the early retirement incentives did thin the ranks (considerably) they also began what was (essentially) a four year brain drain among most every agency in the state.
And what Blagojevich didn't realize -- or Ryan, perhaps -- is that the brain drain was astoundingly ineffective. I'd guess that this brain drain of old-timers *cost* the state more than it saved.
Only now -- in this past, say, two years -- are folks (finally) getting up to speed.
My opinion, I know -- but the cutting agency staff doesn't seem a viable option *at all*. The staff's been cut. Now is the time to cut elsewhere and start thinking about *building back* select sections of agency staff in order to save money in the long run.
I certainly don't claim to have the RIGHT answer to this question, but I did come up with AN answer. And state payroll got a $500M axe in my world because I think that's preferable to losing doctors and social service agencies. YMMV.
This link suggests that the number of state employees in FY08 was over 10,000 fewer than you suggested (just over 58k total).
http://www.civicfed.org/StateBudgetFacts.pdf
And, since I didn't see any rich doctors and hospitals coming on here throwing a fit over the prospect of their medicaid payments getting cut, I'm going to cut the next $2 billion from that category.
For my other billion, I'm going to split it evenly between K-12 education and pension funding.
For a total of $4 billion. This is too easy. Not.
Rich, if this is true, three of the five options you listed are off the table. Then where do we go?
I can only assume the Civic Fed excluded some folks who the Census Bureau counted. Both are FTE.
At any rate, the Civic Fed's 10-year chart at the link you provided shows the terrible reductions that have left us in such a state of crisis on the frontlines today.
However you measure it, we are desperately understaffed, and everyone is suffering: Those who depend on good state services, those who provide them, and those whose taxes underwrite them.
http://www.ilga.gov/commission/cgfa2006/Upload/...
1. not cut Medicaid eligibility
2. pay docs, dentists, fqhcs, nursing homes on a 30 day cycle according to the senate stimulus bill
So whacking a large amount from Medicaid is not possible. There isn't a billion that you could cut from rates, let alone two or three billion. Maybe we could cut enough to get $100-200 million ie $50-100 million net in Medicaid savings from a few targeted rate cuts and eliminating the HMO contracts.
Pension reform going forward is a good idea but it won't save us in FY10.
Requiring state employee retirees to pay some premiums for healthcare makes sense.
But the reality is that increased revenues are the only way out.
1) Medicaid beneficiaries- cut back eligibility to federal minimum for all programs, including children (ie, no triple the poverty rate): Short-term savings??? Don't know, but must be at least $1 billion, or else Rich would have listed it as an option.
2) State employees: cut $750 million, but through RIFs, not buyouts. Buyouts require cash, and IL doesn't have it. Very painful, but no other choice.
3) Pension: remaining $1.25 billion
I don't touch Medicaid payments, because as I said, too many doctors and practices refuse to take Medicaid already. If all docs end up refusing Medicaid, then the only way the indigent will get care is through the ERs, which are already packed to the gills. Ugly...
In reality, I expect the pensions to bear as much as the pain as legally allowed, even if the contribution gets completely zeroed out.
Please Rich, tell us that tomorrow will bring some revenue suggestions, and then next week will be a compilation of cuts and revenue. As it is, this is painful and sobering.
Stimulus money is looking less and less likely. Maybe another round of cuts tomorrow for QOTD?
@SSM, this is an exercise designed to show how difficult the cuts are. We had over 150 comments yesterday about cutting $1 billion. Notice the numbers today? Too many people are all talk.
Anders - since you are the public affairs director for AFSCME Council 31, can you tell us whether the union be willing to make any sacrifices (pay, benefits, etc.) and, if so, have you discussed any of them with Gov. Quinn or the legislature?
I cut a billion from the pension payments yesterday. I don't have all of the actual numbers at hand, but I'll go ahead anyway. I'd cut $1.5B from payments to providers and hope (that's what he got elected for!) DC comes up with the money. Then the rest from schools, but selectively, as described by some above. For example, my school district has over $30M in the bank for tough times. I think this meets the requirement for them to dip further into it so that the state budget can be balanced while less-off districts don't get hammered as hard.
Changes to pay and benefits for employees covered by collective-bargaining agreements would require negotiations with the respective unions.
If there's one thing Rich's exercise has shown, it's that payroll is a very small part of the overall budget. Snipping a couple percent from that very small part will make no discernible progress toward filling the huge shortfall.
1) if you cut Medicaid beneficiaries, they will still get sick; they just won't get care. that's OK with you? they won't necessarily get care in an emergency room - that's just for emergencies. cancer treatment isn't an emergency. chronic disease medications aren't an emergency. those people, left untreated, just die. that's ok with you?
2) if you want to cut $1 or .5 Billion from payroll, please describe what activities that the state currently does that you want it to stop doing that totals up to $1 or .5 Billion. It's too easy to just say "cut" - say "what"!
Anyway, this is a theoretical exercise, kids. Any guidelines that may or may not be included in the federal stimulus package can't be thrown into the mix, since we don't know if they'll be in the final package. Working with the restrictions given above is apparently hard enough for us meager folks who patronize CapFax, since I think there are fewer than ten actual proposals above.
And let me play Rich for a second. Anon 2:42, answer the question or take it to another thread. And come up with a nickname so I'm not timestamping responses!
I will agree, however, that focusing only on cutting the number of state employees and/or their pay will not solve this problem. Realistically, it needs to be a multi-tiered solution with everyone feeling some pain.
Today, I reluctantly skip a pension interest payment - what is it, about $2 bil this year? As others mention, avoids pain today for more pain tomorrow. Halfway there.
The other $3 bil has to come equally from the remaining 3 items - Medicaid reimbursements to private and not-for-profit providers, Medicaid benefits to participants, and K-12 education (state portion of state/federal/local funding mix).
Schools and property tax payers will feel the K-12 cut. Some doctors will just refuse more Medicaid patients, but there will always be physicians who carry out their Hippocratic oath regardless of their finances, which generally are generous. The hardest cut is the bennies to recipients, cause its gonna discourage some from seeking medical attention when they need it.
Such is the lot of an imaginary budgeteer, who makes the hard decisions and whose pain is felt by many.
Today I say nothing significant additional can be cut.
So Rich has flushed out all the bit____s who have derided the state for shorting the pensions who are now doing exactly what Govs did in tough budgets, short the pensions. Hypocrites.
The battle we are fighting here, one in which we had some chance of victory, was lost when the Blagojevich administration paid its first pension payment out of one-time revenues. There was no way to recover after that. They needed to freeze spending (effectively, cut it) for at least two and probably three years except for pension contributions and Medicaid payment cycle. With 3 years of a billion +/- in revenue growth we would have gone into this current downturn in decent shape.
But that was predictably not possible for a D Gov with 2 D houses in the GA to do. Who was going to be the bad guy who said "no"? No one.
More than five years ago I told a group of eaters,"The good news is we are going to have an income tax increase in the future. The bad news is all the new money will already be spent." Here we are.
From Full Metal Jacket: "What we have here is a big (deleted) sandwich, and we're all gonna have to take a bite."
How much would we save if we went through the campaign donor lists and found everyone getting state government money and then we stopped giving them state government money? Lets do that.
Think about Edgar: he spent three years saying no to things, many of which he would have liked to do. He took dental care away from Medicaid adults. Think that was fun?
But, when the state got back on its feet financially, he started kid-care, expanded early intervention programs, started subsidized child care for the working poor, doubled funding for DCFS, etc. And, he left the state with a 16 day Medicaid payment cycle and a billion and a half in the bank.
That's the difference.
I admire the role you played in the Edgar admin as well. And I know it was difficult to say no, so I am thankful that you and your boss had the (deleted) to do it.
10% here and 5% there does not take care of it. Really who of this group is going to lead the state in that discussion? Lets face it there are many downstate Repulicicans who receive lots of state benefits and don't even realize it and when they are withdrawn they will have a fit.
Entire agencies like DNR and AG should be closed. And DHS would really have to start rationing benefits. And to all the people who think that just laying off over paid middle managers in state agencies will do the trick they live in an universe disconnected from reality.
The state employee unions, who is going to confront them? I have never seen any inclination from them to even consider surrendering any of their hard faught for benefits.
Sorry Rich I may be off the topic.
There's probably $200 million in non-entitlement grant dollars out there that could be trimmed, but you have to be careful with federal maintenance of effort issues. $200 million is pretty ambitious, but let's say it's possible.
Elimination of agencies, boards, and commissions...I don't know...maybe $250 million.
Medicaid is tough because you only get $0.50 in state savings for every dollar you cut and there's not much more you can do with rates. Mandatory managed care might save some dollars, but not right away. I don't see any way to cut eligibility groups, but maybe we could eliminate some optional services. HFS has been good at Medicaid cost containment, but actual savings would be hard to accomplish.
I would never advocate short-funding pensions. It's been bad policy everytime it's been done. I do, however, think the rule of 85 needs to be reconsidered.
Bottom line, I can get close to $1 billion, but I can't see how you cut $4 billion. Therefore, I expect to be deleted.
There are really only 2 ways out of this mess I can see. One, to somehow dramatically grow the state's economy so that revenues are humming along with that growth. Two, to hike fees and taxes to a level commensurate with keeping one's head barely above the water. Of course, there is a point of diminishing returns where you're going to kill new sources of revenue by going to the well one too many times, and finding a dry hole there.
Is Quinn going to turn into a rah-rah developer to try to accomplish #1? Or is he going to turn into a tax raising, big government manager to try to accomplish #2? Somehow, he doesn't seem to fit either mold.
I'm sure there are also cuts to be made, but how far can we go, and what do we want our government to look like as a result? These are the tough questions.
(If $25b sounds high to value UIUC, University of Phoenix has a market cap of $13.5b--without a real "campus".)
Maybe look at a 3% discount for holding on to license income from tech transfers (though this may be a sticking point).
Follow up with raising personal and corporate income taxes to 4 and 6.4% respectively, but have graduated levels of standard deduction to introduce progressiveness into the tax system. Increasing income taxes shows bond markets political stability and maturity--leading to lower interest costs.
Don't look at it as selling a treasured asset--look at gaining a landlord who can offer free language lessons.
(Hey, Daley said think "outside the box")
Ah, so.
This, the rule that allows a state employee to retire when his/her age and years of service total 85. Let's say a law is passed that affects 5,000 employees who coud've retired at 55 with an average pension of $3,000 per month under Rule of 85. Now, they will have to take a cut in their retirement if they retire at the same age, some with a penalty, so their collective pension will average $2,500 per month. $500 per month diminishment. Class action suit. IL Constitution. Game, set, match.
You might be able to eliminate this rule for new hires, or at best employees who aren't yet vested in the state pension. Doesn't do much for this year's budget, or 2019's.
Since I missed yesterday's post, I'll start with first $1 billion.
Education hands down. Here is how to cut that billion.
1. The money should be cut from any and all state funding to building projects. (Start them again when you have some money)
2. No district that spends more than the state average (per child) should get a dime of state money. Cut it.
3. Calculate the HONEST Administration Budget. Any District spending over 3-5% Admin gets a haircut. (using honest numbers, that is most districts)
For the next three billion...
$1 Billion from state payroll, starting with elected officials and the top of the pay grade. Offer them 75% percent of pay (until things improve) or leaving. Remind them that they still get their pension.
$.5 billion from pensions, but NOT to reduce what is already promised. Merely abolish ALL end-of-career bumps from pension calculations (all bumps already need to be gone - they are immoral). Reduce benefits for all those not yet vested.
The remaining 1.5 Billion. Hack education again, starting with district EAV calculations. The higher the EAV of the district the less state money. As an aside, let's do FOIA and see just how deeply the IL taxpayer subsidizes the Chicago Teacher's Pension fund. Cut it. Mayor Daley can sell Wacker Drive or Grant Park to some Australians.
Next, send the entire State Board of Ed bureaucracy home, save a skeleton crew to determine the poorest served kids in Illinois. Re-apportion the remaining ed dollars as a scholarship to each child and tell every district left receiving money to cut even more payroll. Offer them a choice of steep cuts in pay or going home.
I'm stuck.
From reading comments, seems like the more real experience a blogger has with the state budget, the harder it is for them to identify viable cuts.
You don't come close to cutting anything significant in your budget cuts. Most districts are foundation districts, which means that they spend less than the state guaranteed level. I agree that those above should be cut, but that only saves you $20-$30 million. Sending home the State Board of Education staff is also a red herring. That will get you about $15 million in general funds. So, you've only cut about $45 million. School districts are already limited to a 5% admin cap, so you don't get any savings there. As for EAV calculations, the formula already discounts districts as their EAV increases. Again, no savings.
I would like to engage this process a bit deeper though. So, I downloaded the fiscal 2009 budget to read through over the weekend (if I have time...)
If you want it, here it is.
http://www.state.il.us/budget/FY%202009%20Opera...
Good points. Let me approach it from another direction then.
The state spends about $7 bn on k-12. Cut $2.5 bn. Apportion the remaining to the most needy children - again, focusing on getting money directly to those children, and not Bus companies, architects, builders, Adminisitrators (any title with coordinator, assistant, director, should go)
If you are correct (and it sounds like you are close to the target), then what DO they spend the money on? I can tell you from my experience pulling data on districts that most easily avoid the 5% cap by hiding such spending the labyrinth of mandates and regulations that they carp about to the electorate even as they lobby for them in Springfield.
Here is my definition of "administration." If it doesn't put a kid in classroom, outfit that room, and then put a teacher in that room, it's "admin."
I realize that it is over broad, but it's time we focused in a little bit. Your critique, while valid, only begs the question...
"Is there ANY real accounting of that $7,000,000,000?
You all know my view. Abolish the district, convert every school district to a charter, and raise state taxes by about $9 billion and cut education property taxes by about $12 bn. (zero them out)
Steve,
"Not bad" coming from you is quite the "compliment". You are, of course correct about me arguing for my solution whether a crisis or not, but these are the folks who caused the larger part of this crisis, so it is only fair they bear the largest brunt.