No Good Options: Spending on Services Vital for Illinois’ Well-Being
By Allison Flanagan, Director of Policy Analysis
Visualizations by Nicole Shen, Research Intern
Two weeks ago, Governor Pritzker proposed what CTBA would describe as a very sobering FY 2022 General Fund Budget. The short of why it was sobering is that the FY 2022 Proposed General Fund Budget increased year-to-year revenue through the elimination of $932 million in existing tax expenditures that benefit businesses, while also generating an additional $304 million in one-time revenue by proposing to prorate the Local Government Distributive Fund at 90 percent of its statutory value, and diverting some cigarette tax and gas-sales tax proceeds from capital projects to the General Fund. All of that in combination with another $1.8 billion in proposed year-to-year savings through a combination of administrative cuts, reduced expenditures on health insurance costs for state workers, and reduced borrowing costs are just to have enough current revenue available to keep total spending on services in the FY 2022 Proposed General Fund Budget level in nominal dollars with FY 2021. Without those proposed initiatives, state spending on General Fund services in FY 2022 would have had to have been cut significantly from FY 2021 levels. Even more sobering is that decrease in net appropriations for Services in FY 2021 exacerbates a long-term trend of cutting General Fund spending on in real terms that dates back to FY 2000.
And yet, some still believe that Illinois needs to get its spending in order and cut General Fund Services. Let’s look closely at what services and programs the state is currently funding through the General Fund.
First, the Basics…
The estimated revenue expected for FY 2022 is $41.708 billion.
The estimated net expenditures for FY 2022 is $41.6 billion.
Second, How CTBA Categorizes State Spending…
CTBA organizes spending into two categories.
First is “Hard Costs” which are mandatory spending obligations over which decision makers have no discretion. Hard Costs are required to be paid either by existing laws, such as debt service payments owed to bondholders, or contractual obligations, like paying health insurance benefits for state workers. In the FY 2022 Proposed General Fund Budget, $13.8 billion, or 33 percent, of the $41.6 billion in total, net spending appropriations are for Hard Costs, as seen in Figure 1.[i]
As stated above, Hard Costs are mandatory. This means, before appropriating funding to services which are discretionary, Hard Costs must be paid.
So, what’s left is “Current Services” which cover spending on public services over which elected officials generally have at least some discretion. Currently, 96 cents out of every $1 of General Fund spending on Current Services goes to the core areas of Education, Healthcare, Human Services, and Public Safety. After accounting for nondiscretionary Hard Costs in FY 2022, the remaining Proposed General Fund Budget contains a gross appropriation of $28.9 billion for spending on Current Services.
However, FY 2022 net appropriations for Current Services will be less than gross appropriations, as seen in Figure 2. The reason for this is the General Fund Budget proposed for FY 2022 — as is typical for most General Fund budgets historically — identifies a dollar amount of gross appropriations that, despite being authorized, will not actually be spent. This line item is generally dubbed “Unspent Appropriations.” The amount allocated to Unspent Appropriations for FY 2022 in the Proposed General Fund Budget is $1.1 billion. Though the total dollar amount that will not be spent is identified, there is no detail about which specific spending categories will be reduced when the Unspent Appropriations are applied.
The figures below go a bit further into Current Services. For each of CTBA’s service spending categories (Education, Healthcare, Human Services, Public Safety and Other), the figures below identify how the FY 2022 Proposed General Fund Budget appropriations are distributed to agencies within each category and then to the programs being funded by each agency.
Education
The largest program costs for Education is the Evidence-Based Funding formula (EBF). Cutting funding for education would set Illinois further back in providing adequate funding for its students when it is already $7 billion short of what the system needs to fully fund the EBF. For more information, please read Fully Funding the EBF: 2020 Update.
[For a full screen, interactive version click here.]
Healthcare
The largest costs for the Healthcare category is Medicaid (Medical Assistance). Cutting Healthcare services in a global pandemic would only continue to hurt those most vulnerable in the state.
[For a full screen, interactive version click here]
Human Services
The largest program costs under Human Services is Developmental Disabilities. However, Human Services provide 86 programs to the state of Illinois. Similar to healthcare, cutting spending on Human Services would hurt the most vulnerable of Illinois residents. Additionally, Human Services includes Unemployment Insurance, which has been vital for the 491,000 workers unemployed as of December 2020 due to the COVID-19 pandemic.[ii]
[For a full screen, interactive version click here]
Public Safety
The largest cost under public safety is Facility Operations which is primarily funding for Correction Centers for the Department of Corrections.
[For a full screen, interactive version click here.]
Other
The other category comprises of government services, economic development, and environment and cultural services. Much of these services are ensuring that the government is running smoothly, and government services are being provided. It is also ensuring that there is economic development for businesses and communities, which is vital for getting the state back on track after an economic crisis. Cutting any more of the government services would result in a reduction of jobs, which then reduces income and thus spending. When spending is reduced, it takes longer for the state’s economy to grow.
[For a full screen, interactive version click here.]
Pension Contributions
While Pension Contributions are considered a Hard Cost, the following figure explains the distribution of the pension contributions by pension system.
[For a full screen, interactive version click here.]
The Bottom Line
Cutting General Fund Current Services during an economic crisis brought on by a public health crisis would likely extend the economic crisis and only hurt Illinois residents more that the reductions to spending have over the last two decades.[iii] Given that the role of state government is to provide services to its residents, Illinois should focus on ways to increase revenue that is stable and efficient as well as prioritizing the reamortization of the state’s Pension Ramp.
[i] CTBA analysis of (i) Governor’s Office of Management and Budget, Fiscal Year 2022 Proposed Budget, “Operating Budget Details (xls),” CTBA analysis of Governor’s Office of Management and Budget, Fiscal Year 2022 Proposed Budget, “Operating Budget Details (xls),” https://www2.illinois.gov/sites/budget/Pages/default.aspx; and (ii) Governor’s Office of Management and Budget, Fiscal Year 2022 Proposed Budget book, https://www2.illinois.gov/sites/budget/Documents/Budget%20Book/FY2022-Budget-Book/Fiscal-Year-2022-Operating-Budget.pdf.
