Illinois` $520 million budget hole may be larger than expected, forcing the need for even deeper cuts in state programs, Gov. Jim Edgar`s top budget aide told legislators Monday.
The revelation from State Budget Director Joan Walters came as several General Assembly committees sat down together at a public hearing in Chicago to try to determine how to make $350 million in cuts, an amount Edgar said last week would be sufficient to close the hole in the 1991-1992 state spending plan.
Edgar`s earlier assessment assumed the remaining $170 million of the budget gap could be closed without further cuts because the economy was expected to pick up soon and tax revenues would resume flowing into the state at a more normal pace.
But Walters told lawmakers Monday that the administration`s hopes for a quick economic turnaround in Illinois do not appear to be panning out and, in fact, the situation seems to be getting worse.
Walters said that ”in all likelihood” the administration will further increase its estimate of the tax-revenue shortfall caused by the recession, raising the need for more cuts.
Walters said a recent state report showed state tax receipts in December had declined more than expected. And unemployment in Illinois jumped to 9.3 percent last month, from 8.5 percent in November, according to a report released Friday.
The unemployment figure was the highest monthly number in Illinois since February 1986.
”That is not a trend we anticipated when we put our (earlier) numbers together,” Walters said.
Already the administration has estimated it will lose $285 million because unemployment and lack of consumer spending has diminished tax receipts. Officials also said increased spending demands, such as higher welfare caseloads, will cost the state $235 million more than expected.
The two problems combine to put the $520 million hole in the budget, which runs through June 30.
Walters` 30-minute presentation was interrupted periodically by bullhorn- wielding protesters who urged legislators to ”show some guts and stop the cuts,” a reference to the $350 million in program reductions Edgar has proposed. Cuts of that size amount to 7 percent of what remains of the current budget.
Meanwhile, Cook County Board President Richard Phelan said he plans to seek a consensus with the presidents of seven other large Illinois counties to oppose Edgar`s ”ax-and-chop tactics.”
The Democratic board president said he will meet Thursday with the board presidents of Du Page, Lake, McHenry, Will, Kane, St. Clair and Madison Counties. ”We will try to determine where the cuts will hurt us and see if we can get some support to block the ax-and-chop tactics,” Phelan said.
While Edgar`s cuts would be painful, a further increase in the revenue shortfall would likely force additional program reductions in light of Edgar`s 1990 campaign pledge not to raise taxes. Many legislators also do not want to raise taxes this year, with the March 17 primary and Nov. 3 general election on the horizon and with all lawmakers running in redrawn districts.
Walters` warning that more cuts may be on the way was echoed by the legislature`s revenue-forecasting arm, the Economic and Fiscal Commission. The commission already has pegged the revenue shortfall at $295 million, or $10 million worse than Edgar`s office, and plans to announce an additional $65 million downward estimate soon.
”We were anticipating that the economy would turn around in early spring, but now we think late spring or early summer, and it won`t be much of a recovery,” said Ann Sundeen, chief of the commission`s revenue unit.
Following Walters` gloomy testimony, directors of some state agencies went public with what a $350 million cut would mean to their departments.
In the Department of Public Aid, Director Phil Bradley said reimbursement rates to providers of medical services to the poor would not be cut. He said any reductions would drop those already-low rates below federally required levels, leaving the state open to lawsuits.
Income-assistance programs for the poor would be cut 7 percent, and programs that pay nursing homes more for superior care and that reimburse hospitals for uncompensated care to the poor will be reduced or eliminated.
”None of these cuts come easy,” Bradley said. But he added, ”I am fairly confident in saying that this is not going to affect health care for the poor.”
For public education, state Schools Supt. Robert Leininger said he drew up a list of cuts that attempted to minimize the effect on schools that depend on the state for much of their funding. Leininger recommended cutting $37.4 million in general state school aid, which would amount to about a 4 percent cut instead of 7 percent.
But that still would slice about $11 million out of the Chicago Board of Education`s precariously balanced budget. And other cuts in special education, transportation and lunch and summer-school programs would reduce the Chicago schools` budget about $15 million more, state officials said.
Any cuts to the Chicago schools would raise the possibility that a recently renegotiated teachers` contract would have to be opened yet again, under the almost certain threat of a teachers` strike.
To make up for such cuts, Kimbrough plans to ask the legislature to let the school system use immediately about $50 million in state revenues it is not supposed to receive until next budget year. His request amounts to an end run around the Chicago School Finance Authority, which has steadfastly rejected that budget sleight-of-hand.
In all, Leininger`s proposed cuts would reduce the state`s share of funding for public schools statewide to 34.5 percent from 35.5 percent. The state is already facing lawsuits alleging that it has failed to adequately fund education.
Community mental health clinics and programs would bear 79 percent of the cuts proposed by the state Department of Mental Health and Developmental Disabilities. The department opted to cut community programs because it cannot further reduce staffing at its 21 hospitals without risking the loss of accreditation and federal funding.
But the Department of Children and Family Services would be left virtually unscathed by the cuts. DCFS recently agreed to make widespread reforms to settle a lawsuit, but the settlement came later than expected, meaning DCFS has not spent money allocated for such reforms. Those reforms would simply be pushed off into the next budget year.
