Math shows the revenue role in state's budget crisis

What are the big take-aways from Gov. Rauner's FY2016 budget proposal? Well, a few are inescapable.

First, the state's fiscal condition is a hot mess. No argument there. The current fiscal year - FY2015 - will close with an accumulated General Fund deficit of some $6.8 billion. That's a lot. In fact, it's about 27 percent of total spending on current services.

Second, the governor emphasized that the state's fiscal woes were caused by irresponsible fiscal practices of the past. Mind you, he didn't provide much specificity on what those irresponsible practices were. That said, this is Illinois. So yes, past administrations - Republican and Democrat alike - engaged in financial practices that wouldn't exactly merit the "good fiscal policy seal of approval," if such a thing existed.

Third, the governor made the "difficult decision" to address the deficit by proposing $6.6 billion in spending cuts. Now, if cuts of that magnitude become law, they'd definitely be difficult. Certainly, they'd be difficult on the teachers, social workers, health care providers and other public sector workers who'd see their retirement security impaired by the significant benefit cuts needed to generate the $2.9 billion in reduced pension payments the governor wants this year.

Also, poor and low-income families would undoubtedly experience some difficulties after losing health care services, if the governor's $1.2 billion in proposed Medicaid cuts were enacted.

Then there's well, everyone. See, if the governor's requested cut of $1.3 billion in funding for cities, municipalities, and other local governments passes, it will be quite difficult for them to maintain services - like police and fire protection - at current levels.

And if he gets his proposal to freeze property taxes, well, all I can say is invest in a really good home security system - that also puts out fires.

Finally, Gov. Rauner insisted that his proposed spending cuts were compelled by the aforesaid irresponsible fiscal practices, and had nothing to do with the loss of $5 billion in recurring revenue caused by the phase-down of the state's income tax rates that became law on Jan. 1. Here, however, the numbers tell a different story. After all, that $5 billion in lost revenue would be enough to pay for every human service scheduled to be delivered in FY2015, including, among other things: all child care for low-income working parents; and all services for the elderly, individuals with mental health concerns or developmental disabilities, abused and neglected children, and victims of domestic violence.

Heck, even the basic math shows how much the governor's proposed cuts are driven by declining revenues - not deficit reduction.

Consider that the accumulated deficit heading into FY2016 will be around $6.8 billion. Rauner has put $6.6 in spending cuts on the table. Using simple arithmetic, you'd assume the state's deficit would drop down to $200 million - that is, $6.8 billion minus $6.6 billion.

And you'd be wrong. According to the governor, if his plan goes into effect, "we will still be left with a budget hole of $6.2 billion."

Wait - what? How does $6.6 billion in cuts become only $400 million in net savings? Easy - a large part of the spending cuts - $6.2 billion - are offset by revenue losses. For, in addition to the $5 billion loss generated by the tax phase-down, there's another $1.2 billion being lost in Medicaid matching funds.

See, Medicaid is jointly funded by the feds and the states. So when a state cuts Medicaid, it loses the associated federal match, which under Rauner's proposal means losing $1.2 billion.

In many ways, the governor's insistence that his proposed cuts weren't driven by this dramatic revenue loss calls to mind the image of a pro-athlete who holds a press conference after signing a mega-million dollar deal, and proclaims his decision wasn't about the money. Sure, other factors may have been involved, but common sense - and basic math - tell you that yeah, the deal went down because of the money.

Ralph Martire is executive director of the Center for Tax and Budget Accountability, a bipartisan fiscal policy think tank.

rmartire@ctbaonline.org