Health and medicine forum - martire

CENTER FOR TAX AND BUDGET ACCOUNTABILITY 70 E. Lake Street  Suite 1700  Chicago, Illinois 60601  direct: 312.332.1049  Email: rmartire@ctbaonline.org “The State’s Fiscal Crisis: Changing our Collective Response” g g p For: Monday, June 14, 2010; 1:10 pm Health & Medicine Policy Research Group UIC Student Center West, Chicago Rooms Chicago, IL Presented by: Ralph Martire Executive Director 1 © 2010, Center for Tax and Budget Accountability Illinois FY2011 Operating and Total Budget Remaining under HB859, SA 1, 2 and 3 Spending Carry Forward of Unpaid Bills $6.0 B Repayment of Debt/Prior Fund Transfers $4.61 B General Fund Approps $26.32 B Required Pension Payment $ 3.52 B Total Revenue Needed $40.45 B Revenue Recurring Estimated 2011 Own Source Gen Fund Revenue $21.412 B Estimated 2011 Federal Transfers $5.295 B THE REAL PROBLEM Total Recurring Revenue $26.707 B FY 2011 Operating Deficit (-$13.743 B) Operating Deficit as % of Total GRF Approps 52.2% One-Time, Nonrecurring Revenue/Debt Securitization of Tobacco Litigation Proceeds $1.2 B Tax Amnesty Program $.250 B Raiding Special Funds $1.0 B Carry Forward of Federal ARRA Transfers $0.0 B Total One-Time Nonrecurring Revenue $2.45 B One-Time Revenue as % of Total GRF 9.3% Minimum Remaining Deficit (-$11.293 B) As Percentage of Total GRF Approps 42.9% 2 © 2010, Center for Tax and Budget Accountability 1

The Context: BIG ‘N RICH • In 2008, Illinois ranked fifth nationally with a Gross State Product in excess of $633 billion ILLINOIS’ ECONOMY (BEA). • That would be the 27th RGE largest economy of any nation in the world- IS LAR E greater than Egypt, Saudi E S Arabia, Colombia, Belgium, Sweden, Greece, Ireland, Portugal, Norway and Nigeria, to name a few. 3 © 2010, Center for Tax and Budget Accountability Illinois GDP Growth Lags But, IL Gross State Product Grew Less than U.S. or Midwest States, 1990-2007 THE ILLINOI ECONOMY 71.7% 80.0% 70.0% 60.0% 49.4% 48.1% 50.0% 40.0% IS 30.0% 20.0% 10.0% 0.0% US Midwest States Illinois Source: Bureau of Economic Analysis, US Dept. of Commerce 4 © 2010, Center for Tax and Budget Accountability 2

For over two decades now:  Loss of high paying/good benefit jobs  All job growth in Illinois came in the service sector. LOW-END SERVICE JOBS GROW  For the most part, service sector jobs part G that pay less than manufacturing  On average, most of these service jobs LOW- pay 29% less than the manufacturing jobs they replace 5 © 2010, Center for Tax and Budget Accountability  Employer-provided health insurance benefits have been steadily declining in Illinois since 1980. ED  By 2008, over 43% of OYER-PROVIDE the workforce didn’t have employer provided insurance BENEFITS  Hispanics especially hard hit–over 57% do OYER- not have employer- provided insurance B EMPLO  B 2009 30% of the By 2009, Illinois population is either on Medicaid or uninsured 6 © 2010, Center for Tax and Budget Accountability 3

Why the Economic and ongoing Deficit Problems—Not Wasteful Spending ATE? Category FY 2000 FY2000 FY2010 Difference FY2000 - Difference Actual Adjusted Enacted FY2000 - FY2010 FY2000 - IS ILLINO PROFLIGA to t FY2010 FY2010 ECI & FY2010 for CPI & CPI & Population ECI & Population Population Population General $21.294 B $29.551 Fund -Pension (- $1.230 B) (- $3.587) OIS General $20.064 B $26.608 $ 25.964 (-$644 M) $ 28.085 B (- $ 2.089 B) Fund/ Current Services 7 © 2010, Center for Tax and Budget Accountability Over $9 out of $10 of G.F. are spent on: • Education (k-12, (k-12 plus Higher Ed) 35% • Healthcare 30% • Human Services 21% • Public Safety 5% 91% 8 © 2010, Center for Tax and Budget Accountability 4

THE REAL IMPACT: $4.4 BILLION LOST Amount by Which Illinois General Fund State Spending on Human Service Programs Falls Short of Keeping Pace with Inflationary Costs and Population Growth From FY2002 to FY2010 $0 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY2010 ($168) ($100) ($393) ($384) ($377) ($200) ($413) ($454) ($434) ($457) ($300) ($270) (millions) ($400) ($33) ($68) ($105) ($500) By failing to account for annual inflationary costs, Illinois cut human service funding in real terms by ($145) ($310) a cummulative $3.1 B from FY2003 to FY2010. By ($186) ($235) failing to account for population growth, Illnois ($600) further shorted human service funding by approximately $1.4 B from FY2003 to FY2010. In total, state funding of human services over this period was approximately $4.4 B less than what ($700) was needed to maintain FY2002 service levels, adjusting for inflation and population growth. ($800) Note: Commission on Government Forecasting and Accountabiity, Budget Summaries for FY2002 to FY2010. Final General Revenue appropriations for the Illinois Departments of Aging, Children & Family Services, and Human Services. Appropriations shortfalls necessary to maintain real value of FY2002 appropriation based on Mid-West CPI (MWCPI). MWCPI for FY2010 is assumed to be 0%, in all likelihood understateng the shortfall. Population growth estimate from Illinois Department of Commerce and Economic Opportunity. Key: Red Bar - MWCPI Shortfall; Blue Bar - Population Adjustment Shortfall 9 © 2010, Center for Tax and Budget Accountability AS FOR HEALTHCARE, WELL……. Medicaid Spending by Funding Source (Federal, State and Local) $16 $13.9B $14 $12.5B $12 5B $12 $11.4B $10.5B $11B $6.6 $10 $9.6B $6.0 (billions) $5.5 $8 $5.5 $5.5 $4.5 $6 $2.9 $2.3 $2.1 $1.5 $1.7 $2.4 $4 $2 $3.8 $4.2 $4.4 $3.6 $3.3 $3.1 $0 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 State General Funds Other State and Local Contribution Federal Funds Data Source: National Association of State Budget Officers, Annual State Expenditure Reports. P.S. After inflation and population, own source revenue spending increased by just $42 M to $154 M over this five-year period. 10 © 2010, Center for Tax and Budget Accountability 5

• Why the Economic Problems? – NOT TAX BURDEN • Illinois’ total state AND local tax burden, ILLINO IS LOW TAX X as a percentage of personal income ranks only 46th in the nation (through 2007). OVERALL • This is the lowest comprehensive tax burden in the Midwest. OIS O • Illi i also ranks only 45th i state Illinois l k l in spending as a percentage of GDP among the states (BEA data). 11 © 2010, Center for Tax and Budget Accountability Education now matters more than ever to economic prosperity: TION EXHIBIT “A” IS EDUCAT Generally: unemployment rates are highest for those with the least education. “  The Change is Wages! 12 © 2010, Center for Tax and Budget Accountability 6

Wages for Minorities lag Whites Real wages for Whites increased modestly between 1980 and 2007, but : FERENCES The White-Hispanic wage gap is larger in amount, but increased by a smaller percentage, growing from $3.82 in 1980 to $5.34 in 2007, an increase of 39.7% over 1980 Real wages for African-Americans declined. The hourly wage gap between Whites and African- African WAGE DIFF Americans grew from $1.52 in 1980 to $3.44 in 2007, an increase of 126.3% over 1980 13 © 2010, Center for Tax and Budget Accountability Percentage of African-American Students in High and Low Poverty Schools RS RACE MATTER 60.0% 55.04% 50.0% 40.0% 30.0% 20.0% Highest Poverty districts Low est Poverty Districts 10.0% 1.28% R 0.0% 14 © 2010, Center for Tax and Budget Accountability 7

A SNAPSHOT OF WHAT IS ANCE Illinois State & Local Revenue • In 2007 (the most recent national comparison available), state and local PROPERTY TAX RELIA revenue came from the following sources: PROPERTY TAX 37.18% SALES TAX 16.6% EXCISE and Utilities TAXES 17.2% INDIVIDUAL INCOME TAX 17.1% OTHER 6.7% CORPORATE INCOME TAX 5.3% SOURCE: Federal Tax Administrators Data 15 © 2010, Center for Tax and Budget Accountability WHY – EDUCATION ANCE • Illinois ranks 49th out of 50 states in the portion of education funding PROPERTY TAX RELIA covered by state – versus local – revenuejust 28% of the cost. • Illinois is the most reliant state on property taxes to fund schools in the nation. (National Education Association Data) 16 © 2010, Center for Tax and Budget Accountability 8

Illinois Property Tax Revenue Growth vs. State Median Income Growth UGH” 60.0% 53.71% Property Tax Revenue Grow th 50.0% URDEN IS TOU State Median Income Grow th 40.0% 30.0% 23.21% 20.0% 10.0% 4.92% 0.0% “THE BU -10.0% -5.33% 1990-2007 2000-2007 17 © 2010, Center for Tax and Budget Accountability The Priorities Under HB859, SA 1, 2 and 3 1 Education $9.35 B $ 35% (K-12 $7.15B, 27%) (Higher Ed $2.18 B, 8%) PRIORITIES 2 Health Care (DPH & HFS) $7.068 B 27% 3 Human Services (DHS, Aging & DCFS) $3.436 B 13% 4 Public Safety $1.147 B 4% PR 5 Governor’s Discretionary Allocations $3.466 B 13% 18 © 2010, Center for Tax and Budget Accountability 9

Consider the Story for Education Category FY2000 FY2000 Adj FY2011 DIFF FY2000 Adj DIFF Actual to FY2011 Enacted to FY2011 CPI and ECI and Population Population K-12 Ed $5.542 B $6.347 B $7.150 B* $803 M $7.253 B (- $103 M) $6.550 B $203 M (-$703 M) Higher Ed $2.379 B $2.819 B $2.180 B (- $639 M) $3.322 B (-$1.042 B) -32% Human $4.599 B $6.025 B $3.436 B (- $2.589 B) $ 6.885 B (-$ 3.449B) Services -50.1% *Note, K-12 funding will be subject to a $600 M ‘hold back” in FY2011, that will result in a cut if the state does not pass new revenue. This increases the K-12 funding cut in FY2011 from 1.4% to 10%. 19 © 2010, Center for Tax and Budget Accountability OPENING ARGUMENT: OOK BAD IN 20 . . . Illinois' State FY2010 Budget Breakdown 010. APPROPRIATIONS $26.08 B* ONE-TIME, NONRECURRING REVENUES Debt Proceeds from issuance of five- $3.466 B year Pension Notes Federal Stimulus $1.966 B Fund Sweeps $ .352 B Debt Restructuring $ .475 B TOTAL NONRECURRING REVENUE $6.259 B** * Note: The FY2010 budget figure does NOT include at least $ $4.0 B in past due, unpaid bills carried forward from FY2009. The p , p THINGS LO Appropriation figure also does not include the $3.466 B in Pension Note proceeds used to fund state pensions though pension payments have historically been included in General Fund appropriations. **Note: That means over 21% of the $29.55 B FY2010 budget ($26.08 B plus $3.466 B in Pension Fund payments) is covered with one-time, nonrecurring revenues not available in FY2011. 20 © 2010, Center for Tax and Budget Accountability 10

Illinois FY2011 Operating and Total Budget Remaining under HB859, SA 1, 2 and 3 Spending Carry Forward of Unpaid Bills $6.0 B Repayment of Debt/Prior Fund Transfers $4.61 B General Fund Approps $26.32 B Required Pension Payment $ 3.52 B Total Revenue Needed $40.45 B Revenue Recurring Estimated 2011 Own Source Gen Fund Revenue $21.412 B Estimated 2011 Federal Transfers $5.295 B THE REAL PROBLEM Total Recurring Revenue $26.707 B FY 2011 Operating Deficit (-$13.743 B) Operating Deficit as % of Total GRF Approps 52.2% One-Time, Nonrecurring Revenue/Debt Securitization of Tobacco Litigation Proceeds $1.2 B Tax Amnesty Program $.250 B Raiding Special Funds $1.0 B Carry Forward of Federal ARRA Transfers $0.0 B Total One-Time Nonrecurring Revenue $2.45 B One-Time Revenue as % of Total GRF 9.3% Minimum Remaining Deficit (-$11.293 B) As Percentage of Total GRF Approps 42.9% 21 © 2010, Center for Tax and Budget Accountability WHAT SHOULD BE: ELEMENTS OF A SOUND AND  FAIR FISCAL SYSTEM M FAIR PROGRESSIVE OG SS V D RESPONSIVE  TO MODERN ECONOMY STABLE  DURING POOR ECONOMIES EFFICIENT  DOESN T DOESN’T DISTORT TS F PRIVATE MARKETS BUT ISN’T 22 © 2010, Center for Tax and Budget Accountability 11

WHICH CREATES: The Illinois Structural Deficit (How Revenue Growth Will Not Keep Pace With The Cost of Current Services) $49 Billion Revenue Expenditures CIT $44 Billion TURAL DEFICI $39 Billion $34 Billion $29 Billion STRUCT $24 Billion *Adjusts solely for historic rates of inflation and population growth, and assumes normal economic growth. 23 © 2010, Center for Tax and Budget Accountability Fair? Responsive? Income Growth in the United States 1979-1999 (Real 1999 Dollars) *Source U.S. Census Data TY INCOM INEQUALIT Percent Change e 100% 93.4% 80% 60% 50.20% 33.20 40% % ME 20% 5% 0% -20% -6% Next Top Top Top Bottom 60% 20% 20% 15% 1% 24 © 2010, Center for Tax and Budget Accountability 12

Illinois Tax Burden 2007 Income Lowest Second Middle Fourth Top 20% Group 20% 20% 20% 20% Next 15% Next 4% TOP 1% MORE REGRESSIVE E Income Less than $18,000 – $36,000 – $58,000 – $95,000 – $196,000 – $500,000 Range $18,000 $36,000 $58,000 $95,000 $196,000 $500,000 or more Average Income in Group $10,100 $26,600 $47,000 $74,700 $128,900 $300,700 $2,084,700 Sales & Excise Taxes 6.9% 5.5% 4.4% 3.6% 2.7% 1.7% 0.8% General Sales—Individuals 3.5% 3.0% 2.5% 2.2% 1.7% 1.1% 0.5% Other Sales & Excise—Ind. 1.7% 1.0% 0.7% 0.6% 0.4% 0.2% 0.1% Sales & Excise on Business 1.7% 1.4% 1.1% 0.9% 0.6% 0.4% 0.2% Property Taxes 4.8% 3.6% 3.7% 3.7% 3.9% 3.1% 1.5% Property Taxes on Families 4.7% 3.4% 3.6% 3.5% 3.7% 2.7% 0.6% Other Property Taxes 0.1% 0.2% 0.2% 0.2% 0.3% 0.3% 0.8% Income Taxes 1.2% 1.9% 2.3% 2.4% 2.4% 2.4% 2.6% E Personal Income Tax Ta 1.2% 1 2% 1.9% 1 9% 2.2% 2 2% 2.3% 2 3% 2.3% 2 3% 2.3% 2 3% 2.2% 2 2% Corporate Income Tax 0.0% 0.0% 0.0% 0.0% 0.1% 0.1% 0.4% TOTAL TAXES 13.0% 11.0% 10.4% 9.7% 9.0% 7.2% 4.9% Federal Deduction Offset –0.0% –0.1% –0.3% –0.5% –0.8% –0.7% –0.8% TOTAL AFTER OFFSET 13.0% 10.9% 10.1% 9.2% 8.2% 6.5% 4.1% Note: Table shows 2007 tax law updated to reflect permanent changes in law enacted through October 2009. 25 © 2010, Center for Tax and Budget Accountability INCOME TAX INCREASE 3%  5% SB750/HB174 4 3%  2% = 5% 2/3 = 67% *Note, corporate rate goes up from 4.8% to 8%, but―overall corporate tax burden goes down! 26 © 2010, Center for Tax and Budget Accountability 13

Revenues of Goods and Services as a Percent of Gross State Product: Illinois SE (SIC: 1965 - 1996, NAICS: 2007) 70% SALES TAX BAS 60% 60% 59% 50% 53% Services as a 40% 41% percent of GSP 36% Goods as a 30% percent of GSP 20% 32% 26% 20% 18% SA 10% 13% 0% 1965 1975 1985 1996 2007 Year 27 © 2010, Center for Tax and Budget Accountability For More Information: ation Center for Tax and Budget Accountability www.ctbaonline.org Further Informa Ralph M. Martire Executive Director (312) 332-1049 rmartire@ctbaonline.org Ron Baiman, Ph.D. Director of Budget and Policy Analysis (312) 332-1480 rbaiman@ctbaonline.org F Yerik Kaslow Research Associate (312) 332-2151 ykaslow@ctbaonline.org 28 © 2010, Center for Tax and Budget Accountability 14

Health and medicine forum - martire

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