Civic Federation Supports Governor’s Budget but Raises Concerns

May 03, 2012

On May 1, 2012, the Civic Federation announced its support for Governor Pat Quinn’s FY2013 budget recommendation based on an analysis by the Institute for Illinois’ Fiscal Sustainability (IIFS), the Federation’s State government research arm.

This marked the first time that the Federation has supported a Governor’s budget proposal since it founded IIFS in 2008 to expand its State budget research capacity. IIFS research is supported by grant funding from the MacArthur Foundation. The Institute produces three major reports on the State budget annually: a State budget Roadmap, an analysis of the Governor’s recommended budget and an overview of the budget enacted by the General Assembly.

The Civic Federation supports Governor Quinn’s FY2013 budget recommendation because it  acknowledges the depth of the State’s ongoing fiscal crisis, proposes necessary pension reforms and makes significant changes needed to rescue the Medicaid program from collapse.

Unlike past budgets opposed by the Federation, the FY2013 proposal holds total General Funds spending on agency budgets mostly flat and total expenditures increase by only $51 million to $33.8 billion. This amounts to less than a 1% increase in total expenditures from the estimated FY2012 total of $33.7 billion. The Governor’s budget does not depend on borrowing for operations, which was a major weakness in both the Governor’s FY2011 and FY2012 budget proposals.

Despite broadly supporting the direction of Governor Quinn’s FY2013 budget, the report also raises the following concerns:

• More detailed information is needed about the actuarial assumptions on which the savings projections of the Governor’s pension proposal are based and the affordability of future contributions;
• More information is needed about the phase-in periods for various aspects of the Governor’s pension plan, especially the transfer of pension normal costs for teachers and university employees to their employers;
• The savings projections for some aspects of the Governor’s Medicaid proposal may be overly aggressive, particularly in light of the State’s recent implementation history;
• In reducing reimbursement rates, special consideration should be given to safety net hospitals, which serve a large portion of uninsured and underinsured patients and rely heavily on Medicaid funding; and
• The Governor’s proposed budget is not expected to significantly reduce the State’s backlog of unpaid bills from the total of $9.2 billion projected for the end of FY2012.

The General Assembly is now in the final month of its regular session deliberations on the budget, which ends on May 31, 2012. The Governor has threatened to keep the legislature in session through the summer until it passes a plan to stave off growth in the backlog of unpaid Medicaid bills that would increase payment delays to healthcare providers in FY2013. The State’s fiscal year ends on June 30, 2012.

The following excerpt from the Medicaid section of the IIFS analysis explains the urgency of addressing the underfunding of Medicaid in FY2013:

"General Funds appropriations for Medicaid underfund program costs by approximately $1.5 billion in FY2012 and $2.7 billion in FY2013. [1] State law allows Medicaid bills, unlike most other State bills, to be paid from future years' appropriations. [2] This exception to Section 25 of the State Finance Act has repeatedly been used to budget an insufficient amount of Medicaid appropriations to cover costs for a given fiscal year, knowing that the bills will be paid from the next year's appropriations. [3]  

The following chart shows the Department of Healthcare and Family Services’ (HFS) latest five-year projections for growth in unpaid Medicaid bills. Costs in the chart are based on HFS’ Medical Assistance program, excluding special funding agreements such as the hospital assessment program. The projections assume that General Funds appropriations are unchanged from FY2012 and that no policy changes are enacted. As shown in the chart, unpaid Medicaid bills rise from $1.9 billion at the end of FY2012 to $4.5 billion at the end of FY2013 and reach $22.7 billion at the end of FY2017.

A $1.9 billion backlog of unpaid bills means that payments to healthcare providers will be delayed by as much as 120 days.[4] If the backlog grows to $4.5 billion, the payment delay is projected at 300 days, raising questions about whether many healthcare providers would continue to accept Medicaid patients." 

Click here to read the full IIFS analysis of the Governor’s recommended FY2013 operating and capital budgets including the Civic Federation’s position, concerns and recommendations.