MA

Illinois FY 2014 Budget: Combating fiscal woes for a hopeful recovery

Published: April 11, 2013

BudgetPublic Finance

Illinois Governor Pat Quinn delivered his FY 2014 budget address to the Illinois General Assembly on March 6, 2013, revealing a promising road to recovery for the state. In efforts to restore fiscal stability, the state will continue implementing spending reductions, including the consolidation of state facilities, the closing of several mental health institutions, and the restructuring of the state’s Medicaid program. Despite these efforts, pension reform remains a critical issue. To date, the governor acknowledges there has been no vote on a comprehensive pension reform bill – a solution needed to drive Illinois’ economy forward and generate revenue for more important initiatives.

While the need for additional cuts remains, the state’s overall proposed FY 2014 budget reflects a roughly $5 billion increase from FY 2013. The top vertical segment increases are in health care, general government, and economic development and regulation. The rise in health care’s budget falls in line with the governor’s $25 million investment in improving mental health and the recent signing of the Affordable Care Act, which will extend health care coverage to millions of Illinois residents.
 
Despite an overall budgetary increase, Governor Quinn remains committed to encouraging agencies to follow a “do the same with less” approach. Areas that received the biggest cuts include education (PK-12), public finance and homeland security, as seen below. Many of these department cuts may be attributed to the elimination and consolidation of 75 boards and commissions.
 
Figure 1: Illinois All-Funds Budget Vertical Comparison
 


Although budget projections reflect departmental cuts in education, early childhood education is a valued top priority. The state remains committed to investing in early childhood education as well as after-school programs to improve higher education rates. In addition, while justice and public safety spending remains stagnant, the governor outlined vital plans to tackle the violence epidemic that has plagued Chicago and other Illinois communities. 
 
Specifics regarding the state’s IT expenditures were not highlighted in Governor Quinn’s budgetary address; however, the overall IT budget is expected to drop from the previous year. Cuts will be seen throughout all verticals, with only transportation receiving a slight boost. This minor increase could reflect Governor Quinn’s plan for a Jump Start initiative for public transit in northeast Illinois. While there continues to be a need to maintain and upgrade the state’s technology systems, a greater need to improve efficiencies and correct financial mismanagement has stunted spending allocations for additional IT projects. Instead, Illinois will be looking to utilize technology for the purpose of enhancing current services as well as lowering operational costs.
 
Figure 2: Illinois All-Funds IT Budget Vertical Comparison
 
 
IT expenditures for general government projects have been on a slow decline since FY 2012. This is likely due to a major system implementation or overhaul that took place in FY 2012, which now only requires ongoing maintenance costs. This same explanation could be tied to recent IT spending drops within education. FY 2013 saw a sharp increase in health care IT expenditures, which could have resulted from the state closing a $2.6 billion annual gap in state Medicaid funding. In turn, this may have created more room for IT projects, some of which may be completed by FY 2014.
 
Analyst’s Take
 
The theme of this year’s budget is centered on doing more with less in order to restore fiscal growth. The lack of action on pension reform has exerted much pressure on resources that could be utilized for other important programs and services within education, economic development, public safety and human services. The state has been looking to tackle the pension crisis for several years as it has begun to affect funding levels for other core priorities. Although overall economic recovery is still tenuous at this point, once pension reform is under control, it is likely that the state will be able allocate more funds for IT projects that have been cut.
 
Despite a drop in IT expenditures, Illinois has not completely ignored the need to improve technological resources. Funding remains strong within health care IT, with funds appropriated for a medical data warehouse. In addition, the Illinois State Police has allocated funds for the replacement of statewide radio communications equipment and towers.
 
While many restructuring efforts will continue to remain in place for years, a road to recovery seems imminent and will create more opportunities for vendors. Contractors are encouraged to establish creative collaborations with the state to identify IT systems and approaches that can boost efficiencies by improving revenue collection and reducing costs. Vendors who succeed in this may very well create new lucrative business opportunities within the state.