DETAILS MATTER by Bob Ginsburg June 28, 2021
Budget Season in Illinois: Spin, Illusion, and Statistical Mis-direction
Welcome to Details Matter a Newsletter about urban development, public finance, Transportation, and politics in Chicago and Illinois. You can subscribe/unsubscribe at (https://robertginsburg.substack.com/welcome). Get previous issues which mostly focus on dealing with the fiscal crisis at (https://robertginsburg.substack.com/archive). PLEASE FORWARD if interested.
Budget Season in Illinois: Spin, Illusion, and Statistical Mis-direction
"There are three kinds of lies: lies, damned lies, and statistics" (Disraeli)
'Statistics is the art of never having to say you're wrong. '(Mark Twain):
‘The devil is in the details’ (likely a 1990’s corruption of an old German proverb — “Der liebe Gott steckt im detail”, which translates as ‘God is in the detail.’ There are many, many misattributions to both variations)
Before getting into the substance, I must acknowledge being AWOL the last two months. There were a few other projects and deadlines, family issues, and, to be honest, so much was happening in Washington, Springfield and Chicago that I was not sure what to say or that I had good enough information to really say anything substantive before it became out of date. I also underestimated how hard it is to write a regular newsletter. My respect for those who can write a daily or weekly column has increased greatly as I went from weekly to bi-weekly to monthly. I will continue to try and write something relevant every week or two (or three?).
But now we are in budget season. The State budget has now been approved and the state and federal contributions to the City and County budgets are set as they are starting their real planning process. Congress has been discussing Infrastructure Bills. The Federal government finally has begun specifying how much state and local aid would be forthcoming even if they haven’t specified all the restrictions on spending it. Not that anything is much clearer but there is more to talk about.
I know this will sound unhinged but budget season in one of my favorite government seasons. There are numbers, policies, mysteries, mis-direction plays and real policy consequences. Even more important to me, is that the details matter. Budgets are real policy details and are the ultimate example of the adage- “the Devil is in the Details.” The Spin, Illusion and Statistical Mis-direction games make it more difficult to see if the budget is a substantial down payment on real change or just a place holder. Budgets sometimes get you too little, alienate supporters and do not build for the future but sometimes can make real progress. The challenge is to figure out what is actually in them.
SPIN
The other day Cook County announced its preliminary budget numbers and it sounded like only good news. Lots of revenue, a pretty small projected deficit and no likely need for new taxes or layoffs. Great Headlines and even Greg Hinz praised the announcement. As I read the preliminary analysis (2022 County prelim) I was struck by how little reference was made to the hospital system cuts last year, the other county cuts and position eliminations last year and the year before. Looking at the Hospital numbers (see the chart in the next section) I was struck by how ALL health delivery expenses in 2021 (e.g. expenses outside of Health Plan/County Care) came in $21M below 2021 budget levels except for County Care which was $347M over budget. Yet 2022 is projected to spend $64M more on health care delivery in 2022 than they actually spent in 2021. What are they going to spend that on? Two days after the announcement, 2,500 hospital employees including 1000 nurses went on strike demanding the County hire more nurses and ease their work loads. Those staffing problems have been growing over the last 4 or 5 budgets but never successfully addressed. Budgets aren’t just numbers, they represent action plans. The preliminary budget report tells very little about what will be different in 2022 than was planned at the start of 2021 or 2020. The underlying problems in the 2020 and 2021 budgets have not been addressed. Uncompensated care will be an even bigger issue in 2022. Getting more patients to use general and specialist services at Stroger, Provident and Oak Forest will be an even greater challenge. But the “Spin” won out over details.
Additional Questions that were not addressed in the Report and press conference:
1. What is the breakdown of County Care revenue into (1) outside providers, (2) ad
ministrative costs; (3) reimbursements to Stroger and Provident and CCHHS clinics
2. What were the # of budgeted employees at end of 2021 and end of 2020
3. What were the # of vacant budgeted employees positions (at end of 2021 and end of 2020)
4. What was the Total Patient count at CCHHS facilities in 2021 and 2020
5. What was the total # of paying patients at CCHHS facilities in 2021 - breakdown by services provided
6. What was the # of patients who could not or did not pay and the cost of their health care
7. What was the total cost of Uncompensated care (Charity and Bad debt) in 2020, 2021, and 2022(est)
Illusion or Do not look behind the curtain
First back to the County. On June 24, Cook County presented a preliminary budget forecast showing an “optimistic” budget recovery and “showing” what a good job the County did to manage the fiscal crisis. Given the strike two days later by nurses and other hospital workers on staff shortages and significant increases in employee payments for health care, a closer look at the Health System part of the preliminary budget forecast is in order.
The Preliminary budget did show, correctly, that the hospital system will have more revenue. That is true. But by combining all the numbers together –both the revenue/expenses for $2.5Billion insurance company that is County Care and the $1.1Billion expenses/revenue for providing health care it gave the illusion that we will be spending a lot more money on health care. The reality is that spending on health care by the County system has not kept up with inflation. Below is a table comparing 2019 (pre-pandemic) expenses with the proposed 2022 appropriations. (NB. Actual health care expenses have fallen well below appropriations each year) The Reality is that the County Insurance company is doing well but health care delivery system is not. Breaking out the numbers differently raises a few more questions about health care delivery. The related question is how much the County Insurance company is actually doing to support the County Hospital system which is the biggest health care safety net in the region. In FY2020 only 10% of County care premiums were paid out for medical expenses at the CCHHS hospitals and clinics. CCHHS also had $409M in charity care and $181M in bad debt. Before claiming budget victory, more information and explanation is needed.
Comparison of FY2019 CCHHS Rev/Exp with Preliminary FY2022 CCHHS Budget
Second, the City presents its own illusions (sometimes confused with “Spin”.) The Mayor of Chicago has recently announced projects in the Invest South/West program as a demonstration of her successful effort to direct investment into underserved communities. There was even the recent announcement by a community group of a City grant program for equitable TOD projects. These are great, even essential, initiatives and programs and rhetorically better than previous efforts. But, rhetoric aside, the question remains if they are more than the “trophy” projects of the Mayor Emanuel years (remember, for example, the Whole Foods store in Englewood where the former Mayor had multiple ribbon cuttings.)
This brings us to the $1.8B in Federal relief (ARP) coming to the City. The Mayor is giving the illusion of a series of community budget hearings to work out how to spend the $1.8B in ARP money AND what should be in the 2022 City budget. By holding COMBINED hearings it gives the illusion of input but it really limits discussion of long term investments since tying ARP funds to budget lines means annual re-appropriations and changes. Rahm Emanuel eliminated the Community policing Bureau in 2011 and then alternatingly reinserted the positions and then cut them again according to political need. The ARP funds should cover revenue shortfalls AND long term investments to address the problems and inequities shown so clearly in the pandemic.
Still unanswered, however, is a more important question: Will Invest South/West kindle a renaissance in wide swaths of Chicago where previous economic renewal efforts have failed to produce meaningful improvement? Lightfoot's ultimate goal is to catalyze broader gains across the South and West Sides, spawning jobs, new businesses and opportunities for the people who live there.
Individual Invest South/West projects can't achieve that objective alone. Each is expected create a few dozen jobs at most. The hope is that they will draw in more investment by demonstrating the economic potential of communities covered by the program. Whether this will be a remedy for the economic woes of long-depressed neighborhoods remains to be seen. Only after projects are completed can we begin to gauge their economic ripple effects and only if we know that the companion pieces are part of the plan
What we do know is that a single, high-profile project won't lift an entire neighborhood out of poverty by itself. Invest South/West will achieve that goal only if it ignites a self-reinforcing cycle of investment in areas once overlooked. And that cycle only starts with “fertile” ground. Creating stable neighborhoods and communities in conjunction with some local development will lead to better health, life outcomes and broader economic development. (Neighborhood effects-NBER2021) A thriving community needs real (simultaneous and comprehensive) plans for sound infrastructure investment. Investment is needed in effective, reliable and regular public transit, affordable and stable housing, stable and effective local schools, access to reasonable health care and access to computers and broadband. That infrastructure investment along with funding community organizations will produce safe communities which can thrive. A clear process to start making those investments is what is needed. At this point, there is no clear roadmap for the companion investments.
Statistical Mis-direction
As discussed above presenting “data” is not the same as being transparent. It is “necessary” but “not sufficient” without the tools and other context needed for evaluation and to create solutions. For example, we always have more information about the State budget revenues (but not expenses) than any other budget in the state. COGFA (cogfa monthly) puts out monthly reports on state revenue through the month of April (10 months of the fiscal year). The Comptroller updates daily the backlog of unpaid bills. In that context, the proposed state budget presented in February is always the starting point for the budget process. This year, the February budget proposal had 2022 revenue levels at roughly 2021 budget levels. However, even at that time, there was little doubt that revenue levels would NOT stay that low especially as they did not include the guaranteed increase in income tax revenue in 2021 from pushing tax payments from 2020 to 2021. Income tax revenues for 2021 were guaranteed to be much higher than budget.
Sure enough, the misdirection worked. “Incredible” revenue gains became clear in early March 2021 (cogfa-March) that the 2021 revenue would be more than $2.3Billion over 2021 budget levels and by early May (cogfa-May) the revenue was estimated to be $4.3Billion over 2021 budget levels. Yet the Governor’s Office of Management and Budget was still not providing an alternative budget or priorities for how to allocate additional state revenues (separate from Federal Recovery Act –ARP- funds.) When the announcement came in mid-May that there was so much extra revenue, plans for how to allocate that revenue were presented at the same time.
The “surprising” revenue was immediately “allocated” to paying back the state loans from the federal reserve bank, restoring education funding, and eliminating cuts to municipal and transit shares of state revenues. There was great relief and great headlines but no real surprise. In the final budget, most of the Federal ARP funding was not allocated leaving investments in communities, hospitals and transit to wait. Supposedly, no one had the time or the information needed to direct that investment.
What Comes Next?
As groups are laying out their plans for spending federal recovery plan funds (e.g. another $5.5Billion at the State and $1.8Billion for the City and $1Billion at the County), decisions will have to be made and budgets crafted. Next week will be a discussion of the pitfalls and compromises awaiting those decisions especially in whether they succeed in making investments not subject to annual budget whims.