DETAILS MATTER by Bob Ginsburg October 18, 2021
CURRENTLY All our budgets are wonderful in the short-term AND All our budgets are horrible in the long-term.
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CURRENTLY All our budgets are wonderful in the short-term AND All our budgets are horrible in the long-term.
‘The devil is in the details’
I apologize for taking so long in writing this newsletter given the release of the City and County budgets. I had hip replacement surgery last week (my third such surgery) and the few weeks before were difficult. However, while I may have been in physical pain, I could still be amazed at the discussions about the City and County budgets. The Tribune editorial on October 10 praised the proposed County budget for no tax increase, funding for new programs and finally increasing staff in the hospital system (despite years of increasing revenue from County Care). At the City, there was a similar response except for the scheduled property tax increase. In reality, the City and County budgets were carefully constructed to minimize immediate opposition by funding popular and needed programs and leaving control of the implementation of those programs firmly behind the closed executive branch doors. Further, there was no long term plan to fund the new programs or address the structural deficit. As is usual, the budgets leave long term funding and structural change to future years. For the progressive legislators, a guarantee of consistent long term investments in underserved communities and populations is still not present. Conservative groups clearly feel that they have many more attempts to reverse any short term investments and keep the status quo.
Long term vs Short Term in the City Budget.
Increases in the City budget did not show up in more positions but in contracts and overtime. In the basic services of Tree Trimming and Rodent control there was no increase in FTE’s for “Vector Control” while Tree Trimming lost 8 FTEs. On the other hand, Rodent control added $204,000 in Overtime and $519,000 in Contracts for Professional and Technical Services. Tree Trimming (e.g. Bureau of Forestry added $827,000 in Overtime and $511,000 in Contracts.) The Chicago Police Department played similar games. $1.09B in salaries (about 10,000 positions) was switched from the 1st Deputy Superintendent to the Bureau of Patrol in an accounting move to make comparisons more difficult. The Bureau of Detectives added 85 positions in the “Fugitives” section despite the rhetoric about increasing commitments to community policing. The final result is that the total FTEs for CPD increased by 8 positions in 2022 from 2021. The budget also expects much higher levels of retirement as the turnover rate in 2022 (the amount of salaries not expected to be spent due to vacancies and delays in hiring) nearly doubled to $70.3M in 2022 over 2021. There is no reason to believe that the number of vacant budgeted positions will change from the 960 reported at the end of July. This is the usual game in budgets where contracts, overtime and hiring slowdowns are increased but the overall government capability is not. Rather than creating a long-term solution, the budget puts a Band-Aid on which can easily be removed next year as federal funds dry up.
The City budget has a number of interesting initiatives such as the guaranteed payments, affordable housing, rent subsidies, etc. The long term impacts won’t be known for a couple of years. There is still no Department of Environment. There was no pool of City funds in the ARP to insure that the Invest South/West comprehensive plans (linking transportation, housing, economic development, health care, and education/training) proceed clearly. There is no reference to increased coordination from the Mayor’s office despite the 27 FTEs increase in the staff of the Mayor’s office compared to the last full budget of the previous mayor.
Finally, it is curious that the number of grant funded positions in the City according to the Budget Overview, Budget Recommendations and the ARP funds report is unchanged from 2021. With over $2Billion in federal ARP funds coming in to the City (primarily divided between CDOT at $662M, DFSS at $360M, Aviation at $329M, Public Health at $119M and OMB at $103M) it appears it is all going into grants and contracts with no increase in the staffing and capabilities of the departments. This budget appears to begin restructuring the City government and services but it mostly continues the pattern of reducing government capabilities and turning operations over to contractors. That does not bode well for future governments.
Long term vs short term in the County budgets
The opening discussion and spin of the County budget can be seen in the cover letter for the budget:
This budget contains historic investments in restorative justice, violence prevention, digital equity, public health, workforce training, affordable transportation, and housing assistance, and builds on our long-standing commitment to increased equity funding in our County budget. It does all of this without the need to increase taxes, fines, or fees …. (we have) instilled sound fiscal discipline, reduced headcount, closed billions of dollars of budget gaps, and worked to address pension and legacy debt… through an equity lens to address decades of trauma and disinvestment.
On the surface it appears to be the best of all possible worlds – more investment, more employees, and better programs. The other emphasis in the budget is a long discussion (pps 20-33 of the executive Budget Recommendation) of uncertainties in revenue and expenses and a substantive analysis of the modeling used to estimate long term trends. Such long term planning is unusual in budgets in Illinois though in this case I would imagine it is to give cover to the assumptions in the budget. Even so, the City budget would be much improved if it engaged in such analysis of revenue and expenses. However, details are lacking. There are no detailed plans for how the funds will be spent or by whom. The $52M Equity Fund will report later on where the money will go. There is no discussion on what could be funded next year or the year after. Rebuilding communities and insuring opportunities for at-risk youth will require years of reliable funding. The same questions apply to the $33.7M for criminal justice reform, the Coronavirus Relief Funds (CRF) or $82M and the $1B in ARPA funding.
Even larger uncertainties still remain with the hospital system. The key issue for the hospital is how they will increase patient revenue from Medicare, Medicaid (especially County Care) and private insurance. All the analysis in the world is meaningless without a clear plan and strategy for HOW CCHHS will attract more patients with insurance to use the Cook County Hospitals and Clinics system. That has been the challenge –unsuccessfully met- for the last 30 years yet the budget only posits that Medicaid and County Care payments (e.g. as part of Net Patient Service Revenue or “NPSR”) will increase by 1-2% per year – a level never previously achieved. The “analysis” avoids any discussion on how it will be achieved, how the additional staff and services will attract new patients and how the hospital and clinic system will market its services and actively recruit new County Care members. For example, why doesn’t the County set up a program with City Clinics to make sure all their clients are signed up for County care? The underlying question is how the County Board will track and oversee the process. Legislative Oversight by the County Board has been rare over the last 100 years.
Long term vs short term in the State budget
There are similar issues in the state budget but I want to point out one which clearly shows the need for oversight. In the State budget, IHDA was authorized to borrow $100M for affordable housing to be backed up by federal Coronavirus funding. This is a major investment in the construction and operation of affordable housing. There is no doubt that the Governor and legislators will campaign on this in the short term even if they do not know what it will actually change or actually accomplish. What is not clear is how it will take to invest those funds, how they will be invested, who will monitor and evaluate results, etc. The State’s track record in this in the past has been very uneven. Any change will require real legislative and public oversight on IHDA which has never occurred before. Thus, results are “TBD.” We will need 10-20 years of investment to create stable, diverse communities. We still have not created the structures to insure that.
So, why are the long term prospects questionable?
Ever since the Reagan presidency began 40 years ago, we have seen a reduction in the funding, resources and capabilities of government at all levels. More importantly, the “accepted wisdom” has been that the private sector can deliver programs better. Countering that is part of a larger discussion, but what has been missing and mis-understood, is that the private sector does not plan long term. Quarterly results dominate corporate decision-making. Once a project is done, the private sector is gone unless they get paid at a cost + profit basis. We create government to look to the long term development. The results of short-term thinking and planning are obvious in our urban and rural areas. I recognize how uneven the government has been but there are key examples going back to the Homestead Act and the creation of Land Grant colleges in the 1860s to the creation of Social Security, and the FDIC(with Mortgage guarantees) in the 1930s, to Medicare and Medicaid and Head Start in the 1960s and to the ACA in 2009. Long term solutions are harder to create because they need institutions to oversee them. Creating vibrant urban and rural communities, reinvigorating and expanding public transportation, insuring reasonable housing for everyone, and insuring quality education and training for all residents will take a long time after more than 40 years of disinvestment. We need a vision and we need to start building those investments in our budgets now. The current budget investments can easily disappear next year or the year after. The libertarians and the Republicans do not build but only take things away so their job is easier. They believe that time is on their side. We are now living with the world the Heritage Foundation started building in their Transition proposals for the Reagan presidency. Waiting another 10 years may be too late for another “New Deal.”