There are two big stories here in Illinois and Chicago, respectively, that I think are interrelated and deserving of a bit of consideration. In the first the Illinois legislature passed sharp cuts in Medicaid:
SPRINGFIELD — Hundreds of thousands of poor Illinoisans would lose health coverage, prescription drug discounts for seniors would be dropped and dental care for adults would be greatly curtailed as part of $1.6 billion in budget cuts lawmakers approved Thursday.
The major Medicaid reductions ignited anger in some lawmakers who say the cutbacks will jeopardize the lives of the state’s most vulnerable residents.
“I don’t know where it’s written in the law that this has to be balanced on the backs of poor people, on the backs of seniors, on the backs of the aged, blind and disabled,” said Rep. Mary Flowers, D-Chicago.
But supporters argued failure to approve the bill could lead to cuts throughout state government and result in the collapse of the entire Medicaid system.
The House voted 94-22 to approve the measure, and the Senate later approved it 44-13. But cuts are only part of the equation to fix Medicaid. Gov. Pat Quinn is seeking support for a $1-a-pack increase in the state’s cigarette tax to help fill an overall $2.7 billion gap in Medicaid funding for the budget year that starts in July.
As I’ve mentioned before the price elasticity of demand of cigarettes (coupled with the ease of avoidance of the tax) strongly suggests that the additional excise tax won’t deliver as much new revenue as they think it will. That sound you hear is the convoy of trucks from Missouri, filled to their roofs with bootleg cigarettes.
Illinois’s Medicaid expenses have increased enormously over the last decade. Part of the reason for that is the general increase in costs in medicine. But another substantial component is the large expansion of the Medicaid roster in Illinois over the last decade or so. The requirements necessary to qualify for Medicaid in Illinois changed several times over the Blagojevich era and, as a consequence, that roster has something like 380,000 more recipients than it otherwise might have had.
On the one hand you’ve got to have some sympathy for people who without Medicaid would have no healthcare insurance and are faced with medical bills that go up faster than their wages do. But on the other hand a good portion of those who will be stricken from the Medicaid rolls as a result of the newly enacted reforms should never have been on Medicaid to begin with.
The other story is the ongoing negotiations between the City and the Chicago Teacher’s Union:
The union and CPS are negotiating with the help of an independent mediator. By law, that negotiation will extend until mid-July, barring an earlier agreement.
If there is no agreement then, the mediator will propose a compromise.
Both sides will have up to 15 days to accept or reject that compromise. If either side rejects the deal, the terms are then made public. That will give residents a full view of what’s on the table. Thirty days after the report becomes public, the union can call a strike.
That process was established last year by state law. The law was written to create a more deliberate and transparent labor negotiation, to reduce the impetus for confrontation. It also set a high bar for a strike — 75 percent of the members of the union must approve it.
So why all the talk right now about holding a strike vote?
“It is impossible to take a vote in summer when all our members are on vacation,” union vice president Jesse Sharkey said Tuesday.
The graph here should put both of these stories into some perspective. As you can see Illinois’s general fund revenues have been flat or declining for the last several years even taking the large increase in taxes that took effect last year into account.
The state of Illinois derives most of its revenues from three sources: individual income tax, corporate income tax, and sales tax. City and county governments derive most of their revenues from two sources: sales tax and property taxes. Since 2007 property values have been flat or declined, retail sales have been more or less flat, and incomes have been flat or declined. In Illinois cities and counties aren’t empowered to enact income taxes and the state.
The bottom line for the state, city, and county governments here in Illinois is that the things that they depend on for revenue have been flat and the things they spend money one, mostly healthcare and education, have been getting more expensive fast.
I understand that Medicaid recipients and teachers want more money. That’s human. Nearly all of us want more money. What I’d really like to know is where they think the money will come from?
Here in Chicago, for example, the starting salary for a teacher with bachelors only for a ten month job is half again the median income for the city. The base pay of the superintendent of Chicago Public Schools is around $250,000 with teacher and administrator salaries ranging between that and $50,000. Chicago is not empowered to enact an income tax. There are legal limits to the rate at which property taxes can be raised and property values have declined. The sales tax in the City of Chicago is already the highest of any major city, high enough to drive some retailers out of the city.
So, that’s the basis for my question. Wages for Chicago teachers are already high relative to wages in the community they serve. Revenues are just about maxxed out. The foreclosure rate in the Chicago metropolitan area is already ninth among major metro areas and higher property taxes will only exacerbate that. Where the heck is the money supposed to come from?