Mayor Belsky Calls for State Budget Reform

Recently “Highland Park Patch”
asked readers to chime in on how to fix the State’s fiscal problems. While
there is much to be done to achieve structural balance between assets and
liabilities there are a few governance changes that would certainly help. The
State of Illinois uses a three year forecast of revenues and expenditures
including one for the annual budget.
What is lacking is a consensus on these revenue forecasts. Each year the
Governor’s budget office will prepare an estimate of revenues, prior to
adoption of the budget. These are primarily based on economic factors
underlying the sales and income tax, such as unemployment and growth in
discretionary income levels. Concurrently the legislature, through its Commission
on Government Forecasting and Accountability, provides its own revenue
forecast, (as they should, given their power of the purse). The problem lies in
the fact that they can and have adopted budgets where the estimated funding
sources can vary between the two branches of government. Often this is a form
of political gamesmanship that lends nothing to getting an accurate forecast of
revenues and therefore a responsibly adopted budget. This lack of consensus
does have ramifications as I heard first hand. Last year I spoke on a panel
sponsored by” Bloomberg News”. The topic was Illinois’ downgraded bond ratings.
The State is rated at the low end of the A category, the lowest amongst all
states. This has increased   borrowing
costs. One of the panel members was the lead analyst at Moody’s covering
Illinois. He specifically mentioned in his remarks that this lack of consensus
revenue forecasting was a negative for Illinois. Almost half the States require
a consensus forecast between the executive and legislative branches, prior to
the adoption of the budget. Some of the best models include a Consensus Conference with not only
financial representatives of the legislative branch such as appropriation
committee chairmen (Illinois does this) and executive branch (e.g. budget
office), but independent outside parties as well. These include bank and
academic economists residing in the state. Through its major money center banks
and excellent universities, both public and private, the State of Illinois
certainly has resources that can be drawn upon for this purpose.  Some states also include participation by
financially related constitutional officers such as the Treasurer and
Comptroller. Disagreements in forecasts between all these parties are handled
through an iterative voting process. The Consensus Conference should meet quarterly or more frequently,
as needed ,to review actual revenue receipts relative to forecasted amounts.  If
revenues are below forecasts, the
Governor should be required, without legislative approval, to make across the
board mid - year spending cuts to align revenues and expenditures.   Any
dollars coming in above estimates should be used, at year end, to build up a
fund balance for” rainy days” and or pay down the pension liability. Cuts may
seem heavy handed if no legislative approval needs to be sought. However, if
this process is put into law ahead of time the legislature has, in effect, had
their say. Will these proposals solve the state’s fiscal woes?  Probably not as that will take financial
discipline and political will. Having said this, these processes may increase the
chances of getting there. 

Michael D. Belsky, Mayor of
Highland Park (2003-2011)