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Flexible budget ideas
amid inflexibility of Medicaid
By Jennifer Halperin
The shortfall in Medicaid dollars announced early this year served as a reminder of how Illinois' financial situation — and that of all 50 states — is shaped by the state's obligation to fund health care for the poor.
This isn't a bad thing, in principle; health care for needy people is as noble a service as any around which a state's budget can be built. But what's frightening is the very real possibility that future Medicaid costs will increasingly threaten the state's ability to pay for education and other important needs. That must have been a sore spot for budget planners as they put together Gov. Edgar's new spending proposal, to be delivered to the General Assembly on March 15.
Realistically, there isn't much Illinois can do to move Medicaid aside as the state budget's driving force. After all, we're talking about health care costs for 1.3 million people. And no one yet knows what effect health care reform on the federal level may have on states' Medicaid obligations.
But in the meantime, Illinois lawmakers may do well to consider any of several suggestions that have floated around, designed to help states deal with fiscal troubles. For two years, a group called the National Commission on the State and Local Public Service held hearings throughout the nation to gather ideas on improving state and local governments. Chaired by former Mississippi Gov. William F. Winter and funded by grants from several charitable groups, it came up with a report based on 10 recommendations for improving government, which was presented to President Clinton last year.
The report contained some recommendations on topics with which Illinois already is wrestling, such as streamlining the procurement process and providing detailed information on campaign financing and lobbying. But it also includes suggestions on how to make states' budgeting processes more flexible. Perhaps the most intriguing one attempts to remove the disincentive for state agencies to save money.
In particular, the commission was targeting the tendency of state governments to require that state agencies spend all money in their budgets by the end of a fiscal year or send the remainder back into a general fund. Because this practice may lead to a cut in a department's appropriation during the following fiscal year, the message sent out is that frugality will not be rewarded.
In response, departments may experience a need to rush out and spend any money remaining in their "accounts" at the end of a fiscal year so as not to appear overbudgeted. While this practice may be good for office supply businesses, it may not be the most efficient way to spend taxpayers' money. To get around this "spend-it-or-lose-it" budget approach, commission members suggested allowing departments to carry over unspent funds from fiscal year to fiscal year. A good first step, they noted, would be allowing carryover of a quarter of a given budget line into the next fiscal year.
Another of the commission's suggestions was designed to increase the ability of public agencies to redirect funds quickly to meet emerging problems — an idea that may be good and efficient in theory but could be politically tricky to support. Since it would involve loosening restrictions on keeping money within narrow budget lines, it would seem to leave a great deal of discretion to random mid-level managers who weren't elected to make decisions involving budgeting and spending tax dollars.
Another suggestion involves some states' tendency to split what perhaps should be comprehensive bills into hundreds of pieces. Twenty-nine states now split their budgets into several spending bills. Illinois has 150 to 200 spending bills, an amount that pales in comparison
8/March 1994/Illinois Issues
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