Chicago faces an austerity crisis. In the coming months, decisions at the state and federal government level could profoundly affect social services in this city and others across Illinois. Chicago has little say in what happens next, especially relative to the degree of change that the city faces.
At the state level, budget negotiations have reached a boiling point. Eighteen months in the making, the Illinois budget must address serious revenue problems, including at least $11 billion in unpaid bills. The Senate aims to address its budget shortfall through a “grand bargain” that will rely on new taxes. Illinois Governor Bruce Rauner, a Republican, has a grand bargain of his own, a deficit plan that would implement a freeze on property taxes and other austerity measures.
Meanwhile, President Donald Trump reiterated his keen interest in Chicago’s murder rate yesterday on Twitter. Chicago figures prominently into Trump’s law-and-order presidency: During his first week as a confirmed member of Trump’s cabinet, U.S. Attorney General Jeff Sessions met with Chicago Mayor Rahm Emanuel to discuss ways to “bring back proactive community policing.”
Other federal machinations, however, may affect Chicago even more profoundly than intervention into its homicide crisis—namely a tax reform bill that promises national austerity and unprecedented domestic spending cuts.
Chicago has enough grand bargains to last the city for a while. But bargains that impose austerity aren’t a good deal for the city.
Illinois faces pressure to balance its budget by slashing spending
At the end of January, the Illinois Policy Institute released a plan for meeting the state’s projected $7.1 billion deficit without raising taxes. Balancing the budget without any revenue hikes necessarily means cutting spending or services, and the Illinois Policy Institute plan does both. The proposal is a dramatic example of red-state austerity budgeting, one that would freeze property taxes, cut spending for grade-school and higher education, eliminate “pensions pick-ups” (public contributions), and cap Medicaid expansion.
The Illinois Policy Institute goes even further by recommending changes to the political fabric of the state, such as the consolidation of various municipal government entities. Relative to that plan, the governor’s proposed budget is modest, although what the public knows about it is limited. Rauner isn’t answering questions about how his spending plan works or how it will affect negotiations in the state legislature. One question to start with might be how Rauner arrives at a $4.57 billion baseline for Illinois’s 2018 budget deficit, which is lower than other official estimates.
The mechanics of Rauner’s spending plan are somewhat mysterious. As Chicago’s Center for Tax and Budget Accountability notes, the governor’s balance sheet starts with a budget basis operating surplus of negative $4.57 billion (the deficit). The plan assumes that “working together on a ‘grand bargain’”—with no more detail than that—will produce savings of $4.57 billion. Presto! A balanced budget.
As CTBA’s Daniel Kay Hertz explains, any plan to rescue the state budget without increasing revenue would necessarily involve draconian cuts. One of the austerity plans for Illinois is simply more detailed than the other.
This is an excellent precis on how draconian public service cuts would have to be to balance IL's budget w/o taxes https://t.co/8FDh9Mt87I— Daniel Kay Hertz (@DanielKayHertz) January 31, 2017
Spending cuts that draw down aid for food, housing, supplemental healthcare, and public education will fall disproportionately on vulnerable families that rely on these services. Hospitals and universities are already feeling the sting. The American Federation of State, County and Municipal Employees just approved a statewide strike.
“There’s some irony in the notion that while President Trump rails against the purported carnage in Chicago’s streets, the state has not been able to fund several successful antiviolence programs, including Operation Cease Fire and Redeploy Illinois,” writes Nonprofit Quarterly.
Federal austerity will only exacerbate Chicago’s problems
Tax reform—the grandest bargain of them all—is ostensibly next on the Republican agenda, after it figures out what to do about Obamacare. Under a GOP-controlled government, tax reform is bound to mean spending cuts for social services. But there are two different flavors of tax reform in the making, one favored by House Speaker Paul Ryan and one favored by Trump.
A recent report from the Center on Budget and Policy Priorities, a nonpartisan nonprofit, shows the enormous gulf between these two plans. According to the report (and reporting by The Hill), the Trump administration is planning a package of budget cuts that could only be described as generational. The Trump budget plan may feature $8.5 trillion in cuts to non-defense discretionary spending, an unprecedented program for national austerity.
Last week, the Senate confirmed Mick Mulvaney, a House representative from South Carolina, to serve as the director of the Office of Management and Budget. Mulvaney is a notable supporter of Trump’s so-called “penny plan,” a campaign pledge to slash non-defense discretionary spending by 1 percent of prior year levels for every year over a decade. By 2026, the penny plan would result in domestic spending at 37 percent below the level in 2010. “Cuts of these magnitudes would have devastating effects on tens of millions of less-fortunate families and on an array of basic services that middle-income Americans, as well, rely on,” writes CBBP’s Robert Greenstein.
Per The Hill and other reports, Trump officials are building the budget on blueprints designed by the Republican Study Committee and the Heritage Foundation. The latter’s austerity plan calls for major cuts to entitlement programs, including Social Security (12 percent), Medicare (31 percent), and Medicaid (35 percent). The biggest spending cuts in the Heritage plan come in non-defense discretionary spending (50 percent).
This kind of budget-slashing can’t be made up just by cutting the paltry funding for PBS and the National Endowment for the Arts. And if the president has said that he intends to protect Social Security, meaning that his administration will need to reach even deeper into other purses. This is grim news for vulnerable households that rely on aid. Project expenditures for assistance for low-income families, for example, already show this spending falling below 1990 levels by 2026 (per a report released by CBBP this week).
Even if the next budget doesn’t go so far as Trump’s penny plan or $10 trillion cuts in spending, its effect on low-income families will be pronounced. The House Republican budget plan calls for enormous cuts to the Supplemental Nutrition Assistance Program and would further convert it to a block grant—a prescription for sharp declines in funding. Pell Grants would face big shortfalls as well. Cuts to unspecified low-income aid programs would make up the rest of the nearly $3.7 trillion in cuts over a decade.
Chicago wouldn’t be alone in facing new problems from spending cuts on aid. But Chicago is unique in a couple of respects. The city is also looking at potentially severe spending cuts from the state government. And, for whatever reason, Chicago is a city that seems to absorb Trump's attention, perhaps because its high homicide rate conforms to his views that law enforcement is being stifled by the forces of political correctness.
Of course, Trump’s vivid portrait of the “inner city” is out of date. Despite a recent nationwide uptick in violent crime, homicide rates are down from historical highs in all but four major U.S. cities: Baltimore, Milwaukee, Memphis, and Chicago. That doesn’t diminish the severity of the crisis in Chicago, but it does suggest that any federal approach on crime should consider that cities with soaring homicide rates are the exception, not the rule. Meanwhile, poverty is increasingly migrating from the cities to the suburbs. As a report from the Brookings Institution shows, suburban households accounted for 55 percent of Supplemental Nutrition Assistance Program recipients in 2012, up from 51 percent in 2007.
Wherever they live, low-income minority families will be hardest hit by austerity cuts to aid. In Illinois, that place is predominantly Chicago. In the state’s 7th congressional district, families that rely on SNAP—one out of five households—have a median income of about $18,000. In districts 1 and 4, which also touch Chicago’s South Side, the rates of SNAP aid are similarly high.
Cutting aid to vulnerable families or the services they rely on will only exacerbate the city’s woes; Chicago can’t afford a pinch from both state and federal governments.