Notes from the Field...

January-February 2011

Springfield Update

In the waning hours of the 96th General Assembly a bill passed the legislature that combines spending caps and increases in income tax rates with mixed results for human services.

SB 2505, signed into law as Public Act 096-1496 on Jan. 13, raised the personal state income tax rate to 5% and the corporate income tax rate to 7% through 2015. As a result, annual revenues are projected to increase by approximately $7 billion. From 2015 to 2025, the personal income tax rate will fall to 3.75% and the corporate income tax rate will drop to 5.25%.

Beginning in 2015, .25% of the personal income tax increase will go towards human services and education through two newly established trust funds: The Commitment to Human Services Fund and The Fund for the Advancement of Education. The fund for human services, estimated to bring an additional $400 million to programs, represents the first time the sector has received a set aside. Still, it is unclear if human services funding will actually increase given past cuts and those anticipated in fiscal year 2012.

At the same time, SB 2505 imposes hard spending caps on future budgets. General fund spending growth will be limited to 2% annually between fiscal years 2012 and 2015. Because of pension contributions and Medicaid obligations the spending cap will result in cuts to state programs - including human services. With pension and health care costs growing about 8-10% per year, the spending cap will force legislators to cut about $800 million in the 2012 fiscal year and $2.2 billion from fiscal years 2012 to 2015 combined.

Based on recent appropriations, there is reason for concern about the impact on human services funding. For the current fiscal year, $576 million has been slashed from the Department of Human Services. Human services cuts in this year alone accounted for almost $1 of every $5 cut over the past two years, or 19.2% of $3 billion in total reductions. The state's human services budget fell from about $4.05 billion in fiscal year 2010 to about $3.47 billion in fiscal year 2011. Grants worth $515.7 million were cut, reducing or eliminating non-Medicaid programs in mental health, developmental disabilities and rehabilitative services. Furthermore, there is still the very real possibility of further cuts to human service programs for the current fiscal year under the Governor's Emergency Budget powers.

In a recent survey by Illinois Partners for Human Service, more than 95% of the 282 human services agencies responding reported negative effects of state budget cuts. The survey showed half of organizations reduced hours or their level of service. More than 40% saw their waiting lists grow and almost 30% had to refer clients to other providers with no guarantee they would be served. Almost 30% shut down programs, which eliminated essential services and jobs in the community. Survey results also are broken down by Cook County, northern counties, north-central counties, south-central counties and southern counties.

Another budget reform bill, HB 5424, will implement "budgeting for outcomes," a set of policies that requires the Governor and state agencies to prioritize outcomes and undergo performance measurement, allowing the state to make funding decisions based on sound evidence about the most effective programs. United Way of Illinois will work with other stakeholders to ensure priority setting takes into account the expertise of the philanthropic and nonprofit sectors in Illinois.

Streamlined Auditing

The Streamlined Auditing Bill (HB 5124), endorsed by United Way of Illinois and a focus of our advocacy on Lobby Day last April, was signed by the Governor as Public Act 96-1141 last summer. This legislation requires several state departments to reduce administrative costs associated with duplication in program and accreditation audits as well as agency oversight. United Way played a key role this fall as a member of the steering committee charged with producing a report to the General Assembly. The process was a model for partnership between the nonprofit sector and government, as well as inter-agency collaboration at the state level. The final report had recommendations in seven categories:

  1. Deemed Status for Accreditation
  2. Fiscal Audits
  3. Centralized Repository
  4. Medicaid
  5. Technology
  6. Contracting
  7. Streamline Monitoring Procedures

While the Steering Committee was only charged with producing the report, it has also begun contemplating the implementation process, and is committed to working collaboratively with all parties to bring the required changes to fruition.

211

Activity continues on a number of fronts to move 211 from the pilot stage to more expansive implementation. A committee of the 211 Illinois board, which was selected as the lead entity to govern and manage the program, reviewed and recommended changes to its contract with the state. We are currently awaiting the state's response. A meeting was held with the new permanent director of 311 in Chicago to explore possible coordination with 211. United Way Metro Chicago convened a meeting with information and referral providers to begin discussing the development of a calling center for the metro Chicago area. Our three pilot programs in cooperation with the United Way of the Quad Cities, The United Way of Greater St. Louis and United Way of McLean County continue to serve 13 counties in Illinois. A recent 211 report showed increased call responses. At the federal level, our valiant efforts to pass the Calling for 211 Act came up short when key committees were unable to recommend the bill for consideration by either the House or Senate.

Stress Testing the Human Services Sector

United Way of Metro Chicago funds 257 agencies consisting of over 450 programs. As part of their due diligence process to ensure quality investments they require agencies to report their financial performance. They review their Net Profit (Loss), Days Cash on Hand (60-day benchmark) and Current Ratio (1.5:1 benchmark). Among the findings from their most recent audit:

UWMC continues to monitor their performance and work with them to provide technical assistance as appropriate. Agencies are addressing their situations in a variety of ways (e.g. staff layoffs wage and benefit reductions)

A version of this "stress test" is now being considered by local United Ways across Illinois as a tool to improve their own evaluation of agency capacity and to develop a statewide picture of the financial condition of the human service sector.

Human Services Database

Work continues to progress on this initiative aimed at developing a process and supporting tools to enable human services funders to make informed decisions surrounding provider funding, resource needs and available service offerings to meet the diverse needs of Illinois communities. A data sharing agreement and governance charter are close to approval by the state's Department of Human Services, the City of Chicago, the Chicago Community Trust and United Way of Metro Chicago. An RFI process to identify a database custodian conducted interviews of four prospective vendors and is now preparing its recommendations. A fundraising plan is in development with the intent to seek corporate and foundation funding in 2011

Illinois Partners

Illinois Partners for Human Service, the statewide coalition in which we played a founding role just a few years ago, now has over 600 members in every county and legislative district representing the full range of human services. The advocacy and active engagement of its members has had a dramatic impact on a number of issues affecting the sector and resulted in major achievements including the human service funding set aside in the recent tax bill signed into law. During the fall gubernatorial campaign, Governor Quinn and representatives of Sen. Bill Brady both responded to specific questions concerning the human services sector during the coalition's special call-in meetings. The coalition also worked closely with the Governor's Office of Management and Budget to expedite payments to providers and market a new vendor payment program to reduce the delay in payments. Conducted in the fall, the state budget impact survey referenced above demonstrated the dramatic impact that funding cuts continue to have on programs and employment. The survey resulted in extensive statewide press coverage and a story in The Washington Post.

Human Services Commission

The second report issued by the Commission in December, "A Review of Past Efforts and Current Directions," captures lessons learned from key human services reform efforts and recommendations made by hundreds of lawmakers, advocates, service providers, consumers and experts serving on various commissions, task forces and advisory councils. The recommendations were sorted by issue areas or populations served.

Renewing the Social Compact

With dramatic changes at the national level and unprecedented challenges in our state, it is more important than ever for nonprofits, foundations and government to form strategic partnerships to advance good public policy. Brent Never's essay "Renewing the partnership between the state and nonprofits" reframes Illinois' fiscal and systems failures as a breakdown in the key partnerships between government and nonprofits. He issues a call to action for the state, nonprofits and philanthropies to form a social compact that will move us forward. The essay, which was published by Illinois Issues and commissioned by Donors Forum, also examines how a problem similar to the breakdown in Illinois was tackled in England and in New York City. United Way of Illinois is included in photos and references to our survey results.