DRAFT – NOT FOR PUBLIC DISTRIBUTIONFact Sheet on Illinois Human Service Funding
1) From FY 2003 through FY 2010, Illinois cut human services funding by an annualaverage of $ 385 M, after adjusting for inflation. Over the same period humanservices should have received on average approximately $169 M more per year toaccount for population growth. Together these two shortfalls imply that Illinoishuman services would have received about $ 4.4 B more funding over this period hadthe State maintained real per-capita appropriations at FY 2002 levels.
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Most taxpayers do not realize that state government provides very few human service programs directly. Instead, the state contracts with private sector providers, that in turn deliver the services. Hence, spending cuts on human services fall on private sector workers and businesses, hurting local economies statewide.
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Figure 1 shows annual General Fund appropriations in millions of current, non-inflation adjusted dollars for the Departments of Aging, Children and Family Services, andHuman Services, that together directly or indirectly fund most human services provided inIllinois. Many critics of public spending complain that these appropriations seemingly increaseevery year, which they claim demonstrates irresponsible, profligate spending. Although thesecritics are correct when pointing out that appropriations tend to increase annually in nominaldollars, that alone tells very little about whether spending is truly increasing or not, because itmisses two crucial factors—the impacts of inflation and population growth. Although all threedepartments have increased in current, or nominal, dollars, as will be shown below this is nottrue when inflation is taken into account. It is also not true when population growth, whichincreases the demand for human services, is taken into account.
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Figure 1: Annu
FAgingChildren andFamily ServicesHuman Services
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As prices for inputs such as labor, insurance, utilities, gas and health care increase,the cost of providing a given level of human services increases. Hence, any evaluation of public spending over time must be adjusted to account for inflation, to determine whether inreal terms spending on a particular service has actually increased, merely kept pace withinflation, or decreased. To use numbers to illustrate this point, if it cost $100 to provide aservice in year one, and inflation increased by five percent over the year, then buying the samelevel of services in year two would cost $105. Anything less would not pay for continuing theservice at the same level.
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Using the Midwest Consumer Price Index (MWCPI) published by the U.S. Bureau of Labor to estimate the impact of inflation on human services costs in Figures 2 and 5 below.
These Figures show that from FY 2003 to FY 2010, Illinois cut human services funding by anaverage of $385.1 million per year in real, inflation adjusted terms. In other words, humanservices would have received $ 3.1 B more funding from the state General Fund over this period had appropriations just kept up with inflation after FY2002. Put another way, in realterms Illinois is spending significantly less on human services today than it did eight years ago.
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This generally will result in more conservative estimate of inflation than that provided by the Employer Cost Index(ECI) which measures the increased costs of labor, the largest component of human service costs, over time.
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Figure 2: Human S(i
Total HumanServicesAppropriations inCurrent $Real Value of 2002
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The cost of human service provision also increases as the state’s population increasesas is shown in Figure 3 and 5 below. The Illinois Department of Commerce and EconomicOpportunity estimates that the state’s population will increase by 6.7% from 2000 to 2010.
This translates into a yearly population growth rate of 0.65%. Assuming that the costs of providing human services to this increased population grow at the same rate, human costswould have required approximately $1.4 B over this period to maintain services at FY2002levels at the level relative to the increased state population.
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Though there may be some “economies of scale” in human service provision, as overhead can be spread over larger participant pools, as most of the cost of services is based on direct care, a proportional increase with population growthis a justifiable rough estimation assumption. What is not subject to dispute is that real costs will go up as needsincrease with increased population.
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CTBA Human Services Fact Sheet
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| Upload Date: | 11/25/2009 |
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