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Cuts Constitute Steps Backward on Illinois’s Path to Economic Recovery

 

Chicago, IL – The Center for Tax and Budget Accountability (CTBA) and the Social IMPACT Research Center released a new analysis that highlights how large cuts to human services, which provide supports for some of the most vulnerable people in the state, will send shockwaves through the state’s economy. The new research, entitled Ramifications of State Budget Cuts to Human Services: Increases Job Loss, Decreases Economic Activity, Harms Vulnerable Populations, shows these cuts could result in nearly 4,000 lost jobs and a $458.5 million loss to Illinois’s economy.

While budget discussions are just beginning, the three year budget projection issued by the Governor’s Office of Management and Budget as part of the new Budgeting for Results process indicates that the human services budget area will receive a significant cut of $350 million dollars from FY2012 to FY2013. This cut continues the pattern of human services taking the brunt of budget cuts. Faced with cuts of this magnitude, human services providers will reduce hours, lay off staff, close facilities, or do all of these things. Not only does this impact thousands of Illinoisans who rely on these programs, but the cuts will have a direct economic consequence on our state.

Since most human services are delivered by private, nonprofit businesses, the vast majority of the economic effects will land on the private sector. When organizations providing human services must cut programs and reduce services, these actions ripple through the economy causing job loss in communities all across Illinois:

•    A budget cut of $350 million to human services could lead to nearly 4,000 jobs lost.
•    A cut of $500 million could lead to over 5,700 jobs lost.

Many of these lost jobs will be in human services. Human services do not exist in a vacuum, however, and many private businesses in Illinois rely on the business of human services organizations and human services workers. These businesses would be directly impacted by a negative ripple effect associated with cuts to the human services budget. Human service organizations and workers will have less income to spend in their local economies, so restaurants, retail outlets, car repair shops, office supply stores, and hosts of other businesses will have fewer customers and see revenue decline, and in this manner job loss would extend well outside of just human services workers.

More broadly, cuts to human services will translate directly into decreased economic activity statewide, and the report shows that could result in a loss of $458.5 million to our economy. The actual negative economic impact of a cut to the human services budget exceeds the actual size of the cut since spending on human services generates $1.31 of economic activity for every $1 spent. In other words, state funding to human services functions as an economic engine and removing it from the economic chain has serious consequences:

•    A $350 million cut to human services pulls $458.5 million out of the Illinois economy.
•    With a cut around $500 million, Illinois’s economy would suffer a $655 million loss.

“By cutting human services funding further in the next budget Illinois is lengthening the time it will take to fully recover from the Great Recession,” said Yerik Kaslow, Director of Education and Social Policy Analysis at the Center for Tax and Budget Accountability and co-author of the report. “Since human services are often the most cost-effective approaches to treating and solving social problems, with these cuts we are allowing social problems to become more entrenched and more difficult to address, which sets the stage for more costs to all Illinois taxpayers.”

This is not simply a point-in-time issue—cuts to human services accumulate: the $1.64 billion dollar cumulative underfunding of human services since 2002 likely led to the loss of over 18,000 private sector jobs in Illinois over that same period. As of October 2011, the State had a backlog of bills to human service providers totaling nearly $459 million, which has the effect of withholding over $600 million from the Illinois economy.

 “We’ve heard from our network of human services providers about the terrible consequences state budget cuts have had on the people they serve, leaving so many Illinoisans without the supports they need to achieve safe and stable lives, “said Judith Gethner, Executive Director of Illinois Partners for Human Service. “This new analysis shows the domino effect reaches even further, killing job growth and slowing the recovery, which constitutes short-sighted decision-making.”

Illinois is in the midst of recovering from the worst recession in two generations. Job growth and increased economic activity are of paramount concern, to voters and lawmakers alike. Ramifications of State Budget Cuts to Human Services provides evidence that public spending on human services serves as an economic stimulus for jobs and private spending in the broader Illinois economy. Adequate public spending also has the longer-range benefits of avoiding future social problems and associated costs. In light of this, cuts to human services are short-sighted and detrimental to Illinois’s economy.

Authors Yerik Kaslow and Amy Terpstra will be available for a teleconference press briefing at 3:00 p.m. on Thursday, March 22, 2012. The dial in number is 1-888-296-6500; guest code 541424.

Founded in 2000, the Center for Tax and Budget Accountability (CTBA) is a nonprofit, bi-partisan research and advocacy think tank committed to ensuring that tax, spending and economic policies are fair and just, and promote opportunities for everyone, regardless of economic or social status. CTBA uses a data-focused, bipartisan approach to work in partnership with legislators, community groups, and other organizations to help change both public policy and perceptions. Visit www.ctbaonline.org to learn more.

The Social IMPACT Research Center (IMPACT) is a nonprofit organization that investigates today’s most pressing social issues and solutions to inform and equip those working toward a just global society. IMPACT, a program of Heartland Alliance for Human Needs & Human Rights, provides research, policy analysis, consulting, technical assistance, communications, and coalition building to projects in Illinois, the Midwest, and nationally. Visit www.heartlandalliance.org/research to learn more.

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