How much worse can Illinois’ financial mess become?

July 19, 2011

 

According to the National Conference of State Legislatures, Illinois ended Fiscal Year 2010 in worst financial shape than any other state in the country, with a total state debt of $120,743,392 when compiling outstanding debt, pension and OPEB UAAL’s, unemployment trust funds and the 2010 budget gap as of July 2010.

How do Illinois legislators and officials propose to change the direction of this state from its deplorable and unsustainable financial situation to one of gradual financial recovery?

The signing by Governor Pat Quinn of the FY2012 budget on June 30, 2011 only augmented Illinois’s tenuous financial condition.

The “House Budget Plan” that awaited Quinn’s signature before June 30 had a general fund budget of $33.2 billion. This same $33.2 billion figure was reported by many news outlets. In reality, as reported in a Tax & Budget Brief published by the Illinois Policy Institute on June 21, accounting gimmicks were used to hide significant spending such as deferred payments for medical assistance and nursing home programs.

Properly accounted for, the “House Budget Plan” would have cost at least $34.2 billion and would have set the stage for a cumulated deficit that could exceed $11 billion within five years and $25 billion by the end of this decade.

What Governor Quinn signed on June 30 was a slightly watered down, reduced state budget with a general fund total of $32.98 billion. This came about when Quinn vetoed $376 million in spending found in the General Assemby-approved 2012 “House Budget Plan” for Busing, Education and Medicaid and $336 million in so-called redundant appropriations.

The 2012 “House Budget Plan” already had called for a $537 million reduction from the state’s Medical Assistance program. The budget signed by Governor Quinn on June 30 cut an additional $276 million from Medicaid. This will increase the payment cycle from 110 days to 163 days. Nevertheless, Illinois will still have to pay for medical services. Less money means bills are simply paid more slowly. Unless things change, about $1.5 billion in Medicaid bills will be left unpaid at the end of the year, with a backlog of unpaid bills of $6 billion or more.

Out of transportation money Governor Quinn’s cut $11.3 million that the state provides to local schools. Eliminated from education was the $11.3 million the state provides for regional offices of education around the state.

In light of the budget Quinn signed on June 30 with cuts that reduced the original “House Budget Plan” by $713 million, will the results differ from those projected by the Illinois Policy Institute?

Has spending really decreased after the January tax hike of the state income tax from 3% to 5%? Is Illinois really on the path to sunset the income tax hike as promised?

The recently passed 2012 budget signed by Governor Quinn puts Illinois on a projectory to higher taxes and more debt unless significant spending reductions are made in the immediate future. As it is, Illinois is still on track to push about $8 billion of unpaid bills and obligations incurred this fiscal year into the next year in the wake of its newly passed state budget.

In contrast, the Illinois Policy Institute Budget Solutions 2012 offers a Road to Prosperity. It has outlined a $27.6 billion budget plan that would have been sustainable without January’s tax increase, yet it included appropriate funding for core government services and full payments to pension funds and bondholders. www.illinoispolicy.org

Those who truly desire an eventual sunset of the January tax increases, and not an increase down the road, must demand spending reductions that are free of gimmicks that hide significant spending. Borrowing more money so Peter can pay Paul is no way to deal with finances whether at the family, business or the state level.

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