Report: Illinois' budget picture will be bleak for years

URBANA — Even if lawmakers extend an income tax increase that is supposed to expire in January 2015, Illinois' structural budget shortfall is so bad that it will continue to deteriorate to at least 2025, according to University of Illinois economists.

Likewise, solving the state's pension problem — unfunded pension liabilities are approaching $100 billion and are expected to continue to grow for at least a decade — won't be enough to fix Illinois' financial woes.

And the state has approximately $6 billion in unpaid bills "that must be paid from future revenue, thus crowding out future spending on other priorities," wrote authors

Richard Dye, Nancy Hudspeth and David Merriman of the UI's Institute of Government and Public Affairs.

They conclude that "Illinois' current revenue and spending policies are unsustainable" and that the state "has a chronic, structural fiscal problem and must either take action to reduce spending, increase revenue or some combination, to avoid facing fiscal imbalances for many years to come."

But the Legislature appears reluctant to act either on the pension problem or the income tax issue. A special House-Senate pension committee appointed in June has yet to develop a plan that satisfies a majority of its members. And there's been virtually no discussion of extending the temporary tax increase that was enacted in January 2011.

Gov. Pat Quinn said earlier this month that he didn't want to talk about a tax increase until the Legislature enacted a pension fix.

A few lawmakers, including local Democratic Sen. Mike Frerichs and Rep. Naomi Jakobsson, have proposed a progressive income tax that would increase revenue to the state, but the suggestion has lukewarm support among their colleagues.

The IGPA report says that even if the current, higher income tax rates are continued, Illinois' annual budget deficit would increase from about $1 billion on Jun 30, 2014, to $7 billion on June 30, 2025. And if the temporary tax rates are allowed to expire the deficit would be $14 billion by June 30, 2025.

"Higher tax rates alone will not solve the state's structural fiscal problems," the IGPA researchers said.

Nor would pension reform alone, they agreed.

And if there was no pension reform, no increase in tax revenue and spending based on current levels and past growth patterns, Illinois' annual deficit would be about $16 billion on June 30, 2025.

Without specifically naming names, the IGPA researchers placed the blame for Illinois' poor financial condition mostly on impeached Gov. Rod Blagojevich and the Legislature.

"From FY 2003 to 2008, which were good years for economic activity and revenue collection, the General Assembly and governor approved budgets with spending well in excess of revenues," they wrote.

Blagojevich became governor in January 2003 and signed off on budgets beginning in fiscal year 2004 through 2009.

"It is clear that Illinois is still mired in a chronic condition which predates the recession, and constrains government's ability to implement and administer policies," said the IGPA researchers. "Illinois' fiscal condition contributes to economic and policy uncertainty for citizens, businesses, nonprofit organizations and local government."

Comments

News-Gazette.com embraces discussion of both community and world issues. We welcome you to contribute your ideas, opinions and comments, but we ask that you avoid personal attacks, vulgarity and hate speech. We reserve the right to remove any comment at our discretion, and we will block repeat offenders' accounts. To post comments, you must first be a registered user, and your username will appear with any comment you post. Happy posting.

Login or register to post comments

Joe Melugins wrote on October 29, 2013 at 7:10 am

Illinois does not have that bad of a spending problem.  It is in the bottom 5 of all 50 states in total state expenditures per capita.  Illinois is dead last in total state expenditures per capita among our neighboring states.                              http://kff.org/other/state-indicator/per-capita-state-spending/

Illinois also has the fewest number of state employees per capita. http://evanstonnow.com/story/government/bill-smith/2011-12-21/46892/ap-i...

On the other hand, over 30 states have higher top individual income tax rates than Illinois 5%. And most of those have progressive tax rates.  One can compare Illinois' 5% rate to the tax rates of the other 50 states at:  http://taxfoundation.org/article_ns/state-individual-income-tax-rates-20...

 

kiel wrote on October 29, 2013 at 7:10 am

Excellent points! These would be viable ways to address the budget issue.

What is stunning to me is how the governor and legislature of this state can be from the same party and STILL not seem to be able to address structural budget and pension problems in a long-term, sustainable way. I've never seen such disfunction within a party before (and I'm saying this as a lifelong Democrat who grew up in a functional state). I cannot figure out how the leaders of the party in this state can be so inept...

EdRyan wrote on October 29, 2013 at 12:10 pm

Once upon a time Illinois had a big strong industrial economy.  The politicians in Springfield could get away with a lot because the big strong industrial economy could absorb it.  But then the politicians in DC decided to sent our big strong industrial economy to China.  The politicians in Springfield were able to keep up business as usual for some time because of the tech and housing bubbles.  But now all the bubbles have burst and the chickens have come home to roost.  The politicians in Springfield have made so many deals and given away so much to keep getting votes that they don't have any idea how to do anything else.  They must make hard decisions and enact legislation that will make many if not most people want to vote for someone else and they can't get a grip on this fact.

Lostinspace wrote on October 29, 2013 at 1:10 pm

"But now all the bubbles have burst and the chickens have come home to roost."

 

No chickens were harmed in this explosion.

EdRyan wrote on October 29, 2013 at 5:10 pm

But they may be roasted later.

EdRyan wrote on October 29, 2013 at 9:10 am

Illinois exempts pension income from state income taxes.  Doesn't matter how much income you have reported on those 1099-R's, you don't pay tax on that income. Providing a tax break to low income senior citizens is reasonable, but this is a wholesale tax giveaway shifting a big piece of the state tax burden to other people.

Sid Saltfork wrote on October 29, 2013 at 10:10 am

After Mr. Fuddles, and the General Assembly finishes stealing the pensions of the eldery retired workers; the temporary tax increase will become permanent.  ADM, CAT, and assorted other corporations will get their tax breaks.  The General Assembly, and Mr. Fuddles will continue spending on illegal aliens for votes, and tax breaks for the corporations for "campaign donations" (bribes) once the pension debt has been illegally erased.  

The state bondholders better start worrying.  Once the pension debt to the elderly, public employees has been defaulted on; the bondholders are next.  Illinois political corruption has no limits.  Neither does the media have any limits on their propaganda, or shame.

Theft is theft no matter how you justify it.  Pay your bills like everyone else!!