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.
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."