Illinois' Budget Deficit Twice As Bad As You Think
From Crain's Chicago Business
Illinois' fiscal woes are significantly deeper and more serious than generally realized, with the state facing a $9 billion operating deficit in the fiscal year that begins July 1.
That's the horrific bottom line of a report released late Monday by researchers at the University of Illinois Institute of Government and Public Affairs, a study that may raise the eyebrows even of Gov. Bruce Rauner, who has been warning of huge financial problems ahead.
The conclusion: The actual deficit is about twice what is commonly reported, with the hole in the current fiscal 2015 budget not $2 billion to $3 billion but $6 billion, and rising to a projected $9 billion in fiscal 2016 and hitting $14 billion by fiscal 2026, assuming no changes in law or spending practices.
The report says the fiscal hole is so big that even fully reversing the income tax cut that took effect Jan. 1 would close "only about half" the gap projected for the next several years. Starting this year, the individual income tax rate went from 5 percent to 3.75 percent, and the corporate levy from 9.5 percent to 7.75 percent.
The hole is so big that even growing the state's economy an extra 0.5 percent a year for a decade would have "only a modest" impact, the report warns. And, significantly, so large that trying to eliminate the shortfall by cuts alone would result in a 20 percent reduction in spending on public education, Medicaid, public safety and more.
"Years of pay-later budgeting has resulted in a massive imbalance between sustainable revenue and spending," said Richard Dye, co-director of the institute's Fiscal Future Project, which produced the report. "Like a person in deep credit-card debt, the state has been spending more than it can afford, and is covering the gap by issuing IOUs."
Top Springfield players are not yet commenting on the report, which is gently titled "Apocalypse Now." But I expect an awful lot of chatter now that it's been formally issued.
Read more in our daily News Update...
From Crain's Chicago Business
Illinois' fiscal woes are significantly deeper and more serious than generally realized, with the state facing a $9 billion operating deficit in the fiscal year that begins July 1.
That's the horrific bottom line of a report released late Monday by researchers at the University of Illinois Institute of Government and Public Affairs, a study that may raise the eyebrows even of Gov. Bruce Rauner, who has been warning of huge financial problems ahead.
The conclusion: The actual deficit is about twice what is commonly reported, with the hole in the current fiscal 2015 budget not $2 billion to $3 billion but $6 billion, and rising to a projected $9 billion in fiscal 2016 and hitting $14 billion by fiscal 2026, assuming no changes in law or spending practices.
The report says the fiscal hole is so big that even fully reversing the income tax cut that took effect Jan. 1 would close "only about half" the gap projected for the next several years. Starting this year, the individual income tax rate went from 5 percent to 3.75 percent, and the corporate levy from 9.5 percent to 7.75 percent.
The hole is so big that even growing the state's economy an extra 0.5 percent a year for a decade would have "only a modest" impact, the report warns. And, significantly, so large that trying to eliminate the shortfall by cuts alone would result in a 20 percent reduction in spending on public education, Medicaid, public safety and more.
"Years of pay-later budgeting has resulted in a massive imbalance between sustainable revenue and spending," said Richard Dye, co-director of the institute's Fiscal Future Project, which produced the report. "Like a person in deep credit-card debt, the state has been spending more than it can afford, and is covering the gap by issuing IOUs."
Top Springfield players are not yet commenting on the report, which is gently titled "Apocalypse Now." But I expect an awful lot of chatter now that it's been formally issued.
Read more in our daily News Update...