To Grasp Illinois’ Fiscal Predicament, Take Off Six Zeroes – Wirepoints Original
By: Mark Glennon*
Billions are harder to fathom than thousands. Former Illinois Comptroller Leslie Munger had a good way to illustrate Illinois’ financial status: Just take off six zeroes.
For Illinois, keep in mind that each thousand below actually a billion. And for some perspective, one thousand seconds is less than three hours. One billion seconds is over 31 years.
For those of you not following the budget crisis closely, imagine you own some kind of service business (services are most of what the state provides). Here’s the situation:
You’re bringing in about $32,000 per year and that’s about what your total top line income should be next year. (That’s total state tax and other revenue.) However, your top line receipts have been slipping. That’s partly because you’re losing customers. (People are leaving and the tax base is shrinking.) Customers think your prices are too high and your service stinks, so they’re leaving for lower prices and better service.
This year, you came up way short and all indications are that will happen in the coming year. Your accounting system says you’re spending $4,000 to $5,000 more per per year than you’re bringing in, but that’s because you’re using junk accounting software you bought from the government. Others taking a look at your books say you’re actually losing more like $13,000 per year at least, measured the way folks in the private sector do.
Then you look at the inbox. Ugly. You have $12,000 of unpaid bills from vendors — vendors you need — some of whom haven’t been paid in over 20 months. (Those are the bills sitting unpaid with the Comptroller.) Many of those bills are bearing a penalty interest rate over 12% per year.
But there are bigger problems. Much bigger.
You promised to send a check every month (pensions) to some of your relatives and that check has to grow 3% per year every year. Your government accounting software says that will eventually cost you about $130,000 more than you’ve set aside for those checks, but that’s just a guess; it may be much more. You already tried to break that promise in court but they said it’s as firm as the state’s constitution.
Just paying towards those pensions is costing you $8,000 per year already — about 25% of your income. But even that isn’t nearly enough, so that long term pension debt of $130,000 is growing and growing. Your government accounting doesn’t include that growing debt, which is the main reason why it doesn’t measure your annual loss correctly.
Oh, and those courts also said your on the hook for healthcare for those retirees, too. Add another $50,000 or so. You have nothing set aside to cover that. You never agreed to pay it but that doesn’t matter: The courts firmly ruled you have to pay it. (The Kanerva decision.)
Finally, you owe about $31,000 for money you borrowed (bond obligations). At least you’re keeping that current — they deduct that from your account automatically every month. (It’s a continuing appropriation.)
You only have about $12,000 in the bank. However, it’s maybe tied up for special purposes and you can’t find anybody who understands how or why. (That’s the balance at the Illinois Treasurer’s office.)
To summarize, you’re business is costing you about $13,000 more per year to run than the $32,000 you’re bringing in. You have bill collectors breathing down your neck for $12,000 and you owe another $211,000 longer term. Your customers are bolting for lower prices and better services elsewhere. You have only $13,000 in the bank.
What are you gonna do?
Why, just raise your prices (taxes). Problems solved! That’s pretty much all it would take, says the majority in the General Assembly, along with a little window dressing. It’s pure genius. Why haven’t we done that already?
*Mark Glennon is founder of Wirepoints. Opinions expressed are his own.