By: Mark Glennon*
“Illinois end of year budget deficit to top $6 billion.” That and similar headlines were very common across Illinois over the past week.
Uh-uh. The real deficit Illinois faces is clearly well over twice that and might easily be over three times that.
The deficit report on which the headlines are based is reproduced below. Look at the column for 2018. That’s the one that matters because that fiscal year starts this July 1. It shows a deficit of $7.651 billion.
For starters, go to to the bottom where there are three line items separate from revenues totaling a little over $1 billion. Those are funds the state is drawing down and should not be counted as income to calculate a meaningful deficit.
Now, go back up and look at the 2018 pension contribution of $7.889 billion. That’s not nearly enough just to keep the pensions even. It’s about $3.2 billion short of what’s needed to keep their unfunded liability from growing further.** That $3.2 billion, at a minimum, should be in a meaningful deficit estimate.
And how about that $14 billion in unpaid bills now sitting on the Illinois Comptroller’s desk? Let’s be unreasonably optimistic and assume those vendors could somehow be strung out for seven years with no interest or late payments. That’s another $2 billion per year.
We’re already up to a true deficit over $13.8 billion, over twice the current year’s supposed deficit.
You could easily keep going much further.
The coming year’s projection assumes a revenue increase of about $1 billion based on current tax rates, but revenues have in fact been declining.
You might add the additional cost of help for CPS and other broke school districts and municipalities. The school funding bill now on Governor Rauner’s desk, SB-1, would cost another $3.5 to $6 billion!
You could add more in for social services, providers of which are going broke. The state’s projection assumes continuation of the austerity now in place.
You could add billions more to amortize the current unfunded liability, which widely accepted accounting standards say Illinois should be doing.
Make those further adjustments and you’d find the real deficit to be three times what was officially reported for this year.
Meanwhile, even the Democratic majority in the Illinois House was unwilling to pass a tax increase that would cover just the phony, official deficit numbers for the year now ending. That would end the careers of many of them, they know.
That’s the genuine bind Illinois is in, not some ego clash between Governor Rauner and House Speaker Madigan. Voters and those they’ve elected simply have no stomach for anything remotely close to the tax increases that would be needed to close the real budget deficit. And they’re right, because any such increase would spark a stampede out of the state.
The narrative on our fiscal crisis remains fictional.
*Mark Glennon is founder of Wirepoints. Opinions expressed are his own.
**That’s annual normal cost for state’s pensions, plus annual “interest” that effectively accrues on the unfunded liability at the assumed discount rate, minus the annual contributions by the state and employees, all for FY2018. For a more detailed calculation by an actuary using numbers from several years ago, coming to about the same conclusion, see our earlier article linked here.