Study: Illinois budget deficit may top $9B

CHICAGO – Illinois’ budget deficit could surpass $9 billion, according to estimates in a report released today that criticizes Gov. Pat Quinn for artificially inflating the amount of money the state has to spend and contributing to an unbalanced budget that pushes the state’s problems into the future.

The Civic Federation said Quinn’s proposed budget did not account for $971 million that the state should set aside to pay for anticipated income tax refunds and to clear a backlog of refunds to businesses that dates to 2008. That accounts for about $2.4 billion of the anticipated budget deficit in fiscal year 2012 when combined with a $1.45 billion budget gap caused by proposed new spending, the report said.

The rest of the deficit comes from $4.6 billion in unpaid bills and $2.4 billion in Medicaid and insurance obligations – for a total estimated deficit of $9.4 billion.

The exact size of the deficit has been difficult to pin down. It was estimated at $15 billion before legislators passed a 66 percent temporary personal income tax increase and a separate corporate rate increase.

The report also criticized Quinn’s plan to borrow money to help close the budget shortfall, reduce the refund backlog, and pay Medicaid and employee health insurance claims, saying it could cost taxpayers up to $4 billion in interest during the next 15 years and worsen the state’s financial condition.

Phone and email messages left with a governor’s spokeswoman and a budget office spokeswoman Sunday afternoon, before the report was released, were not immediately returned.

But Quinn last week defended his plan, despite widespread criticism of its $1.7 billion in additional spending, saying “I think it’s the best budget.”

Civic Federation Laurence Msall said he was encouraged that Quinn and lawmakers were looking at ways to resolve the budget crisis, including Quinn’s plan to pay pension-fund contributions out of the operating budget and Medicaid reforms passed by lawmakers and signed into law by Quinn.

But Msall said it was the responsibility of lawmakers to identify things in the budget that should be reduced or eliminated to meet the constitutional requirement of a balanced budget and prevent an “enormous negative impact” on the state’s finances and credit rating.

The report urged lawmakers to reject Quinn’s spending increases and borrowing plans “and rely instead on budgetary restraint to honor its commitments to vendors, local governments and taxpayers.”

But it already seems unlikely that lawmakers would adopt Quinn’s budget. Democrats in the Illinois Senate began passing a budget last week, using revenue projections rejected by the governor and the Democratic House. But Republicans said the proposal wouldn’t cut spending enough but didn’t introduce their own legislation.

Democrats indicate they would soften some specific cuts proposed by Quinn – for instance, reducing Medicaid rates by 3 percent instead of the governor’s 5 percent – while imposing broad operations cuts at many agencies.

Democratic lawmakers approved an income tax increase earlier this year that is supposed to be temporary. It has helped bring the state closer to matching revenues and expenses, but Illinois government still has about $8 billion in overdue bills and obligations it must pay.

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