Study: Ill. in fiscal mire

( ())

E-mail this story

Print this story

Share

Illinois is one of 10 states headed for economic disaster, according to a new study.

Illinois, Arizona, Florida, Michigan, Nevada, New Jersey, Oregon, Rhode Island, Wisconsin and California are identified as those most at risk of fiscal calamity, according to Pew Center on the States 2009 report.

Illinois received a grade of C- for its fiscal management. Only Rhode Island and California received lower grades.

“Illinois’ budget gap for fiscal 2010 was one of the three biggest in the country: $13.2 billion. But Illinois has run deficits ever since the last recession in 2001,” the study states.

One expert quoted in the study said that the hole was too big to be filled, even by a tax increase: “The difficulty is there is not a tax increase big enough to allow the state to keep spending at the level it has,” said Lawrence Msall, president of the Chicago-based Civic Federation, a business-oriented group that studies state and local government.

The Pew Center study hammered state elected officials for putting off bills.

For example, Illinois routinely has pushed back making Medicaid payments. In 1998, unpaid Medicaid bills totaled $752 million; that rose to $1.85 billion in 2003. The study states that this practice proved disastrous when the recession hit: “The amount of its unpaid bills quadrupled to $3.9 billion in a one-year span that ended in June 2009.”

State Rep. Jack Franks, D-Woodstock, said he was not surprised by the state’s low grade. He said budget cuts are needed.

“Everyone agrees that there must be cuts,” Franks said. “Unfortunately, when it’s time to make the tough decisions, we don’t; we just decide not to pay the bills.”

The Pew Center also was critical of former Gov. Rod Blagojevich’s first budget in 2003.

Blagojevich’s plan involved floating $10 billion in 30-year bonds and letting the state pay two years’ worth of pension payments with the proceeds. The study states that Illinois took credit upfront for all of the profits that would accrue over 30 years. The recession hit, however, and the state has earned only 3.8 percent on investment of its bond proceeds.

“I thought it made sense at the time; I don’t believe anyone envisioned what was going to happen [with the economy],” Franks said. “It’s easy to be an armchair quarterback on that one.”

Franks said the pensions were funded at only 48 percent and that improved to 60 percent. He said that when the state did not follow through on the plan and reduced the annual catchup payments, he voted against it.

The Pew study states that Illinois would have to find $3.4 billion to make next year’s annual pension payment and the state also will owe an additional $800 million to pay back this year’s short-term loan.

The study paints a bleak picture for next fiscal year, forecasting a budget shortfall of $11.7 billion, without taking into account rising costs.