May 9, 2018
(CHICAGO) – In a report released today, the Civic Federation’s Institute for Illinois’ Fiscal Sustainability announced it cannot support Illinois Governor Bruce Rauner’s recommended budget for FY2019 because it is precariously balanced and its modest surplus relies on aggressive assumptions. Additionally, the proposal does little to address Illinois’ massive backlog of bills. The Institute’s full report is available here.
The State of Illinois’ financial condition is significantly improved from a year ago. The prolonged budget impasse is over, the operating deficit has narrowed and the backlog of unpaid bills has been partially reduced. Additionally, the Governor’s proposed budget is substantially closer to being balanced than his administration’s previous proposals. While the Civic Federation is encouraged by these developments, Illinois still faces severe fiscal problems, including staggering public pension costs, a large backlog of bills and a lowest-in-the-nation credit rating.
“Illinois residents were able to breathe a short sigh of relief following the end of the unprecedented impasse, but the State is far from fiscal stability,” said Civic Federation President Laurence Msall. “Unfortunately, the possibility of renewed political stalemate hangs over Springfield, and it would be financially reckless to wait until after the upcoming election to start working toward long-term stabilization. The State narrowly avoided a downgrade to junk status last year and another impasse could squander recent progress.”
The proposed budget relies on the sale of the James R. Thompson Center for the third year in a row and on speculative group health savings. The proposal also depends on shifting pension costs back to Chicago Public Schools, which would further destabilize the State’s largest school district. In total, the Civic Federation is concerned about $1.8 billion in precarious projected savings or revenues, as the evaporation of any of these projections could put the meager surplus in jeopardy.
Further, the Federation cannot support a budget proposal that does not effectively address the State’s bill backlog, which is expected to stand at $7.7 billion at the end of FY2018. Because of the backlog, the State begins each fiscal year in a hole, using revenues from the current year to pay off the previous year’s obligations. Even if the $351 million surplus in the Governor’s budget were realized and used to pay these bills, the backlog would only be reduced slightly by the end of FY2019.
The Civic Federation continues to recommend a comprehensive plan featuring spending restraints paired with broadening the tax base to allow for lower rates. The Federation’s plan proposes that Illinois expand the income tax to federally-taxable retirement income, place a constitutional amendment on the ballot to clarify the pension protection clause, broaden the sales tax base and consolidate and streamline government units throughout the State.
“In order to move forward, the residents of Illinois need more than a budget that works on paper; they need a sustainable and long-term plan,” said Msall. “Unfortunately, this proposal does not accomplish that goal.”