By: Mark Glennon* “The hard (for some) truth is this: Illinois fiscal condition is in its best shape since September of 2001.” That’s from Illinois State Rep. Mike Zalewski (D-Chicago) on Twitter Thursday. For proof he linked to a WBEZ column with this glowing headline, “After Years Of Mockery, Illinois Is Finally Earning High Marks
By: Mark Glennon*
“The hard (for some) truth is this: Illinois fiscal condition is in its best shape since September of 2001.” That’s from Illinois State Rep. Mike Zalewski (D-Chicago) on Twitter Thursday.
For proof he linked to a WBEZ column with this glowing headline, “After Years Of Mockery, Illinois Is Finally Earning High Marks Over Its Finances.”
That’s preposterous, but it’s no doubt prologue to the high-fives and backslapping we’ll be hearing from Illinois lawmakers and much of the media over the new state budget.
Let’s take a look at Zalewski’s claim first. Our fiscal position is better than it has been since 2001? Really?
It was bad enough back then, but Illinois has since that time gone off the cliff and, no, the new budget is not helping it climb out.
Since 2002, the state has plunged into a debt abyss, escape from which is difficult to envision. It lost $180 billion since then, sinking its Net Position to negative $186 billion. Its officially reported unfunded pension liabilities alone soared from $35 billion in 2002 to $144 billion today.
Back then, it was putting under $2 billion per year into pensions. Under the new budget pensions will take $9.4 billion from the General Fund alone. On top of the payments from the General Fund, another $1.2 billion in pension payments will come from other budget funds, meaning the state’s total retirement costs will be an estimated $12.4 billion in 2022.
The state’s credit rating was downgraded 22 times in just the period from 2009 to 2020. Despite a shrinking population during the period, the state budget soared by 63% though inflation accounted for just 22% of that increase. In 2002 the personal income tax rate was 3%. Today its 4.95% and most homeowners are paying property taxes two or three times what they paid in 2002.
We could go on and on about the hole Illinois has dug, and there’s nothing in the new budget that changes anything. Maybe it will get a credit upgrade because the can has been kicked for at least a year, but nothing that will take it away from near-junk status.
The WBEZ article by Dave McKinney and Tony Arnold is equally baffling. “JB Pritzker fully funds big priorities, lacks some of the familiar accounting gimmicks of years past and appears balanced. Yes, balanced,” they wrote.
Like heck it’s balanced. Even by phony budget accounting it’s over $400 million short. Far more importantly, however, is that the budget ignores growing debt, including growing unfunded pension liabilities, and pensions are by no means “fully funded. Correct pension costs – based on the pension funds’ actuarial reports – would add another $4 billion in expenses to the budget, while retiree health insurance costs would add about $2 billion more. That’s where losses get stuffed that add up to the debt burden strangling the state.
And there’s no “accounting gimmicks” in in the new budget, as McKinney and Arnold wrote? This year, they added perhaps the biggest gimmick we’ve seen by entirely ignoring a $5.2 billion hole created over the past year in the state’s unemployment trust fund. That fund had to borrow $4.2 billion from the federal government and it depleted another $1 billion of its assets. The new budget does not address repayment of that loan or replenishment of the fund.
Most importantly, the only reason why pressure came off the state budget is that that the federal government rained cash on the state, local governments and taxpayers. The state got $8.1 billion and local governments got another $13 billion. Tax revenue held up remarkably well thanks to massive, direct federal aid to individuals and business. It won’t be repeated.
The WBEZ article does make the point about federal cash and does say that the pension problem was not addressed, but somehow nevertheless claims Illinois is earning high marks. That makes no sense. It’s like saying, “Except for the problems, all is well.”
Another error in the WBEZ article is its focus on the reduction in the state’s backlog of unpaid bills. It claims that “a concrete data point reflecting the state’s improved fiscal condition is the $3.8 billion in unpaid bills Illinois owes. It’s a sobering amount. But in 2017, that total stood at more than $16 billion, one of the most glaring calamities caused by the two-year budget impasse between then-GOP Gov. Bruce Rauner and Democrats in the legislature.”
No, it’s not a meaningful data point. The backlog is just one of hundreds of accounts the state has. The backlog can be run up or down depending on where the state chooses to put its cash. The backlog has also been reduced thanks in large part to billions of dollars of borrowed money, which is just moving debt from one credit card to another. In addition, the Illinois Treasurer began using its assets to pay down the backlog.
And the previously high backlog was not the result of the budget impasse or Rauner. That’s party propaganda and WBEZ should know that. Tax collections were not suspended during that impasse. The backlog began to improve when the impasse ended chiefly because of the huge jump in personal income tax rates that accompanied the budget that finally passed. In fact, it began to improve significantly before even that.
One other thing about the rosy spin on the new budget that should sadden everybody no matter what their politics. Helping disabled adults, who suffer through no fault of their own, should surely be a priority no matter whether you believe in big government or small. Illinois has long been among the worst states in funding that obligation.
But the disabled got shorted again. Lawmakers now devote nearly 30% of the budget to pensions and found enough money for their own pay raise and larger staffs, but the disabled are out of luck. Read the Chicago Tribune’s editorial on that. “If the measurement of a well-run government is how it cares for its most vulnerable, Illinois is in a shameful, low rung,” it says.
“High marks” for the Illinois budget, that WBEZ headline says.
You grade it yourself.
*Mark Glennon is founder of Wirepoints.
For further background on these matters, see the following Wirepoints’ pieces:
- Illinois 2022 budget: The state’s financial cliff will be waiting after the federal largesse runs out –
- New Illinois Budget Ignores $5 Billion Hole In Unemployment Insurance Fund –
- Mass Federalization: How Washington is Bailing Out Failed States, Decapitating Competitive Ones and Ending America As You Knew It –
- Susana Mendoza Just Can’t Stop With Her Biggest Whopper –
- Illinois’ crisis: 20 facts Pritzker doesn’t want ordinary Illinoisans to know –
- Dog chasing tail? Legislation Proposed to Authorize Illinois Treasurer to Buy Receivables Owed by the State –
- Illinois Comptroller: Moving Debt From One Credit Card To Another Is ‘A Win Win Win’ –
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