Thursday, October 25, 2012
A new national report that dissects Illinois' dismal financial outlook echoes concerns that Republican lawmakers have been raising for years. In short, the Illinois report of the State Budget Crisis Task Force warns that Illinois has dug itself into a deep financial hole, largely over the past decade.
"Illinois' budget is not fiscally sustainable," the report bluntly states and later adds, "Illinois has been doing backflips on a high wire, without a net."
While the report is long on details when it comes to Illinois' financial mismanagement, it is short on specific solutions. Instead, the authors say they hope that by highlighting the serious problems facing Illinois it will spur the public to insist on reforms.
Of course, neither the findings, nor the call for reforms are news to Republican state senators, whose warnings have gone largely unheeded throughout the Blagojevich and Quinn administrations.
Most of the report's findings will be familiar to anyone who has followed Illinois' financial crisis in recent years. For example, the report states:
"Illinois has the worst unfunded pension liability of any state, an estimated $85 billion."
"Medicaid enrollment and expenditures in Illinois doubled between 2000 and 2011, growing far more rapidly than tax revenue."
In the area of Medicaid spending, the report does credit the state with adopting important cost-cutting reforms in 2012. (Most of those reforms were first proposed in a Senate Republican Caucus "Reality Check" plan in 2011).
However, the Quinn administration has come under criticism of late for apparent delays in implementing those reforms and the new study warns that even those changes are unlikely to bring Medicaid spending down to manageable levels. The report says that under the federal Affordable Care Act (Obamacare), up to one million new persons could be added to the Medicaid rolls in Illinois. Even though the federal government will be on the hook for most of the new Medicaid costs, the state's costs could still rise by 10 to 20 percent by 2020.
The report also devotes a significant section to "uses and misuses of state borrowing." The report criticizes the use of debt to "plug budget gaps and borrow to finance current cash deficits. Financing deficits, particularly using debt as if it were an element of revenue, is bad financial and budgetary practice."
Blagojevich and Quinn, along with their legislative allies have consistently used or sought to use borrowing to avoid tough budget decisions. In fact, Quinn's plans for massive new borrowing have been blocked only because it requires a supermajority vote in the legislature and Republican lawmakers have refused to authorize the added debt.
According to the report, Illinois ranks second in the nation in debt per person, at $9,624 in state and local debt for every man, woman and child in Illinois. Only New York is deeper in debt, at $13,840 per person. However, of the 10 states with the highest debt per person, Illinois actually has a higher percentage of state debt (vs. local government debt) than any of the other states.
State debt has skyrocketed under one-party control of the legislature and the governor's office and Illinois has the worst record of any state in the nation for credit downgrades during the past decade.
"Illinois' high levels of debt have contributed to its deteriorating bond rating," the report states. It also declares, "Illinois' heavy reliance on debt is unsustainable."
The report offers no simple solutions, but does reflect many of the recommendations that Republican senators have long argued for: more honest and open budgeting and making tough decisions sooner, rather than later.
The State Budget Crisis Task Force is co-chaired by former Federal Reserve Chief Paul Volcker and Richard Ravitch.
Volcker headed the Federal Reserve from 1979 to 1987. He also served as the Chairman of the federal Economic Recovery Advisory Board from 2009 to 2011.
Ravitch has held numerous positions in government, dating back to the Lyndon Johnson administration. He most recently served as Lt. Governor of New York and is also known for having headed the Major League Baseball owners' Player Relations Committee in the early 1990s.