If we’re to believe the Illinois politicians–Democrat and Republican–the new fiscal year 2019 “balanced” budget they passed overwhelmingly is a bipartisan lovefest, a return to what should be a normal budget process and a first step to putting the fiscally challenged state back on track.
Ha, ha. The joke’s on us. And the politicians know it.
The budget is not balanced. It does nothing to fundamentally solve Illinois’ structural budget problems (i.e. its bloated pensions) and actually repeats many of the tricks that got us into trouble. If it’s a first step we’ll be waiting around a long, long time for a second one. If there ever is one.
Even before Gov. Bruce Rauner signs the budget, which he has promised to do, the Moody’s Investment Services, was issuing “warnings” about the budget’s shortcomings.
Among them is the startling observation that in the coming fiscal year, the money for required payments for the employee pension funds plus the interest required to pay for its massive borrowings could eat up 30 percent of total spending. In other words, 30 percent of the $38.5 billion budget won’t go to schools, health care, social services and all of the state’s other desperate needs to serve the poor, young, old and other “marginalized” people. The money will instead be siphoned off to pay for the mountain of mistakes and deceptions that the politicians have committed. Those are extravagant public employee pensions and reckless borrowing that has made Illinois the nation’s least creditworthy state.
Moody’s, the bond rating house, put a name on where Illinois heading: “inflection point,” where fixed costs become “extremely difficult to manage.” Said Moody’s: “Given their magnitude and growth trajectory, the state’s unfunded pension liabilities will likely require more than a single response. Under some scenarios, Illinois could eventually find the burden of paying for retirement benefits becomes extremely difficult to manage.” (Crain’s Greg Hinz goes into more detail here.)
Jeez, Moody’s, don’t beat around the bush. More to the point: The damn roof is collapsing. And so many Illinois residents see it coming, they are high-tailing it out of the state.
The Illinois Policy Institute (which liberals won’t listen to because the group is fiscally conservative) provides more troubling details. In “Budget gimmicks explained: Why the new Illinois spending plan is not balanced,” it points out that the budget:
- Depends on speculative pension savings. Of the more than $444 million in pension savings, as much as $422 million unlikely to materialize. That require that state workers will voluntarily cut their own pensions.
- Ignores known labor costs. Illinois state workers represented by the American Federation of State, County, and Municipal Employees (AFSCME) have been working for almost three years without a contract. Rauner and the union have disagreed on a number of costly requests the union is making. Despite being without a contract, courts have ordered Rauner to pay the raises union workers would have received under the last contract. According to Wirepoints, this could cost as much as $400 million.
- Depends on selling the Thompson Center in Chicago three times. Selling the building for an unrealistic $300 million now has been in the spending plans for three years running. Even though the sale is iffy, to say the least. Meanwhile, differed maintenance costs have soared to more than $326 million.
- Sweeps about $800 million from other state funds. Talk about repeating old tricks, this is another one.
- Phony accounting practices. Here’s an example of the deceptive use of cash-based budgeting that the state employs: If you balanced your household budget each month by not paying the electric bill you’d eventually go broke. The state does the same thing, something that would become apparent if the state used accrual-based accounting. It would show that the “budget true budget deficit for fiscal year 2017 alone was at least $6.6 billion worse than official reporting, and lawmakers’ assumptions, suggest.”
It’s an election year, so none of the pols want to repeat the two previous years when they couldn’t pass a budget. Especially one that is “unbalanced.” So, the tricks and the deceptions continue, just like before.
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