Budget office challenges NCSL study
Wednesday, Jul 28, 2010 - Posted by Rich Miller
* NCSL has a new report that has caused more than a few eyeballs to pop out…
Thirty states plan to spend more in FY 2011 than last year. Four of these boosted appropriations by more than 10 percent, with the largest increases in Illinois (15.1 percent) and Texas (14.8 percent). […]
Thirty-three states expect year-over-year growth in revenue collections, although in three the increase is less than 1 percent. Five states project double-digit increases: Illinois (17.9 percent), Alabama (16.0 percent), Washington (14.1 percent), North Dakota (13 percent) and Kansas (10.2 percent).
* What the heck? That’s gigantic growth in both spending and expected revenue increases. What’s going on here? I asked the governor’s budget office for a response. Here it is…
1. SOURCE: NCSL report does NOT cite where the data is coming from, especially regarding revenue (17.9%) and spending (15.1%) growth amounts cited. If there is any “wishful thinking”, it is on part of NCSL, not GOMB or the State.
2. FACTUAL BUDGET INFORMATION: The State’s Budget information incorporated in recent bond documents can be found in Table 5 (attached):
a. FY11 Revenues (all General Funds sources including State Revenues, Federal Revenues and Transfers In from Other State Funds) are forecast as $27,655M versus actual FY10 Revenues of $27,090M (per the IOC) or a 2.1% growth.
b. FY11 Spending (Appropriations plus Transfers Out to Other State Funds) are budgeted at $33,502M versus estimated FY10 Spending of $28,865M. However, FY10 Pension Contributions of $3,466M were NOT appropriated in the General Funds so the FY10 Spending in Table 5 (see footnote #1) must be adjusted to provide an apples-to-apples comparison. Using the adjusted FY10 amount of $32,331M ($28,865M + $3,466M) results in a 3.6% increase ($1,171M) in FY11 Spending over the adjusted (for pensions) FY10 Spending.
3. FY11 SPENDING GROWTH: FY11 growth can be attributed to pensions, as follows:
a. Statutorily Required Pensions – as Certified by the Pension Boards: The FY10 amount was $3,466M while the FY11 amount is $4,157M, or an increase of $691M.
b. Debt Service of FY10 Pension Bonds: The FY10 pension contribution of $3,466M was financed using GO Pension Bonds sold in January 2010. The FY11 Debt Service on those bonds increased by $1,095M over the FY10 Debt Service amount for those bonds. The debt service is shown in the Statutory Transfers Out to Other Funds in Table 5.
c. Appropriations – Excluding estimated FY10 Unspent Appropriations and FY11 estimated Reserves, Appropriations DECREASED by $509M ($26,340 in FY10 vs. $25,831M in FY11).
d. Remaining Difference: Relates to REDUCTIONS in other Statutory Transfers Out to Other Funds beyond the pension bond debt service.
* Related and a roundup…
* ADDED: Metra claims reforms, but state panel wants more: Too little, too late. That was the prevailing sentiment about Metra on Wednesday at a state Senate hearing at which the commuter train operator won praise for reforms in the wake of the death of Phil Pagano, but lawmakers made it clear they’d like to see more.
* Report: Illinois Budget Crisis Worst in Nation
* Illinois Has Nation’s Largest Budget Deficit - Study Says Deficits For All States Together Will Total $83.9 Billion Next Year
* Sharp: State has moral obligation to get budget in line
* Illinois named Race to the Top finalist
* Illinois named education grant finalist
* Union pans plan to merge Department of Children and Family Services with Juvenile Justice
* Illinois supports social services hot line, but not with money
* Quinn vetoes measure that would boost U-46 funding
* Disabled school may close without state money
* Amid ‘Transformers 3′ filming, tax incentives come under scrutiny
* New Illinois Blue Book contains error
- John Bambenek - Wednesday, Jul 28, 10 @ 2:59 pm:
So let me get this straight, the Office of the Governor admits that despite having a huge budget deficit, it STILL increased spending 3%?
Yeah, that’s a winning policy.
- Ghost - Wednesday, Jul 28, 10 @ 3:37 pm:
So 2.1% growth, but 3.6% increase in spending?!? So they budgeted to spend at a greater pacde then revenue increases?
um what about the 13 billion in unpaid debt?
- wordslinger - Wednesday, Jul 28, 10 @ 3:40 pm:
I like the NCSL numbers. Let’s go with those and our problems are over.
- Quinn T. Sential - Wednesday, Jul 28, 10 @ 4:18 pm:
Part of the GOMB response which needs a little more clarity for the average citizen is this:
The budget deficit and increased spending is not only fueled by the cost of public pension BENEFITS, which the state and citizens can not afford to fund, but also the DEBT SERVICE to fund the BENEFITS, since the BENEFITS themselves can not be funded directly.
The pension funds themselves are going to implode not just due to the cost of BENEFITS, but also due to the coming tsunami of the age wave of baby boomer retirees. It may not be long before the number of beneficiaries receiving pension BENEFITS far EXCEEDS the number of active employees which are contributing to the pension funds in order to fund BENEFITS for those already retired.
This unsustainable PONZI SCHEME House of Cards is teetering, and its fall may bring down with it the Prairie State, which has been up and operating since 1818.
- steve schnorf - Wednesday, Jul 28, 10 @ 4:19 pm:
Many of the related national organizations have a hard time comparing state government finances accurately, because the various states’ budgets are laid out and reported in so many different ways. It is almost impossible to come up with a comparison template for anything but a very simple analysis.
Having personally had the experience of reading such analysis and wondering how those numbers and conclusions could ever have been arrived at, I suspect that GOMB’s numbers reflect reality much better than the national organization’s numbers.
- zatoichi - Wednesday, Jul 28, 10 @ 5:28 pm:
That 211 social services hotline sounds like a great idea. The small details of increasingly strict funding qualifiers for service and will the local services even exist to handle any referrals to seem to be a couple of minor issues.
- soccermom - Wednesday, Jul 28, 10 @ 5:45 pm:
Gee, Quinn T. Sential,
As long as we’re CAPITALIZING, let’s point out that under the state CONSTITUTION, those pension benefits cannot be REDUCED. And state LAW requires payment to BONDHOLDERS before a dime is spent on CURRENT PROGRAMS.
So absent a TAX INCREASE to help the state meet its LEGAL OBLIGATIONS, the PENSIONERS and BONDHOLDERS get paid and state programs are HACKED TO SHREDS.
- Quinn T. Sential - Thursday, Jul 29, 10 @ 12:36 am:
The notion that under the state CONSTITUTION, pension benefits cannot be REDUCED, is an ADVISORY OPINION, which has not been fully adjudicated in THE COURT SYSTEM. The same was thought to be the case with the RETIREMENT PLAN
FOR THE CHICAGO TRANSIT AUTHORITY, but those benefits were changed BY LAW. In addition the constitutional prohibition; IF APPLICABLE, would pertain to CURRENT RETIREES, and possibly CURRENT EMPLOYEES, although several government agencies have a multi-tiered pension benefit system. Nothing in the CONSTITUTION or THE LAW would prohibit the establishment of a multi-tiered pension benefit program for FUTURE EMPLOYEES, and nothing in the CONSTITUTION requires a PESNION BENEFIT at all, and a DEFINED BENEFIT PENSION PLAN could easily be replaced by a DEFINED CONTRIBUTION PLAN which would substantially limit the GROWTH OF FUTURE BENEFITS.
The reduction or elimination of PENSION BENEFITS, or their growth, could significantly reduce or eliminate the need to issue MORE BOND DEBT to cover FUTURE PENSION OBLIGATIONS, and remove the uncertainty of continuing as a GOING CONCERN, which could SUBSTANTIALLY REDUCE the cost of BONDED DEBT.
Reducing or substantially eliminating future PENSION BENEFIT OBLIGATIONS could reduce or eliminate a signifcant contributing factor for the need for a TAX INCREASE, and then actually HACKING TO SHREDS STATE PROGRAMS WHICH ARE UNNECESSARY OR DUPLICATIVE could singifcantly reduce any remaining need for a TAX INCREASE.