Budget games could lead to a cash crunch
Tuesday, Jul 11, 2017 - Posted by Rich Miller
* Greg Hinz asked Civic Federation President Laurence Msall and Illinois Taxpayers’ Federation President Carol Portman three questions about the budget. Here are the first two…
Question one: Democrats say the $36 billion spending plan they enacted last week is “balanced.” Rauner says it’s $2 billion out of whack. Who’s right?
Msall notes that the bulk of the $2 billion is due to extra spending in fiscal 2017 that was not financed then or in the fiscal 2018 spending plan that just was adopted by override. “We believe a calculation on of the operating surplus or deficit should be based on the current year’s results,” he adds. “The prior year’s results are reflected in the backlog of bills.”
So, one vote for the Democratic position—and Portman tends to agree. “We’ve frequently spent more than we’ve brought in and not cleaned it up before carrying on into the next year. That doesn’t make it OK,” she says. “But that doesn’t mean the FY18 budget package as passed doesn’t balance, if it truly spends no more than we expect to bring in for the fiscal year. . . .I’d say both sides are right—they’re just using a different definition of ‘balanced.’ ”
Question two: Democrats claim their version cuts spending by $1 billion or more below the budget Rauner introduced. True?
Msall sides with Rauner on this one. “The spending is roughly equivalent, even though on paper the governor’s budget is $37.3 billion and the General Assembly’s $36 billion. The (General Assembly’s) budget appears to be smaller mainly because of transfers out” from the general funds to other funds that spend the money themselves. That reduced general funds spending, but not total spending.
Yeah. They used the exact same accounting gimmick that Rauner and the Republicans used in their “Capitol Compromise” proposal.
* Rep. Greg Harris (D-Chicago) offered this explanation to the SJ-R…
Harris, however, says that with a change in how the state disburses the income tax and a boost from a tax hike on workers’ salaries, Springfield will come out with 6 percent more this year in its share of income tax.
Harris said the gains will happen because the state will accelerate payments to local governments by directly transferring the money to them instead of having them wait in line for a transfer from the state’s general revenue funds. Municipalities will receive their share within 60 days, Harris said. With those faster payments, cities would see 14 payments instead of 12 this year.
So, they moved money intended for the Local Government Distributive Fund out of GRF and into a new fund that directly transfers payments to the locals. That will, indeed, speed up payments and has the added “benefit” of taking the money off budget and making it look like locals get an increase when it was really just money that was owed to them.
However, expediting these payments means the comptroller can’t use her discretion to delay writing LGDF checks while she pays for something else more pressing. And that means there will be more cash flow pressures every month. Things could get super tight.
- Anonymous - Tuesday, Jul 11, 17 @ 11:02 am:
Owed to them??? Please explain…. LGDF is State Income Tax.
- Anon - Tuesday, Jul 11, 17 @ 11:09 am:
From a friend……
Chicago having to pay 7% on tax free basis is over 10% when comparing to normal credit markets.
With $250 billion of debt on $30 billion budget, and implicit cost of 4% more on that debt, if State of IL had to go out and borrow that $250 billion, would cost $10 billion MORE per year than normal ($250 x 4% = $10). Total cost would be close to $20 billion. With $30 billion budget, means would have to spend 2/3 of entire budget on interest. Not a very pretty outcome here.
- Anyone Remember - Tuesday, Jul 11, 17 @ 11:29 am:
Anonymous 11:02 -
=Owed to them??? Please explain…. LGDF is State Income Tax.=
It is owed to them pursuant to 35 ILCS 5/901 (b).
http://www.ilga.gov/legislation/ilcs/ilcs5.asp?ActID=577&ChapterID=8
- DuPage - Tuesday, Jul 11, 17 @ 11:48 am:
@- Anon - Tuesday, Jul 11, 17 @ 11:09 am:
===From a friend……
Chicago having to pay 7% on tax free basis is over 10% when comparing to normal credit markets.
With $250 billion of debt on $30 billion budget, and implicit cost of 4% more on that debt, if State of IL had to go out and borrow that $250 billion, would cost $10 billion MORE per year than normal ($250 x 4% = $10). Total cost would be close to $20 billion. With $30 billion budget, means would have to spend 2/3 of entire budget on interest. Not a very pretty outcome here.===
Rauner seems to be deliberately trying to drive the interest rates Illinois will have to pay as high as possible.
- Anon - Tuesday, Jul 11, 17 @ 11:58 am:
Interest costs on debt and pension payments from the general fund are eating Illinois tax revenue alive.
The state can’t survive when it is losing between $3 and $4 out of $10 right off the top every year, which is essentially where we are at right now.
The scary part is it is only going to get worse and there is little we can do about it.
- Lucky Pierre - Tuesday, Jul 11, 17 @ 12:40 pm:
Except for significant pension reform legislation which apparently out of the question for the Speaker
- Smitty Irving - Tuesday, Jul 11, 17 @ 12:56 pm:
Lucky Pierre -
What is your pension reform that reduces costs and will be approved by the Illinois Supreme Court?
- Anonamouse - Tuesday, Jul 11, 17 @ 1:50 pm:
Stiffing them, SI. That is the plan.
- Ajjacksson - Tuesday, Jul 11, 17 @ 2:24 pm:
I have the same question for LP as Smitty Irving…..what is your plan?
- Enviro - Tuesday, Jul 11, 17 @ 2:59 pm:
=The scary part is it is only going to get worse and there is little we can do about it.=
Illinois can tax retirement income and services as so many other states do.
- Ole' Nelson - Tuesday, Jul 11, 17 @ 4:23 pm:
“Except for significant pension reform legislation which apparently out of the question for the Speaker”
…and the Illinois Constitution
- No Raise - Tuesday, Jul 11, 17 @ 5:04 pm:
Love these people that want to stiff the pension system. Look, if the state can stiff a constitutionally-protected class of pensioners, than what can stop the state from stiffing non-constitutionally-protected vendors? I’m surprised any vendors want to do business with the state but the ones that do may take a real, second-look at things if constitutionally-protected persons are stiffed.