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Our new and unbalanced budget

Monday, Sep 25, 2017

* The Illinois Policy Institute says the new FY18 budget is out of whack

* 2018 revenues are overstated by at least $300 million. The budget’s 2018 revenue estimates were based on 2017 revenue estimates that turned out to be overly optimistic. 2017 full-year revenue estimates (total state sources) available for 2018 budgeting purposes were about $300 million higher than they eventually turned out to be, according to the Commission on Government Forecasting and Accountability. As a result, the estimated 2018 budget revenues were inflated.In addition, the Governor’s Office of Management and Budget has reported that revenue is likely down $300 million-$500 million compared with the estimates used for the fiscal year 2018 budget plan.Getting the revenue base right matters since Illinois has been suffering from a decline in income tax revenues. 2017 fiscal year revenues (total state sources) ended 2.1 percent lower than in fiscal year 2016, or more than $600 million lower.

Given that trajectory – and the negative economic impact of the 32 percent income tax hike – 2018 base revenues may be even lower than this year’s.

* An expected $500 million in pension savings from the budget’s pension changes can’t happen in 2018. Part of the budget’s pension reform was erroneously estimated to save the state $500 million in 2018. Not only is there no official public analysis and verification of those savings, but officials say it could take two years or more before they can even enact the new pension reform plan. So no savings – if there are any to be had – can occur in 2018.

* The budget accelerates state payments to local governments in 2018, costing the state an additional, and unaccounted for, $220 million. The 2018 budget moves money for the Local Government Distributive Fund and Public Transportation Fund out of the state’s general fund. As a consequence, municipalities will get 14 payments from the state next year instead of the usual 12, costing the state at least an additional $220 million in 2018.

* The budget failed to fully account for $600 million in borrowing costs to pay down $6 billion in unpaid bills. The budget authorized and the governor has agreed to borrow $6 billion to pay down a portion of the state’s nearly $16 billion in unpaid bills. However, borrowing the $6 billion will cost the state about $600 million a year. The full amount of that annual borrowing cost was never accounted for in the budget.

* Many of these same arguments were made by the Rauner administration to the BGA last week and the BGA rated them as “Mostly true.” There are strong disagreements, however, on borrowing costs and revenue projections. Click here for the BGA’s analysis.

- Posted by Rich Miller        

21 Comments
  1. - 47th Ward - Monday, Sep 25, 17 @ 12:25 pm:

    Didn’t Rauner’s budget, as proposed, also book some of these same questionable savings?

    I’m not excusing it, because the budget is still unbalanced, I’m just wondering how Team Rauner can criticize the General Assembly for doing some of the same things GOMB told them to do.


  2. - Norseman - Monday, Sep 25, 17 @ 12:30 pm:

    It’s time for Rauner, the Governor, to govern.


  3. - Anonymous - Monday, Sep 25, 17 @ 12:43 pm:

    Democrats have never cared if the money was there. Just spend it, and worry about having the money later. It’s their way, and has been the way in Illinois for many years.


  4. - Perrid - Monday, Sep 25, 17 @ 12:49 pm:

    @12:43 Come on now. For the last 30 years (longer than that but let’s focus here) do you think 0 Republicans have voted for a budget? Do you think that every Republican governor vetoed every “unbalanced” budget? Have you been paying attention to federal spending at all? There is a huge problem with politicians promising the world, and then not worrying about how to cough up the money, and the problem is bipartisan. And Republicans yell and cry about it, occasionally, if it suits them, but they very, very rarely have anything concrete to cut. Thinking this is all one party’s fault just exacerbates the division in our state and nation and does nothing to help any one or any thing.


  5. - RNUG - Monday, Sep 25, 17 @ 12:51 pm:

    The bond borrowing costs are a red herring. As I demonstrated the other day, the refi may well pay for itself in terms of covering the borrowing costs.

    The other issues are legitimate.

    In fact, I’ve said there will never be any taxpayer savings from the pension changes, although there may eventually be some State budget savings. I’m expecting the local school district costs will go up more than the State will save.

    All this just means Rauner will have to bring a laser focus of his awesome business skills to find some efficiencies and savings. Maybe he could start by scrapping some pinstripe patronage consulting contracts?


  6. - Blue dog dem - Monday, Sep 25, 17 @ 12:58 pm:

    Man. Just think how bad this budget will be when the effects of the Medicaid expansion kicks in. Higher ed and K-11 will really need haircuts.


  7. - Publius - Monday, Sep 25, 17 @ 1:08 pm:

    47th- the first side to message wins the argument because they other side argument first has to defend or explain their action before saying I know you are but what am I.

    Dems are really bad at this because they assume people know and they do not. Hell, most people can’t nam their legislators and dems believe people pay attention to facts lol


  8. - the Patriot - Monday, Sep 25, 17 @ 1:13 pm:

    Not surprising. If you can read at the 3rd grade level you should have figured out by now, Madigan will never balance a budget. It is his achilles heal. He is incapable.

    The issue is who is best to hold him off until he has to retire. I think there is little dispute Rauner gets and a D- to this point.

    So, as bad as he is, until I see another candidate commit to balancing the budget which means completely dismantling the broken social system that keeps madigan in power, he is still probably going to win.

    The difference between JB and Rauner at this point is Rauner will try and fail to reign in Madigan, you won’t even here JB say he will try.


  9. - Wordslinger - Monday, Sep 25, 17 @ 1:19 pm:

    –2018 revenues are overstated by at least $300 million.–

    Is that a gag? That represents .8 of one percent of projected $36B of
    GRF revenues over 12 months.

    Did the whiz kids at IPI get a crystal ball that allows them to sharpen that 12-month projection, one way or the other, beyond .8 of one percent?

    Sign those swamis up for BTIA(TM) and give us the economic and fiscal projections for the Turnaround Agenda.


  10. - Rod - Monday, Sep 25, 17 @ 2:08 pm:

    Even if one doesn’t like the IPI the BGA analysis Rich linked draws very bad conclusion too indicating the additional money is simply not there for the evidence based funding model and the few other areas of the budget where funding was actually increased this year.

    Susana Mendoza is towards the end of the fiscal year going to run out of money to meet the appropriations based on the BGA analysis and will be required simply not to issue payments yet again. Unless of course a supplemental appropriation is passed by the Assembly or additional borrowing for current year expenditures is approved. The circle remains unbroken and here we go again.


  11. - City Zen - Monday, Sep 25, 17 @ 2:20 pm:

    ==The bond borrowing costs are a red herring.==

    At the market price, it’s more like caviar.


  12. - Sir Reel - Monday, Sep 25, 17 @ 2:22 pm:

    As others have said, the General Assembly appropriates funds, the Governor spemds (releases) them.

    The Governor can simply not spend the full appropriations.

    Let’s see if he will.

    My bet is he blames Madigan, the General Assembly, whoever, and never acknowledges that he can solve this problem.


  13. - Whatever - Monday, Sep 25, 17 @ 3:28 pm:

    ==The difference between JB and Rauner at this point is Rauner will try and fail to reign in Madigan ==

    You mean Rauner is actually going to start proposing balanced budgets? He never has. How else can he rein in Madigan’s desire for unbalanced budgets?


  14. - VanillaMan - Monday, Sep 25, 17 @ 3:56 pm:

    Since when has Rauner succeeded at dealing with Madigan?

    Voting for him to block Madigan is like believing that tomorrow Illinois will have snow-capped mountains.

    We’ve seen what Rauner can do. Nuthin’ but cost taxpayers more.


  15. - Sue - Monday, Sep 25, 17 @ 4:03 pm:

    There is no escaping the FACT- the pension hit just keeps sucking all newly created revenue down the rabbit hole- there is no way to tax the citizens of Illinois enough to pay the pension obligation as the numbers of retired increase and state growth is flat to down. The proof is right in front of all of you- taxes increased nearly 50 percent with no meaningful fiscal improvement though at least things don’t get worse


  16. - Rich Miller - Monday, Sep 25, 17 @ 4:06 pm:

    ===no meaningful fiscal improvement though at least things don’t get worse===

    If true, that’d be an improvement.


  17. - Rick - Monday, Sep 25, 17 @ 5:22 pm:

    Rauner’s budget savings get tossed aside, his budget veto was overridden, and there are those who now blame him? We need the citizens to stop electing the Madigan patsies and get some support for our Governor.


  18. - wordslinger - Monday, Sep 25, 17 @ 5:23 pm:

    –Rauner’s budget savings get tossed aside,–

    Huh?


  19. - Oswego Willy - Monday, Sep 25, 17 @ 5:24 pm:

    ===Rauner’s budget savings get tossed aside…===

    Rauner’s own budget was unbalanced and required a tax hike.

    You’re welcome.


  20. - Whatever - Monday, Sep 25, 17 @ 5:33 pm:

    ==The proof is right in front of all of you- taxes increased nearly 50 percent with no meaningful fiscal improvement though at least things don’t get worse ==

    The pension payments were made and the bill backlog was reduced significantly before the 2011 tax increase was allowed to expire. Other than that, you’re right.


  21. - Perrid - Monday, Sep 25, 17 @ 6:36 pm:

    Sue, when you don’t pay your bills for decades, of course the debt looks devastating. That does not mean that the spending itself was extravagant, just that it builds up over time. Remember, the average annual pension is around 35k. That is not a “Cadillac pension.”


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