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GOMB projects $19 billion bill backlog in five years without new revenue sources

Wednesday, Oct 23, 2019 - Posted by Rich Miller

* Press release…

GOMB Releases Five-Year Forecast Showing Significant Long-Term Challenges Without Fair Tax

Despite making substantial progress on Illinois’ fiscal challenges this year, Illinois will continue to face significant financial challenges until it finds a long-term solution to its structural deficit, the annual Economic and Fiscal Policy Report from the Governor’s Office of Management and Budget concludes.

The bipartisan, $40.1 billion fiscal year 2020 budget enacted by the Governor and the Legislature – the state’s first truly balanced budget in years – begins to pay down Illinois’ debt and sets Illinois on a path to return the state to fiscal stability, while making key investments in long-term programs. In fact, the state’s projected surplus has increased by $30 million since the budget was enacted, and projected deficits into the coming years are improved from the past administration. But the state must continue to grapple with a multi-billion-dollar structural deficit in nearly all of the out years, which would further exacerbate the state’s bill backlog and payment delays. Because of the state’s unfunded pension obligations, the deficit is projected to grow faster than the economy, even in good years, diverting revenues away from critical investments in areas such as an educated workforce and strong infrastructure.

As a result, the Governor’s Office of Management and Budget is projecting sizeable deficits in the General Funds budget for fiscal years 2021 through 2025. Without changes to the current trajectory of the state’s finances, year-end accounts payable will continue to grow year by year, the report states.

“Without structural changes like the Fair Tax, Illinois will continue to struggle to make ends meet, pay our bills on time and deliver vital services, like public education and public safety,” said Governor JB Pritzker. “While years of mismanagement has created these issues, we have a strong path forward and solution with the Fair Tax, which will ask the wealthiest 3 percent to pay more while 97 percent of Illinoisans will pay the same or less. Thanks to the bipartisan efforts of the General Assembly, we’ve already made fiscal progress, and I’m committed not only to stabilizing our budget but also making sure that Illinois grows and creates an economy that works for everyone.”

There are few alternatives if the Fair Tax amendment is not enacted, according to the report. Illinois would need to consider dramatic budget cuts of approximately 15 percent to many essential services such as education funding and public safety, or the state would need to raise taxes on all households – not just the wealthiest Illinoisans – by 20 percent under the existing flat tax.

Since taking office in January 2019, Governor Pritzker has taken several steps to control state spending and has ordered agency directors to continue to responsibly manage the limited resources of state government by proposing reductions in their maintenance operations funding for the coming fiscal year, identifying significant efficiency and savings ideas, eliminating or consolidating duplicative programs, reducing funding for underutilized or inefficient services and making improvements in service delivery that streamlines costs.

The Governor’s Office of Management and Budget (GOMB) is required to annually submit an Economic and Fiscal Policy Report to the General Assembly outlining the long-term economic and fiscal policy objectives of the state, along with the economic and fiscal policy intentions for the upcoming fiscal year and for the subsequent four fiscal years.

The report is here.

       

54 Comments
  1. - Anotheretiree - Wednesday, Oct 23, 19 @ 3:31 pm:

    Not to mention the next recession happening during that time frame, and with no Federal Reserve ammunition left to fight it, and the GOP likely in power who don’t believe in fighting recessions.


  2. - Sue - Wednesday, Oct 23, 19 @ 3:53 pm:

    Is one of the steps JB has taken to constrain spending, rolling over on the wage agreements with all the unions as a big thank you for supporting his election. All JB has done is increase spending and rationalize it all with the future fair tax revenue stream.


  3. - Occasional Quipper - Wednesday, Oct 23, 19 @ 4:08 pm:

    == or the state would need to raise taxes on all households – not just the wealthiest Illinoisans – by 20 percent under the existing flat tax. ==

    With or without the constitutional amendment, I’m guessing the rate is eventually going to go up for everyone anyway, once it’s realized that the optimistic projections from the graduated income tax didn’t pan out. Or maybe they already know they will need to raise the rates on everyone and this is just an elaborate way to sell a tax increase.


  4. - Grandson of Man - Wednesday, Oct 23, 19 @ 4:10 pm:

    We have to pay our bills, as is plainly evident, and the rich finally have to carry their weight around here. It’s not fair to the rest of us that we have to keep shouldering their burdens, so we have to right-size the tax code. Republicans and right wingers are not change people, still supporting the same broken system that deprives us of revenue.


  5. - City Zen - Wednesday, Oct 23, 19 @ 4:12 pm:

    “Most of our Midwest neighbors have a graduated income tax structure.”

    You don’t say? Do any of those select neighbors have married tax brackets? How about tax brackets indexed to inflation? Do any of them let you deduct your federal taxes paid from your state taxable income? How do they tax retirement income?

    No room in the GOMB report for those little nuggets, apparently. Not even in the footnotes.


  6. - Romeo - Wednesday, Oct 23, 19 @ 4:15 pm:

    If you owed a debt of $200 and had an annual salary of $40, would you continue to spend on the assumption that you will get a raise to $50 next year?


  7. - Oswego Willy - Wednesday, Oct 23, 19 @ 4:20 pm:

    - Romeo -

    You can’t run government like a household, a household is not your state government.

    To the post,

    === There are few alternatives if the Fair Tax amendment is not enacted, according to the report. Illinois would need to consider dramatic budget cuts of approximately 15 percent to many essential services such as education funding and public safety, or the state would need to raise taxes on all households – not just the wealthiest Illinoisans – by 20 percent under the existing flat tax.===

    Vote against the progressive tax… the options after aren’t great either.


  8. - Grandson of Man - Wednesday, Oct 23, 19 @ 4:21 pm:

    Our neighbors’ higher graduated tax rates start at much lower incomes than the fair tax rates. The fair tax is a very good deal. The marriage tax issue is a red herring.


  9. - City Zen - Wednesday, Oct 23, 19 @ 4:28 pm:

    ==Illinois would need to consider dramatic budget cuts of approximately 15 percent to many
    essential services such as education funding and public safety==

    So they already have a prioritized list of cuts? At least they’re thinking ahead.


  10. - Just Me 2 - Wednesday, Oct 23, 19 @ 4:38 pm:

    Instead of saying more tax money is needed, they could have said more cuts. Instead they issued a report justifying taking more of my money.


  11. - Oswego Willy - Wednesday, Oct 23, 19 @ 4:40 pm:

    === Instead of saying more tax money is needed, they could have said more cuts. Instead they issued a report justifying taking more of my money.===

    Elections have consequences.

    We’re gonna see how the referendum plays, then you might get all kinds of cuts or a much larger tax increase, if you’re in the 97% that won’t see a tax increase with the progressive tax.


  12. - Pick a Name - Wednesday, Oct 23, 19 @ 4:52 pm:

    Grandson always neglects to mention our high sales tax, our extremely high real estate taxes and our high gas taxes. Quit taking a micro view when clearly we all operate in a macro environment.


  13. - Oswego Willy - Wednesday, Oct 23, 19 @ 4:59 pm:

    - Pick a Name -

    What keeps you here in Illinois?


  14. - Sue - Wednesday, Oct 23, 19 @ 4:59 pm:

    Grandson- the State already raised income taxes 66 percent. Our sales tax and real estate taxes are the highest in the country. If you want higher taxes from the “3 percenters” at least show us some spending discipline. In 2019 my total State tax bill will approach 80k so enough about how we don’t pay our fair share


  15. - Old Illini - Wednesday, Oct 23, 19 @ 5:01 pm:

    There is evidence, California for instance, that taxing the mega-rich is 50% efficient due to salary adjustments and emigration. the political unattractiveness of “the state would need to raise taxes on all households” needs to be revisited.


  16. - Pick a Name - Wednesday, Oct 23, 19 @ 5:02 pm:

    Family Willy, that is it. Namely, a special needs grandkid.


  17. - Oswego Willy - Wednesday, Oct 23, 19 @ 5:02 pm:

    ===If you want higher taxes from the “3 percenters” at least show us some spending discipline.===

    Dunno if that’s gonna work in defeating the referendum when 97% won’t se any change.

    Again, it appears the right argument to try to defeat the progressive tax isn’t out there yet.

    “Protect the 3%” probably won’t cut it.


  18. - Just Me - Wednesday, Oct 23, 19 @ 5:03 pm:

    GOMB is supposed to be a budget office, not an advocacy arm of the Governor. It is fair to say structural change is needed, but it isn’t fair for them to join the Governor’s campaign for a tax increase.


  19. - Oswego Willy - Wednesday, Oct 23, 19 @ 5:03 pm:

    === Family===

    Fair enough. Thanks.


  20. - JS Mill - Wednesday, Oct 23, 19 @ 5:14 pm:

    =GOP likely in power who don’t believe in fighting recessions.=

    Unless it is injecting hundreds of billions in bail out dollars into big banks and corporations.

    = at least show us some spending discipline=

    Raising revenue to pay our bills and debt IS spending discipline.


  21. - City Zen - Wednesday, Oct 23, 19 @ 5:18 pm:

    ==Grandson always neglects to mention…==

    Problems with the code.


  22. - Romeo - Wednesday, Oct 23, 19 @ 5:36 pm:

    ==OswegoWilly==

    Operate it like a business, a charity, a foundation, a research think-tank or however you like.

    You can’t keep operating an entity of any kind with long-term and unsustainable debt.


  23. - Oswego Willy - Wednesday, Oct 23, 19 @ 5:41 pm:

    === Operate it like a business, a charity, a foundation, a research think-tank or however you like.===

    Can any of those raise revenue by voting to do so?

    “My company/charity/non-profit needs cash, tax folks.”

    Nope. Revenues are not similar.

    === You can’t keep operating an entity of any kind with long-term and unsustainable debt.===

    Yet, here we are… trying to manage the debt, as a governmental entity tries.


  24. - Been There - Wednesday, Oct 23, 19 @ 5:47 pm:

    === If you owed a debt of $200 and had an annual salary of $40, would you continue to spend on the assumption that you will get a raise to $50 next year?===
    I’m guessing anyone who has ever owned a house has been in this situation.


  25. - PublicServant - Wednesday, Oct 23, 19 @ 5:52 pm:

    Sue,

    I’m guessing that if you pay 80k a year in state tax, you’ve got much more income left in a single year than most illinoisians will individually gross in the next 20. It’s how much you have left after those taxes that, if you cared to divulge, would allow people to better determine whether you’re paying your fair share.


  26. - Dybalaton - Wednesday, Oct 23, 19 @ 5:55 pm:

    Except the bank doesn’t let you borrow based on future potential earnings growth.


  27. - Oswego Willy - Wednesday, Oct 23, 19 @ 6:00 pm:

    === Except the bank doesn’t let you borrow based on future potential earnings growth.===

    Probably *another* reason your business or personal finances is not like a state government.

    Oh, and a pesky constitution that says those bonds get paid… first. Don’t forget that


  28. - Grandson of Man - Wednesday, Oct 23, 19 @ 6:04 pm:

    Let’s talk about SALT. The wealthiest pay the smallest share of Illinois state and local taxes, per family incomes. The plan is to lessen tax burdens at the bottom and raise them at the top.

    The only plan to do that now is the fair tax, with cuts for many and modest hikes for those who can afford more. It’s very clear that it will do us good, with paying past-due bills, credit ratings and bringing more revenue.


  29. - IT Guy - Wednesday, Oct 23, 19 @ 6:26 pm:

    I would support the progressive tax proposal if I could also vote on a proposal to change the pension language. We need to address both.


  30. - Oswego Willy - Wednesday, Oct 23, 19 @ 6:29 pm:

    === if I could also vote on a proposal to change the pension language===

    That won’t be on the ballot in 2020.

    There wasn’t 71/36, there wasn’t a petition that passed muster.

    No if… it’s not gonna be there.


  31. - SSL - Wednesday, Oct 23, 19 @ 6:50 pm:

    The current economy is doing just fine. Much better than during the prior administration. Yeah, it’s that good. And wage increases have been solid under the current administration. So yeah, it’s good. Who you going to thank for that? Hint: it isn’t JB.

    But hey, we’re all friends here, so I don’t want to touch on a sensitive topic.

    JB is doing the smart thing. Try to scare everyone so they come out and vote. Of course, if history in Illinois teaches us anything, it is that our illustrious leaders can spend it faster than they can raise it. Remember how JB wanted to short the pensions as soon as he took office? Only a windfall resulting from the current robust economy prevented that from happening. That’s pretty funny when you think about it. The current administration prevented JB from shorting the pensions. Classic.

    Will be an interesting 12 months.


  32. - Blue Dog Dem - Wednesday, Oct 23, 19 @ 7:16 pm:

    Grandson. Whats the plan on lessening the tax burden on the lower class?
    .05%?


  33. - Blue Dog Dem - Wednesday, Oct 23, 19 @ 7:20 pm:

    IT guy. I agree. No pension reform. No progressive tax.


  34. - Oswego Willy - Wednesday, Oct 23, 19 @ 7:24 pm:

    === No pension reform. No progressive tax.===

    Vote no. All done.


  35. - Blue Dog Dem - Wednesday, Oct 23, 19 @ 7:35 pm:

    I will. And i believe in the progressive tax.


  36. - Cadillac - Wednesday, Oct 23, 19 @ 7:43 pm:

    === - Oswego Willy - Wednesday, Oct 23, 19 @ 4:40 pm:

    Elections have consequences. ===

    And if the CA doesn’t pass, JB’s consequence will be that he needs to raise taxes on everyone by around 50%. Yikes.


  37. - Oswego Willy - Wednesday, Oct 23, 19 @ 7:46 pm:

    ===JB’s consequence will be that he needs to raise taxes on everyone by around 50%. Yikes.===

    Yep. Probably after $8-10 million in advertising on that exact “what if”

    Crazy times.


  38. - Sonny - Wednesday, Oct 23, 19 @ 8:40 pm:

    Omg guys Sue is rich.


  39. - City Zen - Wednesday, Oct 23, 19 @ 9:13 pm:

    ==I’m guessing anyone who has ever owned a house has been in this situation.==

    I see we’re back to false comparisons of mortgages on physical assets and pension debt again.


  40. - Oswego Willy - Wednesday, Oct 23, 19 @ 9:16 pm:

    === I see we’re back to… ===

    Meh, no different than folks still equating budgets to their home or business finances.


  41. - Yellow Dog Democrat - Wednesday, Oct 23, 19 @ 9:47 pm:

    There are arguments to defeat the progressive income tax.

    “What about the millionaires?” is not one of them.

    “What about pension reform?” is also not one of them.


  42. - Jibba - Wednesday, Oct 23, 19 @ 10:01 pm:

    ==No pension reform. No progressive tax.===

    Tier 2 done. Thanks for your vote. Got other constitutional ideas?


  43. - AnotherAnon - Wednesday, Oct 23, 19 @ 10:48 pm:

    For most people the best way to deal with Illinois unsolved fiscal disaster is leave. Let the GrandsonsofMan of Illinois pay for it. They seem to love taxes.


  44. - RNUG - Wednesday, Oct 23, 19 @ 10:55 pm:

    == No room in the GOMB report for those little nuggets, apparently. ==

    The purpose of this GOMB report is to report what is EXPECTED to happen if the current policies continue.

    The report makes it clear more tax revenue is needed. It is a policy question outside the scope of the report where such revenue will come from.


  45. - RNUG - Wednesday, Oct 23, 19 @ 11:03 pm:

    == if I could also vote on a proposal to change the pension language ==

    And given the ILSC pension rulings and the US Contracts Clause, changing the IL Constition’s Pension Clause will NOT eliminate the debt and obligations to the pensioners.

    Plus, you can change the pension rules for new hires any time the State wants to … as long as they comply with Federal IRS ruled.

    Given the above, EXACTLY what would you change in the Pension Clause and what would said change achieve?


  46. - Liandro - Thursday, Oct 24, 19 @ 6:27 am:

    All those tax hikes and we aren’t close to financial stability? I’m shocked!


  47. - Rich Miller - Thursday, Oct 24, 19 @ 6:50 am:

    ===All those tax hikes===

    Don’t argue like a child here.


  48. - Blue Dog Dem - Thursday, Oct 24, 19 @ 7:05 am:

    RNUG
    Its our only hope. And a slim one at best.

    Tier 3. SSN plus matched 403b.

    Must challenge with CA the AAI.


  49. - Grandson of Man - Thursday, Oct 24, 19 @ 7:54 am:

    The people who scream about taxes being too high and the need are those who mock a tax cut, small as it would be? Bottom incomes would get the biggest cut under the fair tax rates.

    The anti-fair tax massaging should and probably will be turned on its head. Republicans and right wingers don’t want to give the working class a tax cut. They want to protect the rich at all costs. Ought to be fun, this upcoming campaign. If Think Big and other messaging is as good as the last GA session for Democrats, what more can be asked for?


  50. - Just A Dude - Thursday, Oct 24, 19 @ 8:13 am:

    Blue dog I don’t think a CA could effect the AAI for years of service already earned. Though I would defer to RNUG and be intetested in his take.


  51. - Oswego Willy - Thursday, Oct 24, 19 @ 8:16 am:

    === Must challenge with CA===

    Which GA and governor will go along?


  52. - City Zen - Thursday, Oct 24, 19 @ 8:40 am:

    ==Tier 2 done.==

    We may be done with Tier 2 but Tier 2 isn’t done with us.


  53. - Monadnock Pigeon - Thursday, Oct 24, 19 @ 9:21 am:

    Yesterday, Sue said this
    ==In 2019 my total State tax bill will approach 80k so enough about how we don’t pay our fair share==

    The individual income tax rate in effect on 10/23/19 is 4.95%. To pay $80,000 in Illinois income taxes requires taxable income in excess of $1,600,000.


  54. - Anyone Remember - Thursday, Oct 24, 19 @ 2:53 pm:

    Blue Dog Dem
    “Tier 3. SSN plus matched 403b.”
    The only way that “saves” money is if you extend the Edgar Ramp. The Feds (non-military) have something similar to what you’re proposing. Reagan / Stockman put it in place in 1986, and at the time it was acknowledged savings were decades away. Why would Illinois be different?


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