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More hard times ahead

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Illinois

* The Commission on Government Forecasting and Accountability has a new report on Fiscal Year 2013, and it’s not pleasant…

After exceeding expectations in FY 2012, the largely economically related sources are forecast to slow significantly as the recovery appears to be stalling out. With most econometric prognosticators anticipating little growth, coupled with the continuing disappointing jobs picture, there is little reason to believe underlying revenue growth will be able to match last fiscal year’s pace.

Illinois’ net income tax revenues will be down, according to COGFA, because of the extra tax payments made this past April 15 which weren’t taken out of paychecks immediately after the tax hike took effect in January of the previous year. But net corporate income taxes are expected to grow by $214 million. After a barn-burner year, sales taxes are expected to grow only 1.6 percent.

* Translation…

State Sen. Mike Frerichs, D-Champaign, who is one of 11 legislative members of COGFA, said the new report will put greater pressure on lawmakers to cut spending again next year.

“I think a lot of my colleagues looked at the cuts we made this year and said, ‘We did it. We’re done,’” Frerichs said. “But I think this shows that there’s going to be a lot more pain in the next few years.”

Frerichs said that “next year could potentially be as bad or worse in terms of cuts to important services. It just means we’re going to have to work extra hard to protect the important parts of state government, and make sure our priorities downstate are protected.”

* The budget squeeze is one of the reasons that Gov. Pat Quinn has latched onto pension reform. He pushed it again yesterday…

Gov. Pat Quinn Thursday said lawmakers should consider a comprehensive pension-reform proposal when they return for a one-day special session next week.

Speaking before the start of the Illinois State Fair Twilight Parade, Quinn said lawmakers should consider a reform bill introduced this week by Rep. Elaine Nekritz, D-Northbrook.

Nekritz’s bill imposes the same changes on pensions for downstate teachers, university workers, state employees and state lawmakers. A bill approved in May by the Illinois Senate made changes only to pensions for state employees and lawmakers. […]

One problem with Nekritz’s legislation is that it was introduced as a brand-new bill and could not work its way through the General Assembly in a single day. The special session called by the governor is only scheduled to last Aug. 17. Quinn, though, said there are parliamentary techniques available to lawmakers to put the Nekritz proposal onto another bill and pass it in one day.

* And the governor has cranked up the rhetoric…

A retirement funding hole long pegged at $83 billion could hit nearly $93 billion by next summer if changes are not made, the administration projects. In turn, pension payments are gobbling up so much of the state budget so quickly that state government could be spending more on basic annual pension payments than it does on education within four years.

“This is a fire bell in the night,” Quinn said this week. “This is an alarm for all of us.” […]

But the Quinn team estimates that by mid-2016, state government will be spending $5.8 billion on grade schools and high schools and $6.2 billion on pensions. Although it is true that pension payments are scheduled to keep increasing in the coming years, the governor’s analysis also assumes that lawmakers will continue to cut education spending.

That point is disputed by many lawmakers, however. A spokeswoman for Senate Republican leader Christine Radogno of Lemont dismissed the Quinn estimates as “extremely unreliable.” […]

Depending on one’s point of view, the state already may have reached the schools-pensions imbalance Quinn projects will take place in four years. The state is making a $5.2 billion pension payment this year, but it’s also paying back $1.55 billion in pension-related loans taken out under former Gov. Rod Blagojevich and early in Quinn’s tenure. Totaled up, that $6.75 billion is greater than the $6.2 billion the state is spending on schools this year.

* And the Tribune thinks that just passing a SERS and General Assembly Retirement System reform would be a “baby step”…

At best, this bill would be a baby step up Mount Kilimanjaro. But that’s nowhere near enough.

Illinois is in crisis. “Reform lite”? Forget it.

posted by Rich Miller
Friday, Aug 10, 12 @ 1:08 pm

Comments

What is so discouraging, to me at least, is that Illinois was in bad shape even before the economic meltdown went national. It seems like we have been living through this for more than a decade.

Comment by Esquire Friday, Aug 10, 12 @ 1:46 pm
It’s wise to have conservative estimates, but it’s not all gloom and doom.

Reports in the last couple of days have housing prices rising at their highest pace in seven years and new home building picking up as well.

Comment by wordslinger Friday, Aug 10, 12 @ 1:50 pm
We need a forensic audit. I don’t believe the Gov. Or GA know where some of the money is going. I.E. in speaking with a contract IT person for DCFS, she talked about repeated daycare overpayments. She cited the agency’s antiquated computer system and explained how frequently double payments are made if a caseworker fails to report a change or a move promptly. She said the overpayments were not addressed in her 10 yrs with DCFS. DHS also pays daycare through it’s Public Aud program. But there is no interface between agencies. Double payments are suspected. These are just two of many examples I know about. The Governor wants to restore funding to DCFS “to save the children.” I truly wish throwing $$s at the problem would fix it.

What Illinois is doing just ain’t workin’. I’m growing tired of government by soundbite.

Comment by whatnext Friday, Aug 10, 12 @ 1:54 pm
===We need a forensic audit.===

Do you even know what that is?

Comment by Rich Miller Friday, Aug 10, 12 @ 1:54 pm
Well Rich I thought I did. I know it’s a term usually used for Irs audits, but doesn’t it actually mean a detailed accounting by a private, neutral party when a problem is suspected or has been identified? If I’m off base, I’ll appreciate being educated.

Comment by whatnext Friday, Aug 10, 12 @ 2:03 pm
The Democrats problem continues to be they think someone else should pay for their spending programs.

Comment by Liberty First Friday, Aug 10, 12 @ 2:11 pm
Whatnext, Illinois has an Auditor General who does nothing but audit and issue reports on government operations and spending.

By all accounts, his office does a swell job. And there’s loads of reading material there for anyone who cares to make the effort.

Forensic audits are conducted for the purpose of obtaining evidence for criminal or civil trials.

Comment by wordslinger Friday, Aug 10, 12 @ 2:13 pm
Also, the Nekritz plan is a total scam. It forces employees to choose between two options both of which are reduced benefits. If an employee chooses to stay in the insurance system, there is no guarantee on rates on continued benefits. The plan specifically says the constitutional guarantee isn’t extended to the choice of health benefits.

Comment by Liberty First Friday, Aug 10, 12 @ 2:15 pm
The Democrats problem continues to be they think someone else should pay for their spending programs.

What does this even mean? Such a silly talking point.

IL still has relatively low/moderate spending levels and moderate taxation levels when compared to the rest of the states in the country and the surrounding midwest states.

And your implication that Republicans a) don’t spend money, and b) don’t enjoy the “spending programs” that you vaguely refer to is just funny.

BTW - why don’t the Republicans want to pay for their own folks’ “spending programs” in the form of higher teacher salaries that force the state to pick up the higher pension tab?

Comment by dave Friday, Aug 10, 12 @ 2:18 pm
A baby step? It might not be enough, but it’s 40% of the pension systems and without even looking at the distribution of funds, it’s probably around 25% - 30% on the financial side. It’s more than just a baby step, it shouldn’t be billed as the solution, but let’s not downplay it.

Comment by Ahoy! Friday, Aug 10, 12 @ 2:18 pm
The plan specifically says the constitutional guarantee isn’t extended to the choice of health benefits.

You know that no “plan” can override the constitution, right?

Comment by dave Friday, Aug 10, 12 @ 2:19 pm
Didn’t Mike Frerichs, D-Champaign vote to keep all the facilities open, except like one DCFS office? Didn’t most members of COGFA vote to keep all the facilities open, except like one DCFS office?

How is this going to work if the people who are studying how bad it is can’t even make the cuts?

Comment by Dan Bureaucrat Friday, Aug 10, 12 @ 2:28 pm
Word-thanks for clarification of forensic audit. I still think spending needs perhaps a bit more oversite. No, much more. Just retired from the State. Our agency audits were a joke. Last three done by Revenue interns. Like you, i’ve heard only good about Auditor General. But he’s not everywhere.

I know there is much material to read….but not all necessarily accurate.

Comment by whatnext Friday, Aug 10, 12 @ 2:33 pm
We need a forensic miracle.

– MrJM

Comment by MrJM Friday, Aug 10, 12 @ 2:43 pm
Having participated in a state audit recently, I can attest it was no fun but very thorough. Anytime they had a question about something, it was an intelligent and worthy question that inevitably took hours for me to clear up due to the complexity. I know it sounds like I’m sucking up to the auditors, but it was eerie how their questions cut to the heart of issues when they had never stepped foot in the office before.

Comment by Colossus Friday, Aug 10, 12 @ 2:48 pm
Good one!

Comment by whatnext Friday, Aug 10, 12 @ 2:48 pm
If these projections are correct, and the GA adopts an unconstitutional pension reform (like several of the ones proposed along the way), the GA will be under great pressure to spend the assumed savings elsewhere - and we’ll be in really bad shape once the pension bill gets overturned.

Comment by titan Friday, Aug 10, 12 @ 3:04 pm
dave,

No matter what you say about how Illinois is taxing/spending lower than other states (possibly another silly talking point, BTW) the impression folk here have is that the state is in dire straits and there is little desire on the part of the GA to raise taxes since those folks KNOW that their constituents don’t want their taxes raised, despite all your contrary explanations. These issues don’t exist in a vacuum.

It ain’t a dem/GOP problem - both sides have engaged in the historical perfidy regarding spending/programs/promises. Can’t raise taxes for the above reasons. Can’t really borrow our way out of the problem. What we are really left with, until the housing boom word seems to be foretelling fills the coffers up, is spending cuts. Not a happy scenario.

Comment by dupage dan Friday, Aug 10, 12 @ 3:19 pm
–What we are really left with, until the housing boom word seems to be foretelling fills the coffers up, is spending cuts.–

I didn’t foresee or predict a “housing boom,” I just pointed out that there’s been some improvement reported in that all-important sector.

And, of course, any significant tax increase is off the table, and should be. It’s been done already.

But we’re crazy not to bond out some of the existing overdue bills. We may never see borrowing costs this low again.

Comment by wordslinger Friday, Aug 10, 12 @ 3:41 pm
When I hear reports that bonds sell out even tho the ratings have been lowered it gives me pause. I understand that bond holders are assured of the payback so they have that going for them. It is the taxpayers who get short shrift because they (we) are left holding the bag. Folks in Illinois are so battered from one direction or another it is understandable that they are leery of borrowing more to pay off our debt given the track record of the dem/GOP led spending cabal. And the hapless GOP sees this as a defining moment where they can stand strong and resist the temptations. Sheesh.

Comment by dupage dan Friday, Aug 10, 12 @ 5:32 pm
Why can the GA not comprehend the difference between short term debt (delinquent payments to this year’s service providers, for instance) and long term debt (notably, the pension systems)? The former are like credit card debt and need to be handled promptly. The latter are like a mortgage. The problem is, we have no realistic payment schedule for that mortgage. The annual costs for the pensions are completely affordable, as I understand it. Something like 2/3 of the annual expenditures are toward the debt. The rational approach would be to find a better plan for amortization of the long term debt, rather than floating ill-conceived proposals to renege on payments to retirees that are likely to be found unconstitutional, at which point the state will be even worse off. For decades IL has paid for services to all citizens, not by taxing appropriately, but by raiding the pension funding (some would say stealing from the five systems.) If the state reneges on its obligations to the five systems, why would any vendor believe the state won’t renege on its short term contractual obligations as well?
It’s time to figure out how to pay the bills, not how to get out of paying.

Comment by jimmer Saturday, Aug 11, 12 @ 11:49 am