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Posted by Barton Lorimor (@bartonlorimor)
* Fitch Ratings stuck with its “A-” rating and “Negative” outlook on Illinois’s general obligation bonds. From the explanation…
BUDGET TEMPORARILY STABILIZED WITH TAX INCREASE: Temporary increases in both the personal and corporate income tax rates, coupled with statutory spending limits, have closed a significant portion of the structural gap in the state’s budget through the current fiscal year 2014.
NEED FOR LONG-TERM SOLUTION REMAINS: Due to the temporary nature of the enacted tax increases, the state will need to find a more permanent solution to the mismatch between spending and revenues. The Negative Outlook reflects the critical need to address this issue. The governor’s recommended budget for the coming fiscal year would make these tax increases permanent and provide a basis for the state to achieve fiscal balance.
LARGE BALANCE OF DEFERRED PAYMENTS REMAINS: The state has a large general fund accounts payable backlog, which although reduced still totaled $4.2 billion at the end of fiscal 2013. The state prudently used higher than forecast income tax collections in fiscal 2013 to pay down a portion of the accounts payable balance.
That extra boost in revenue last April brought on by recession inspired income tax receipts put a big dent in the backlog. The Comptroller’s Office recently estimated there is another $2.2 billion in unpaid vouchers being held at the agencies in addition to the reported vouchers and transfers. (Full transparency: I work for the Comptroller.)
More from Fitch…
The governor has proposed two alternative budgets for fiscal 2015; one based on current law with expiring tax rates and a second recommended budget that makes permanent the higher tax rates. The current law budget is balanced through large spending cuts. Even with the higher taxes maintained, however, the recommended budget would rely on a small interfund borrowing ($170 million or 0.4% of forecast general fund revenues) to balance. The recommended budget includes a total of $650 million in interfund borrowing, the balance of which would be used to pay down accumulated accounts payable.
* A budget roundup…
* State approves prison hepatitis C drug, likely to cost millions: Officials say there are an estimated 100 to 150 inmates at each of the state’s 25 prisons who have the disease…Documents show the state estimates the cost of treating an inmate with Sovaldi will range from $61,000 to $122,000.
* SIU budget cuts could cost hundreds of jobs: “With a $23.5-million dollar decline in our appropriation it will get into the hundreds of people that we will not be able to rehire,” said Dr. Glenn Poshard. “There may be layoffs, but there certainly will be hundreds of positions left unfilled.”
* SIU Board Staves Off Tuition Increase
* Heartland College concerned about Quinn’s budget plan
* Fair Tax supporters meet with lawmakers in Decatur
* Funding for Illinois school education under fire
posted by Rich Miller
Friday, Apr 18, 14 @ 5:47 am
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“The governor’s recommended budget for the coming fiscal year would make these tax increases permanent and provide a basis for the state to achieve fiscal balance.”
This is another reason why the so-called “Fair Tax” could be the best option. Since we need the revenue that the current tax rate gives us, we may be able to do it better when more people get a tax break through progressive taxation.
Comment by Grandson of Man Friday, Apr 18, 14 @ 8:39 am
===The governor’s recommended budget for the coming fiscal year would make these tax increases permanent and provide a basis for the state to achieve fiscal balance.===
===The state prudently used higher than forecast income tax collections in fiscal 2013 to pay down a portion of the accounts payable balance.===
Ty needs to give Fitch a call, and explain that budget cuts are what this state needs to balance the budget, not making temporary taxes (which did nothing but increase the amount of uncertainty about the long term viability of state finances) permanent. And R Eden needs to chime in about never…ever…mentioning fiscal balance and tax increases in the same sentence. I demand the Civic Committee do this immediately, and expect Fitch, chastened, to issue an amended statement post haste!
Comment by PublicServant Friday, Apr 18, 14 @ 8:40 am
The writing’s on the wall: the rating agencies will whack the state’s credit rating if the income tax increase expires.
Can’t say you haven’t been warned.
Comment by wordslinger Friday, Apr 18, 14 @ 8:49 am