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* From the Illinois Policy Institute…
According to the governor’s own estimates, when the tax hike sunsets next year, the state’s General Fund Revenue will drop to about $35 billion. That’s more than the state spent just two years ago during the 2012 fiscal year – not quite the doomsday scenario Quinn is trying to sell.
* If you click here and take a look at a document published by the Commission on Government Forecasting and Accountability, you’ll see that the Policy Institute is right about their simple comparison between FY 2012 and FY 2015. Total operating and transfers out spending in FY12 was $34.1 billion, while the same number in the governor’s not recommended (no tax hike) proposal is $34.6 billion.
But, dig down a little for the real story.
* For instance, FY12’s pension fund contributions totaled $4.13 billion, while pension contributions next fiscal year in the governor’s “not recommended” budget are projected to be $6.24 billion - a $2.11 billion jump.
Plus, the state had a $477 million operating deficit in FY 2012, which was down from the $3.8 billion operating deficit the year before, but still pretty darned high. The not recommended budget’s operating surplus for next fiscal year is $357 million - an $834 million swing from FY12.
Compared to FY12, mandated transfers out (debt service, etc.) are about $316 million higher by next fiscal year.
Also, in inflation-adjusted terms, FY12’s $34.1 billion in total spending equals $35.1 billion in today’s dollars. That’s a half billion dollars more than the state is projected to actually spend in the coming fiscal year with the not recommended budget.
* So, increased pension payments, wiping out the operating deficit and creating a small surplus, higher mandated transfers out, plus inflation adds up to $3.76 billion in net budget pressures that didn’t exist in FY 2012. At least by my math.
And they still have to somehow fund the government on net appropriations that are projected in the not recommended budget to be $1.9 billion lower next fiscal year than in FY12, not counting inflation ($25.07 billion in FY12 vs. $23.12 billion in FY15). The difference is $730 million higher when you factor for inflation.
Yes, it’s a real problem.
posted by Rich Miller
Tuesday, May 6, 14 @ 11:44 am
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Clearly, the Illinois Policy Institute wants to go back to the days of shorting pension contributions and running deficits. They’re conservatives.
Comment by wordslinger Tuesday, May 6, 14 @ 11:54 am
Here’s another report.
http://www.illinoispolicy.org/half-of-illinois-obamacare-enrollees-havent-paid-their-premium/
Comment by Only in Illinois Tuesday, May 6, 14 @ 12:00 pm
Well when you started with from the Illinois Policy Institute, you just knew you weren’t going to get the real numbers now didn’t you Rich?
And to further clarify the 2.11 billion pension payment jump, that is what is mandated by the ill-advised Ramp law passed in 1995, which allowed the state to defer even more of their pension payments up front while exponentially backloading the repayment schedule later. That’s what the budget is suffering from now. The normal cost of the pensions is only approximately 8.75% of wages/salary. The remainder of the payment is paying back what was diverted in past years. Think about it. 8.75% is not overly generous. If the state had to contribute to social security, they don’t because they offer the pensions, they would be outlaying and unskippable 6.2%. So the remainder of the 8.75% is the equivalent of a very low employer contribution to say a 401K, and that’s less than most businesses whose workforces approximate that of the state.
Comment by PublicServant Tuesday, May 6, 14 @ 12:01 pm
==They’re conservatives.==
More than that, they’re reactionaries. Right now, a status quo loving conservative would be fine making the pension payments.
Comment by Precinct Captain Tuesday, May 6, 14 @ 12:07 pm
The “haven’t paid their premium” thing is now THE right wing talking point. Too bad that most people signed up after January 1st so their premium wasn’t due yet.
No that Obamacare is working as intended and millions more people have health insurance they’re really grasping at straws.
Comment by Rahm's Middle Finger Tuesday, May 6, 14 @ 12:07 pm
Rich ought to delete the post, since it’s free advertising for their propaganda.
Comment by PublicServant Tuesday, May 6, 14 @ 12:09 pm
PC, I was being snarky. They’re not conservatives. Real conservatives pay their bills.
Comment by wordslinger Tuesday, May 6, 14 @ 12:11 pm
Illinois collected $68,901,523,000 in revenue during 2012. - http://factfinder2.census.gov/bkmk/table/1.0/en/SGF/2012/SGF001
== Total operating and transfers out spending in FY12 was $34.1 billion ==
That means we spent more money on other expenditures ($34.8 billion) than we spent on the “budget” ($34.1 billion).
As NPR pointed out recently, we may wish to re-evaluate the manner in which we do our budgeting and accounting, especially in regards to what we call our “budget”.
Comment by Formerly Known As... Tuesday, May 6, 14 @ 12:15 pm
–That means we spent more money on other expenditures ($34.8 billion) than we spent on the “budget” ($34.1 billion).–
Sigh.
You might want to learn the components of the all-funds budget, and the restrictions on funds outside of general revenues.
Comment by wordslinger Tuesday, May 6, 14 @ 12:22 pm
===That means we spent more money on other expenditures ($34.8 billion) than we spent on the “budget” ($34.1 billion). ===
Um, that includes unemployment insurance, workers’ comp and other “Insurance Trust” stuff, plus federal money. That’s $24 billion right there. The state brought in about $36 billion in all taxes, excluding refunds.
Comment by Rich Miller Tuesday, May 6, 14 @ 12:24 pm
@FKA:
You don’t understand the budget. I don’t understand the “re-evaluating” comment since all of it’s out there to see. It’s not that hard.
Comment by Demoralized Tuesday, May 6, 14 @ 12:36 pm
Rich, please stop with all of these facts, it interrupts a great story.
Comment by Try-4-Truth Tuesday, May 6, 14 @ 12:37 pm
Consider the source.
Comment by Anyone Remember Tuesday, May 6, 14 @ 12:41 pm
I applaud the integrity of the Illinois Policy Institute, erecting a firewall to prevent any undo influence by any sort of rational policy analysis on their press releases.
Comment by Yellow Dog Democrat Tuesday, May 6, 14 @ 12:47 pm
Ditto those saying consider the source.
Comment by Norseman Tuesday, May 6, 14 @ 12:52 pm
Plus, in FY ‘12, the GA simply did not appropriate nearly $2 billion of the State’s Medicaid liability.
Comment by Juice Tuesday, May 6, 14 @ 1:05 pm
ISP needs to realize that the State’s pension payments are an expense just like any other expenses such as paying salaries, paying bondholders, paying vendors, etc. - they should be paid.
Comment by Joe M Tuesday, May 6, 14 @ 1:18 pm
Today an article came out about out the very good tax revenue year we expect to have when FY 2013 ends in June. The article warns that this year’s revenue boon is a one time only event, and that there will be a steep dropoff if the tax increase sunsets.
http://www.sj-r.com/article/20140505/NEWS/140509691/1999/NEWS?rssfeed=true
In other tax news, a survey came out in which millionaires strongly support a tax increase on the wealthy, as well as a minimum wage increase. It’s a small poll, but I’ve seen at least one other poll that supports its finding.
http://finance.yahoo.com/news/millionaires-support-higher-taxes-wealthy-100000787.html
Comment by Grandson of Man Tuesday, May 6, 14 @ 1:28 pm
I think the Illinois Policy Institute is looking at Missouri with envy
http://abcnews.go.com/Politics/wireStory/missouri-lawmakers-override-veto-enact-tax-cut-23606164
Comment by Bill White Tuesday, May 6, 14 @ 1:34 pm
I “get” the budget along with the myriad mandatory expenditures accompanying it, pension obligations and so on. The fact is those expenditures consumed more the general fund “budget”. We should take a look at it.
It’s not just me saying this, either. For background:
- http://wuis.org/post/expert-says-state-illinois-needs-better-financial-planning
- www.civicfed.org/iifs/blog/illinois-law-requires-new-revenue-diversions-general-funds-fy2015
Comment by Formerly Known As... Tuesday, May 6, 14 @ 1:45 pm
They got in extra money? O.K. then, they can cancel the pension cuts.
Comment by DuPage Tuesday, May 6, 14 @ 1:58 pm
Also saying this are
- The CBBP www.cbpp.org/cms/?fa=view&id=4085
- The IGPA at U of I http://igpa.uillinois.edu/sites/igpa.uillinois.edu/files/toolbox-budget/files/Hudspeth-Fiscal-Planning-web.pdf
- The commission led by Richard Ravitch and Paul Volcker www.statebudgetcrisis.org/wpcms/wp-content/images/Illinois-Report-Revised.pdf
COGFA, GOMB, Dept of Revenue, Comptroller and others do a great job, but there are clearly things we can do to improve our budgeting and accounting process in regards to the all-funds budget. We need to consider more than just the stuff IPI points to in our budgeting and accounting. Whether I miscommunicated or some misinterpreted, that’s not meant as a “slam” on our state.
Comment by Formerly Known As... Tuesday, May 6, 14 @ 2:35 pm
@FKA:
The all funds budget is irrelevant when you are talking about the tax increase. That’s just a fact. You count them as part of the “budget” but you don’t count them in the discussion on the tax hike. If you truly understood the budget you would realize that.
Comment by Demoralized Tuesday, May 6, 14 @ 2:43 pm
On one hand, you bash the state for an massive unfunded pension liability.
On the other, you bash them for overspending when they actually start to pay into the pension systems.
What a life.
Comment by Michelle Flaherty Tuesday, May 6, 14 @ 2:44 pm
With this crew it’s hard to tell what’s scarier, less revenue or more revenue. They really don’t know how to handle either situation. They should use every opportunity to shore up pension funding that comes along. It won’t solve the problem, but it would make it less difficult. Any good faith in that direction would be helpful.
Comment by A guy... Tuesday, May 6, 14 @ 3:01 pm
@Demoralized
My initial comment was in the context of the manner in which we conduct our budgets and accounting.
I get your point and understand that it reflects the majority view. I also recall from your prior postings and our prior discussions that you understand the budget process better than most.
But as the Civic Fed piece touches on, the all-funds budget and the general funds budget are more integrated than many believe and receive less scrutiny - especially in light of the way funds can be and have been shifted away from “general revenue” only to essentially disappear from the public consciousness.
I realized after the initial posting that it could be misconstrued as being a comment on the tax hike and spending rather than our budgeting, our accounting and the “big” picture. Simply trying to say that we need to remember the budget is much larger than just “general funds”, and that a number of highly respected experts feel General Funds and Consolidated Funds are more closely related in their impact on our state than many people realize.
Comment by Formerly Known As... Tuesday, May 6, 14 @ 3:14 pm
If you are truly interested, @Demoralized, the IGPA at U of I published an 18-page paper on this exact thing in 2011 called
Why Ignore Over Half of the Illinois State Budget Picture? http://igpa.uillinois.edu/system/files/FiscalFuturesBudgetTransparencyReport.pdf
That paper explains things far better than I can apparently lol. If you ever have the time, I’d welcome your thoughts on what they say and how they may be right or wrong.
Comment by Formerly Known As... Tuesday, May 6, 14 @ 3:25 pm
wordslinger says,
“Clearly, the Illinois Policy Institute wants to go back to the days of shorting pension contributions and running deficits. They’re conservatives.”
Why would you mischaracterize their position? If you bothered to read any of their stuff you would know their first answer to Illinois’ fiscal problems is spend less money, including on pensions (their goals is to eventually move public workers to a defined contribution plan). Rich makes a good point which is that between 2012 and 2015 there are new expenses to take into consideration — but in response the IPI would probably say there is also plenty of room for State government to get leaner. I myself would have never participated in Obamacare (i.e. expanded Medicaid) and I would scale back education spending given that there is literally no evidence that links more spending to better educational outcomes. But there are all sorts of big ticket items (pensions, healthcare, economic development, etc.) that could be trimmed in a way that makes sense for growth and mirrors the kind of reforms our neighbors have implemented.
Comment by Fake Herzog Tuesday, May 6, 14 @ 4:02 pm
@FKA:
I understand better your point. My point was simply that when we are talking about the tax increase the non-general funds portion of the budget doesn’t matter. You are correct that few understand what the entire budget (all funds) consists of. There are hundreds of special funds, all with special revenue sources and all created with some specific funding purpose in mind. To tell you the truth it can be a nightmare sometimes dealing with them. I have heard people say we should get rid of all of them and have one fund. I’m not sure that’s such a good idea but I would say that we probably don’t need most of those special funds.
Comment by Demoralized Tuesday, May 6, 14 @ 4:11 pm
I got your snark Word, I was just in a mood to call those IPI folks what they really are. They’re not free marketers or conservatives or liberty loving. They’re old school, hardcore reactionaries with no principle other than atavism.
Comment by Precinct Captain Tuesday, May 6, 14 @ 4:17 pm
==But there are all sorts of big ticket items (pensions, healthcare, economic development, etc.) that could be trimmed in a way that makes sense for growth and mirrors the kind of reforms our neighbors have implemented.==
Trimmed how exactly?
Comment by Demoralized Tuesday, May 6, 14 @ 4:37 pm
A guy: That’s exactly what’s been happening. The bulk of increased revenue has been applied to back bills, and “shoring up” the pension funding with the scheduled ramped up payments.
Michelle Flaherty has it right, as pension payments have risen for five years, many of the same folks who complained about not meeting pension obligations, then complained about “increased” spending. Or they say such nonsense as “cut the increased spending so that we can pay pension obligations.”
Comment by Walker Tuesday, May 6, 14 @ 4:59 pm
@Demoralized
Thanks. I appreciate you engaging in some constructive dialogue and sharing your own view of things. We may not always see eye-to-eye on some issues, and may even trade barbs once in a while, but you will always have my respect. imho, you’re part of what makes the CapFax community great.
Now if we can just figure out how best to revamp and re-organize the accounting on this multi-billion dollar budget, we might be on to something. Take care, and the next round is on me.
Comment by Formerly Known As... Tuesday, May 6, 14 @ 6:02 pm