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* Back on May 28th, I did a back of the envelope estimate for subscribers of the Fiscal Year 2016 budget hole and came up with almost a $6 billion deficit plus a couple billion more dollars in new unpaid bills. That was before the pension systems revised their state revenue needs upward by almost a billion dollars. So, I was pretty close…
Illinois’ fiscal woes are significantly deeper and more serious than generally realized, with the state facing a $9 billion operating deficit in the fiscal year that begins July 1.
That’s the horrific bottom line of a report released late today by researchers at the University of Illinois Institute of Government and Public Affairs, a study that may raise the eyebrows even of Gov. Bruce Rauner, who has been warning of huge financial problems ahead.
The conclusion: The actual deficit is about twice what is commonly reported, with the hole in the current fiscal 2015 budget not $2 billion to $3 billion but $6 billion, and rising to a projected $9 billion in fiscal 2016 and hitting $14 billion by fiscal 2026, assuming no changes in law or spending practices.
The report says the fiscal hole is so big that even fully reversing the income tax cut that took effect Jan. 1 would close “only about half” the gap projected for the next several years. Starting this year, the individual income tax rate went from 5 percent to 3.75 percent, and the corporate levy from 9.5 percent to 7.75 percent.
The budget they passed last May wiped out all progress and put us in a nighmarish fiscal position.
The full report is here.
posted by Rich Miller
Tuesday, Jan 20, 15 @ 9:27 am
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‘I tried to warn you,’ famous last words.
Comment by William 'I tried to warn you' Kelly Tuesday, Jan 20, 15 @ 9:30 am
You’re gonna need a bigger hammer Bruce.
Comment by 6184life Tuesday, Jan 20, 15 @ 9:31 am
All these economists and professors just don’t seem to understand, if you lower taxes you raise revenue. Sure the Laffer-curve is a U and, theoretically, it is possible to be on the low-end of the optimal tax-rate, but we all know that isn’t true because it “feels” right.
Comment by PMcP Tuesday, Jan 20, 15 @ 9:38 am
does this mean things really are worse that people suspected? I remember all the eye-rolling when Rauner made comments to that effect, and many presumed he was exaggerating the problem for political effect.
Comment by jim Tuesday, Jan 20, 15 @ 9:39 am
Houston…we have a problem!
Comment by JS Mill Tuesday, Jan 20, 15 @ 9:42 am
Rich, yes you did. Your talents extend to picking lottery numbers?
Comment by Anyone Remember Tuesday, Jan 20, 15 @ 9:43 am
Looks like the IL GOP finally caught up to the truck they’ve been chasing. Governor Bruce, time to propose a budget.
Comment by Bill White Tuesday, Jan 20, 15 @ 9:44 am
===Your talents extend to picking lottery numbers? ===
Nope.
But that estimate really wasn’t too difficult to do.
Comment by Rich Miller Tuesday, Jan 20, 15 @ 9:45 am
Time for another Rauner pronouncement that things are worse than he thought.
Comment by Norseman Tuesday, Jan 20, 15 @ 9:46 am
Chairman of Diet Committee: Professor Yamane, let’s be honest. If there’s a way to defeat Godzilla, we need to know!
Kyohei Yamane-hakase: It’s impossible! Godzilla absorbed massive amounts of atomic radiation and yet it still survived! What do you think could kill it? Instead, we should focus on why it is still alive. That should be our top priority!
– Godzilla (1954)
Comment by MrJM (@MisterJayEm) Tuesday, Jan 20, 15 @ 9:48 am
The report states that Illinois is like a person with a big credit card debt problem, and we’re at the point now where that debt is crowding out current spending. They also weigh several options for correcting the growing deficit. Now if news organizations would get Rauner to weigh in on which of the options presented are ones he would support, then we’d be talking. How bout doing that?
Comment by PublicServant Tuesday, Jan 20, 15 @ 9:48 am
Is this the year the legislature stops kicking the can down the road?
Comment by LaJuice Tuesday, Jan 20, 15 @ 9:50 am
Do elections work as a system for holding legislators accountable for this kind of budgetary malfeasance?
Comment by Carl Nyberg Tuesday, Jan 20, 15 @ 9:53 am
Here comes a POB, for starters. Treasury yields are plummeting as money pours into the U.S. seeking safe haven. Price on Illinois paper will be historically good, no matter what the rating agencies say.
Be interesting to see who gets the pinstripe patronage.
Comment by Wordslinger Tuesday, Jan 20, 15 @ 9:54 am
“The budget they passed last May wiped out all progress and put us in a nighmarish fiscal position”
Quinn, Madigan,& Cullerton thank you very much.
Way to run a state into the ground
Comment by fed up Tuesday, Jan 20, 15 @ 9:54 am
Bruce said he would increase education spending by cutting taxes!
Comment by Del Clinkton Tuesday, Jan 20, 15 @ 9:54 am
Yep Word, and a re-amortization of the pension debt to an 80% funded target over a longer horizon. The new GASB rules specifying 30 year windows be used should only apply to businesses that can actually declare bankruptcy, which the state is not able to, nor anywhere near having to do.
Comment by PublicServant Tuesday, Jan 20, 15 @ 9:58 am
To his credit, Gov. Quinn offered up two budgets last Spring, both balanced. One cut spending to match the income tax reduction and the other kept the income tax in place. The GA picked neither and Quinn chose not to fight.
My preference would be for Rauner to do something similar, offer up several realistic budget scenarios. People need to see the relationship between the taxes they pay (or don’t pay) and the services they will receive (or not). It’s a message the voters hate and the politicians avoid, but its one way to “shake things up.”
I won’t hold my breath…
Comment by Pot calling kettle Tuesday, Jan 20, 15 @ 9:59 am
===80% funded target over a longer horizon===
I dunno. I used to think that about the horizon, but after looking at the numbers, it makes the problem so much worse.
Comment by Rich Miller Tuesday, Jan 20, 15 @ 9:59 am
Looks like we have no choice but to raise taxes.
A lot.
Comment by Leroy Tuesday, Jan 20, 15 @ 10:00 am
… But yet, Attorney General Madigan’s emergency police powers argument to the Supremes is still false, unwarranted, immoral and repulsive …
Comment by ZC Tuesday, Jan 20, 15 @ 10:00 am
=== Del Clinkton - Tuesday, Jan 20, 15 @ 9:54 am:
Bruce said he would increase education spending by cutting taxes! ===
This comment is related to the post in what way?
Comment by dupage dan Tuesday, Jan 20, 15 @ 10:01 am
==Is this the year the legislature stops kicking the can down the road?==
Nope.
==Do elections work as a system for holding legislators accountable for this kind of budgetary malfeasance?==
Nope.
Comment by Toure's Latte Tuesday, Jan 20, 15 @ 10:02 am
Can’t wait to see the Trib Ed Board to not write about this.
Comment by From the 'Dale to HP Tuesday, Jan 20, 15 @ 10:03 am
==Quinn, Madigan,& Cullerton thank you very much.
Way to run a state into the ground==
Are some of you done yet playing this game? How’s this blame game working out for you?
The problem is what it is. The only thing that matters is what we do about it moving forward.
Comment by Demoralized Tuesday, Jan 20, 15 @ 10:04 am
The GA didn’t have the cojones to vote to keep the “temporary” tax increase but did have the strength of character to craft a spending budget that breaks the bank even if the increase passed, likely having full knowledge of just how bad things are.
WTG!
Comment by dupage dan Tuesday, Jan 20, 15 @ 10:04 am
(HT to a tweet I got)
At least the GA is focused like a laser on the #1 priority this year — expanding gambling.
Comment by Toure's Latte Tuesday, Jan 20, 15 @ 10:05 am
Well I’m not going to fight to change the existing pension ramp, I just think it’s an option to smooth out payments over a longer timeframe. It certainly prolongs the ramifications of the state’s foolishness in ignoring the pension actuaries over the previous decades, but since the Supreme Court is about to tell the state that the debt has to be paid, POBing it out, as Word suggests, would be the prudent thing to do, but then we’d all have to acknowledge that debt is debt, and one type can’t be treated differently than any other bills the state has.
Comment by PublicServant Tuesday, Jan 20, 15 @ 10:09 am
Compiled by my office as required by state law, this report contains information from agencies
throughout state government. Tax expenditures, such as exemptions, credits or abatements, are given to individuals, corporations or other organizations. In fiscal year 2013, state agencies reported 273 such expenditures, totaling roughly $8.9 billion in foregone revenues. http://www.ioc.state.il.us/index.cfm/resources/reports/tax-expenditure/fy-2013/ Comptroller’s Tax Expenditure Report 2013 Is it a crisis of revenue or of priorities?
Comment by NoGifts Tuesday, Jan 20, 15 @ 10:09 am
No matter how bad it is, something with more than a little drama needs to be done. It would be bad enough if the number was cut in half.
Maybe, just maybe that number being soooo dramatically high will actually help everyone understand that something very serious needs to be done and there will be enough political cover for everyone. Maybe.
Comment by A guy Tuesday, Jan 20, 15 @ 10:11 am
We might have to do a tax hike deluxe (along with spending cuts). That means raising the income tax, passing a millionaire surcharge plus some sales taxes on services. Is this delusional thinking on my part, to even imagine something like this passing with a divided government, when it couldn’t pass with a Democratic-controlled government? Sure, I accept that, but it’s what I believe.
We have such a big problem that we have to think outside the box. Will we have the courage to add more revenue streams, like legal marijuana and a financial transaction tax? These are ideas worth debating at least.
Comment by Grandson of Man Tuesday, Jan 20, 15 @ 10:13 am
==The report states that Illinois is like a person with a big credit card debt problem==
I would argue that Illinois is like a person who skipped a mortgage payment for 20 years, then was shocked when the balloon payment came due.
Comment by Jocko Tuesday, Jan 20, 15 @ 10:13 am
@dupagedan:
“Illinois’ fiscal woes are significantly deeper and more serious than generally realized, with the state facing a $9 billion operating deficit in the fiscal year that begins July 1.”
*******
The newly elected Governor, Bruce Willard Rauner III, was elected on a platform of expanding government spending by cutting taxes. Some 60-odd percent of the people fell for this.
How do you increase spending on a budget item without ensuring you have the revenue to pay for it? Very relevant to the post.
Comment by Del Clinkton Tuesday, Jan 20, 15 @ 10:14 am
On deck, Governor Bruce Rauner . . .
= = The Illinois Constitution requires the governor to prepare and present a State budget recommendation for the state to the General Assembly. The Constitution also requires that the proposed budget be balanced and include recommended spending levels for state agencies, estimated funds available from tax collections and other sources, and state debt and liabilities. = =
http://www.niu.edu/statebudget/budget_process/index.shtml
Comment by Bill White Tuesday, Jan 20, 15 @ 10:14 am
But we don’t need to keep the 5% income tax. We just need to cut spending. Yeah. Right.
Comment by Diogenes in DuPage Tuesday, Jan 20, 15 @ 10:16 am
Now we know the real reason why Lisa chose not to run for governor (as if there was much doubt). She wasn’t anxious to assume the role of “clean up committee” for good old dad. I can’t say as I would blame her.
Comment by Rowdy Yates Tuesday, Jan 20, 15 @ 10:17 am
Hopefully there is still room in the budget to have political friends of Madigan get 6 figure jobs that allow them to retire by age 55?
Comment by Amused Tuesday, Jan 20, 15 @ 10:28 am
No tax hike until the GA can demonstrate some spending restraint! Rainer should not propose specifics, which everyone would criticize no matter what. He should sit down with Madcullertonigan and make a deal that everybody buys into.
Comment by Let'sMovetoTexas Tuesday, Jan 20, 15 @ 10:31 am
==Rainer should not propose specifics==
Umm, it’s RAUNER. And it’s now his JOB to propose specifics. He’ll have to do that with the budget he releases in about a month.
Comment by Demoralized Tuesday, Jan 20, 15 @ 10:36 am
No matter what the house, senate and governor decide to do, it will be difficult. Looking at Comptroller’s Tax Expenditure Report 2013 as cited by NoGifts, the least painful way of correcting some of the problem would be to eliminate all of the Tax Expenditures except for the Food/Medical, Standard Deduction and Property Tax Credit. Those are the ones that impact the average citizen….
Comment by OutSider Tuesday, Jan 20, 15 @ 10:36 am
Lest we blame all of the 2015 budget woes on the Dems - I don’t recall any republicans stepping up to the plate during the budget development, nor supporting a continuation of the 5% income tax.
All were content to let those in power deal with the mess. That might win political points - but results in further suffering for Illinois.
Comment by archimedes Tuesday, Jan 20, 15 @ 10:36 am
=== Del Clinkton - Tuesday, Jan 20, 15 @ 10:14 am: ===
Doesn’t seem to able to identify campaign rhetoric when he sees it. DC blaming all the woes of the state on BR in 3….2….1……
Comment by dupage dan Tuesday, Jan 20, 15 @ 10:37 am
=== Are some of you done yet playing this game? How’s this blame game working out for you? ===
Blaming the GOP (Party of NO!) for not engaging in the process in 3….2….1…..
Comment by dupage dan Tuesday, Jan 20, 15 @ 10:39 am
Demo, in fairness, the crazy auto-correct always wants to make it “Rainer” instead of Rauner. On your more substantive point; I agree.
Comment by A guy Tuesday, Jan 20, 15 @ 10:40 am
DD:
I think we’ve had our fill of victims on this comment board for today. We have passed our quota.
Comment by Demoralized Tuesday, Jan 20, 15 @ 10:41 am
@amused: Bruce will do the same thing with his buddies as well!
Comment by Del Clinkton Tuesday, Jan 20, 15 @ 10:42 am
No surprise here. The reason many knowledgeable commenters here, led by Rich, were so frustrated with Rauner’s half answers and half-baked budget “blue print” during his campaign is that they didn’t address the depth of the fiscal problem — which was crystal clear months prior. He should not claim this is new news to him, because that would be an attack on his advisors.
Comment by walker Tuesday, Jan 20, 15 @ 10:43 am
This won’t effect the employee bonuses and increased funding that Rauner has been floating at the agency chin-wags, will it?
Comment by Wordslinger Tuesday, Jan 20, 15 @ 10:48 am
==“The budget they passed last May wiped out all progress and put us in a nighmarish fiscal position”
Quinn, Madigan,& Cullerton thank you very much.
Way to run a state into the ground ==
Don’t forget Blagojevich, Ryan, Edgar, Thompson. Walker, Olgivie, Shapiro, Kerner, Stratton,Stevenson, Green, and Stelle to name a few.
Comment by SAP Tuesday, Jan 20, 15 @ 10:56 am
Great post, Walker. Thanx!
Comment by Del Clinkton Tuesday, Jan 20, 15 @ 10:57 am
@Jocko,
Amen. Right on. Perfect.
Comment by From the 'Dale to HP Tuesday, Jan 20, 15 @ 10:59 am
—It would be bad enough if the number were half as bad—
Yes. Even with lower numbers, “all of the above” is the required option for both the GA and the Gov.
Comment by walker Tuesday, Jan 20, 15 @ 11:00 am
Okay…California moved their state in 2009 from a $42 billion deficit to a small surplus. They did it with tax increases on millionaires, eliminating corporate tax loopholes and doing severe budget cuts except for education. They are now ready to work on their debt load. Sounds fairly logical. What can we learn from this?
Comment by illilnifan Tuesday, Jan 20, 15 @ 11:04 am
IL has never 100% funded its pension costs. The GASB rules can’t require any funding %’s-it’s a financial reporting measurement only. Why not shoot for 75-80% funding? I never understood why we had to go from 40% fund to 100% funding unless it was to magnify or worse yet exaggerate the funding problem.
Comment by Anonymous Tuesday, Jan 20, 15 @ 11:04 am
How can any of this be a surprise? These numbers did not just suddenly develop in the last month. The Miller envelope, various other reports, even Quinn’s budget address all pointed in this general direction. There may be dispute over what to include or what is affordable but the reality of the numbers did not suddenly blossom as a complete surprise. As SAP said, the basic issue has been in the hands of many people over a long time. That can is getting pretty flat.
Comment by zatoichi Tuesday, Jan 20, 15 @ 11:14 am
You don’t cut your way to prosperity either in the tax code or the budget. This is a serious issue for serious people who can keep their ideology separate from a pragmatic problem solving approach. You need budget restraint, cultural change, a progressive tax system and a broader tax base along with a highly professional competent state government that sets a pro business environment in place. We need real ethical and moral change day by day in this state which over time returns much of the trust and glue that helps to create a solid state where people thrive. Illinois pay your bills and honor your contracts. Many small budget changes that don’t in themselves make a dent in the budget are important because they demonstrate a change in how business is being done. Confidence and certainty are important for business to want to invest and expand and take risk with their capital. It is a simple slogan but it says a lot, “red state taxes and blue state services” do not work. Illinois can not keep spending at one level and taxes flat and low for ever. WE see what taking from the pension system does to allow that to happen. You reap what you sow and until this state starts to sow honesty and a serious thoughtful desire to put things on the correct tract nothing will change for the better.
Comment by facts are stubborn things Tuesday, Jan 20, 15 @ 11:28 am
SAP -
Unfortunately, it didn’t start with Stelle. Illinois State Government bad finances have been around since the days of the Long Nine and Internal Improvements … .
Comment by Anyone Remember Tuesday, Jan 20, 15 @ 11:42 am
It has seemed obvious for a long time now that the state needs to amend the constitution so as to allow a graduated income tax. (That great 20th century development.) And then to set rates which would leave the median household slightly better off, while still raising significantly more money. Why is it so difficult? (I fear the answer is: Because the people who would pay more money under that plan have disproportionate political influence. How much longer will the citizenry as a whole put up with that?)
Comment by UIC Guy Tuesday, Jan 20, 15 @ 11:44 am
@Rowdy Yates, it’s surely the most logical explanation for Lisa’s non-run that I’ve heard. Still doesn’t address why she didn’t run for Senate in 2010; she’d have had the seat and she’d have been able to watch the Springfield mess from afar.
Comment by Angry Chicagoan Tuesday, Jan 20, 15 @ 12:07 pm
===why she didn’t run for Senate in 2010===
She didn’t want the job. It was pretty clear at the time. I know you find this hard to believe, but she wasn’t a fan of the legislative process when she was in the IL Senate.
Comment by Rich Miller Tuesday, Jan 20, 15 @ 12:11 pm
The critical number is $1.4 billion missing from the current budget. That’s the urgent problem. Yes, there are long-term obligations that we can’t run away from anymore, but if Team Rauner can’t find a mix of cuts and new revenue to patch the current hole, we are going to limp to the end of June.
POBs, graduated taxes, constitutional changes, all of these are probably necessary, and all will take some time to implement. But we’ve only got five months to find $1.4 billion with a b. Rauner’s going to need more than a freeze on non-essential spending to cover that gap.
Comment by 47th Ward Tuesday, Jan 20, 15 @ 12:16 pm
===we are going to limp to the end of June===
We are going to crawl on our bellies half dead without arms to the end of June.
Fixed it for ya.
Comment by Rich Miller Tuesday, Jan 20, 15 @ 12:18 pm
Oh no. How will hands be shaken?
Comment by PublicServant Tuesday, Jan 20, 15 @ 12:20 pm
Time for a garage sale!! Maybe the Chinese will give us a loan. Seriously, why are we surprised? The General Assembly has been spending money it didn’t have for decades. Many of the Democrats are just plain scared of MJM. Plain and simple.
Comment by Union Man Tuesday, Jan 20, 15 @ 12:23 pm
The state could issue bonds at a far lower rate of interest then the rate of interest they have on money owed to the pension systems. They could re-finance much of that pension debt, saving many billions. They could also adjust the ramp. Those 2 actions would help a lot. “Pension Holidays” would be the worst thing to do.
Comment by DuPage Tuesday, Jan 20, 15 @ 12:31 pm
Thanks for the link, Rich. This was about the most comprehensive, laymen understandable presentation on the issue that I’ve read.
The conclusions and solution options described were brutally credible, and their description about the problem being grossly exacerbated by the “pay later” approach used for the last several decades was spot on.
It is clear that the time of reckoning has come for Illinoisans. It’s time to pay for the sins of electing people who were quite willing to fiscally destroy the state for a short term plundering of the taxpayers, giving away unnecessary “goodies” without making those getting them pay the piper for this largesse.
The sad thing is that this isn’t a financial problem, it’s a political culture issue. You could raise income taxes to 6%, tax services and retirement income and raise sales taxes and it won’t make a bit of difference in generating deficits in Springfield. For decades, Springfield kept increasing pension liabilities, but refused to fund them. They could have balanced this off by reducing spending for those departments and institutions generating these liabilities, putting downward pressure in raises, but they chose not to do so. They could have gone to the voters and asked for tax increases to pay for the pension benefits they gave to groups like TRS (NOT negotiated),but they chose not to.
Giving the GA much more revenue would just be repeating the same mistakes and expecting different results from the same pols that created these problems. Wasn’t that Einstein’s definition of insanity?
The Illinois financial problems won’t be solved by tax increases, or temporary spending cuts. It’ll take a change in political culture. I just don’t see that happening given the Illinois voter mindset, and lack of a political organization who can credibly show that “the Emperor has no clothes” and convince the people that they can’t keep electing Santa Claus, and giving him your credit card number, if they want to remedy this coming disaster.
The PEOPLE are the problem, which is why the possibilities for solving this problem are so bleak…
Comment by Arizona Bob Tuesday, Jan 20, 15 @ 12:41 pm
I agree DuPage, but bonding it out would not allow the state to just attempt stick it to the employees as they are trying to do now. You can’t default on bond payments unless you want the ratings agencies to make our current rates look good in comparison. They’ll find out soon, and then I hope they take you up on POBs. It’s clearly the better fiscal option because of the interest rate savings.
Comment by PublicServant Tuesday, Jan 20, 15 @ 12:47 pm
===We are going to crawl on our bellies half dead without arms to the end of June.===
Lol. I was trying to sugarcoat it, but yeah, it’s gonna be bad.
Comment by 47th Ward Tuesday, Jan 20, 15 @ 12:54 pm
I totally agree with what “Facts are Stubborn Things” at 11:28am above. If we implement each of his suggestions (even though a few would require a littlt time to fully implement, they would get the job done, and put Illinois on the kick a– track to being an extremely competive match-up to any other state and keep us going for many decades to come. The sooner we implement his suggested changes the easier it will be.
Comment by Capitol Fax Follower Tuesday, Jan 20, 15 @ 12:57 pm
+1 for “facts are stubborn things”. An eloquent and intelligent synopsis of what needs to be done. Even if we can just begin moving in this general direction it would be a big help.
Comment by NIUprof Tuesday, Jan 20, 15 @ 1:41 pm
I’ve seen POBs mentioned a few times on here today. For a variety of reasons, do we really think that POBs are a politically viable proposal for the new Governor?
To be fair, I’m not sure what cuts/changes to the FY16 budget will be politically viable since we are in a whole that is about to be 2x the entirety of state payroll ($4 Billion).
I just don’t see POBs as a viable political option for the new Governor.
Comment by john Tuesday, Jan 20, 15 @ 2:04 pm
John the pension money has already been borrowed. Why would paying it back at a much lower rate of interest be so politically unviable?
Comment by PublicServant Tuesday, Jan 20, 15 @ 2:13 pm
You know, if Rich had been listened to by the main stream media and / or this report had come out 6 to 9 months ago, we would probably be talking about a different govenor right now. Instead, the table is being set for massive cuts and massive tax hikes.
Comment by RNUG Tuesday, Jan 20, 15 @ 2:39 pm
Arizonabob - you are spot on. The fact that Madigan got reelected tells you the current general assembly has no interest in fixing the structural problems. Could raise the tax rate to 7%, would still not do a bit of good
Comment by Amused Tuesday, Jan 20, 15 @ 3:03 pm
===The fact that Madigan got reelected tells you===
…nothing. He had the votes.
Comment by Rich Miller Tuesday, Jan 20, 15 @ 3:16 pm
Sure they are Amused. They just didn’t want to give the Republicans a free pass on the difficult decisions that have to have bipartisan support to pass regardless of democratic majorities.
Comment by PublicServant Tuesday, Jan 20, 15 @ 3:17 pm
No, you didn’t warn us. You have consistently been in the “sky is not falling crowd” and agreeing with Cullerton that our problems are largely just PR, the Tribune, Fahner, whatever. Same with most of the Illinois political establishment, i.e., readers here.
Let’s all say it loud and clear: The sky is falling.
Comment by WirePoints Tuesday, Jan 20, 15 @ 3:45 pm
===No, you didn’t warn us.===
Um, yes I did. And I turned that subscriber post into a newspaper column.
===s. You have consistently been in the “sky is not falling crowd” and agreeing with Cullerton that our problems are largely just PR===
Um, no. What I’ve consistently pointed out is that the problem is difficult but manageable with the tax hike revenues and a nightmare (see $9 billion above) without those revenues.
Comment by Rich Miller Tuesday, Jan 20, 15 @ 3:48 pm
AB, you’re talking out your tukkus with the “political culture” stuff.
This is dollars and cents, baby, cash on the barrel, where you can go to those great Big Budget Books and start revising the enormous amount of work that’s been done laying out the real money in, money out, anyway you choose.
More cuts? More revenues? Show me.
You know you’ve run into someone with no game when they blissfully ignore facts and start evangelizing about “culture,” and “business friendly,” and “regulations” when the issue is money.
AB, IPI, take the last budget books and substitute figures for spending and revenue as you see fit.
Then, sell it.
Comment by Wordslinger Tuesday, Jan 20, 15 @ 3:58 pm
When the Yiddish comes out, the guy’s serious. lol.
Comment by A guy Tuesday, Jan 20, 15 @ 4:12 pm
Refinancing the debt was proposed by Quinn. The GOP unanimously said no way. Perhaps Republicans will now see the wisdom in refinancing at lower interest rates, which they were blind to during a Democratic administration.
By the same token, Republicans have been complaining for the last 12 years that this state has a spending problem, not a revenue problem. It’s hard to believe the problem was suddenly caused by lack of revenue in the last week. Yet that’s what the GOP will have to argue when they support Rauner’s unavoidable tax hikes. And they will do it with a straight face.
Comment by anon Tuesday, Jan 20, 15 @ 4:13 pm
== California moved their state in 2009 from a $42 billion deficit to a small surplus. They did it with tax increases on millionaires, eliminating corporate tax loopholes and doing severe budget cuts except for education. Sounds fairly logical. What can we learn from this? ==
Rauner and Griffin have taken the tax on millionaires off the table. Ditto for eliminating corporate tax loopholes. While Rauner has pledged to increase education spending from pre-school through college, he could only do that with smoke and mirrors, unless he proposes one of the biggest tax hikes in state history.
Comment by anon Tuesday, Jan 20, 15 @ 4:15 pm
Public Servant-you are repeatedly pushing for a huge POB because the State would then have an enforceable obligation to ensure the bonds were paid down and the $$ would be safely in the hands of the pension funds to be available to pay benefits where as of now the State can essentially contribute whatever it can afford. It is not going to happen. The interest rate arbitrage you mention is nonsense. The interest rate you think exists on past due amounts is an artificial number whereas the bond interest rate is real and owed to bond investors. When the State owes money to its pension funds it can choose to ignore that obligation until it elects to pay the money . That choice doesn’t exist when the money is owed to bond holders. Our past experience with POBs is mixed and given Rauner’s background I think you are dreaming
Comment by Sue Tuesday, Jan 20, 15 @ 4:22 pm
Don’t have a clue why anyone is surprised at the extent of the debt. When you cut the income tax back to 3.75, do you think you might make progress on paying off bills? Is that they way it works in peoples’ homes? Quit work and then try paying off the mortgage with no money? According to this genius logic, the next step will be to eliminate all state tax period and see if that helps. Where do these people come from?
Comment by Anonymous Tuesday, Jan 20, 15 @ 4:27 pm
== The sad thing is that this isn’t a financial problem, it’s a political culture issue. You could raise income taxes to 6%, tax services and retirement income and raise sales taxes and it won’t make a bit of difference in generating deficits in Springfield. ==
This is an admission that Republicans are no better than Democrats. The Dems in the GA can’t force the Republican governor to spend money, as I’m sure AB knows.
Comment by anon Tuesday, Jan 20, 15 @ 4:29 pm
@WirePoints
There’s really no other way to say this so I’ll say it - you are an idiot.
Unless somebody is a complete recluse or is incapable of even the basic understanding of the English language, the problem has been known for quite sometime now. And nobody on this blog (obviously you are new here) has ever said that there wasn’t a problem.
Are there those who have tried to downplay the problem? Absolutely. But your fingers better point to others besides Senator Cullerton. I seem to remember during the last budget cycle the Republican members of the GA constantly crying that what Pat Quinn was laying out with his “Not Recommended Budget” was nothing but scare tactics. That was the common refrain from everybody (doesn’t matter which side of the coin they were on) when they didn’t want to admit there was a problem.
Comment by Demoralized Tuesday, Jan 20, 15 @ 4:37 pm
Anonymous- your comment might have more cred if the State made any progress while the tax rate was 5 percent-rather then take advantage of the additional income to lessen spending and pay off the past due bills-Quinn with the GAjust spent more $$.
Comment by Sue Tuesday, Jan 20, 15 @ 4:39 pm
==AB, you’re talking out your tukkus with the “political culture” stuff.==
Word, Arizona Bob thinks everyone in Illinois is an idiot. When you begin your analysis with that assumption everything else is kind of background noise.
Comment by Demoralized Tuesday, Jan 20, 15 @ 4:39 pm
@Sue:
The state was making the full pension payment and trying to pay down some old bills. That’s what they were doing with the additional money.
Try and keep up
Comment by Demoralized Tuesday, Jan 20, 15 @ 4:41 pm
== your comment might have more cred if the State made any progress while the tax rate was 5% ==
The state backlog of bills was cut almost in half thanks to the 5%. And no pension payment were missed, to prevent the unfunded liability from getting even worse.
Comment by anon Tuesday, Jan 20, 15 @ 4:43 pm
===Ditto for eliminating corporate tax loopholes===
No. He has put that high on his list.
Comment by Rich Miller Tuesday, Jan 20, 15 @ 4:50 pm
Sue, the courts are about to confirm the Belz ruling that the pensions are an enforceable contract. The sooner you recognize that and act to structure the repayment schedule in the most financially responsible way, the better off the state will be. Your pay whenever we feel like it fantasy is a major contributor to a “kick the can down the road” attitude that has been a major contributor to the state’s current bleak financial condition. Paying back debt at the lowest interest rate possible is clearly the practical and fiscally responsible thing to do. The stock market’s long run average ROR is north of 8% per year. POBs would allow the state to reduce the annual interest on the debt by approximately 50%. That actuarially calculated interest rate isn’t fantasy. It’s reality. Not recognizing that is ideological blindness, and foolish.
Comment by PublicServant Tuesday, Jan 20, 15 @ 4:56 pm
Folks-take a look at what happened to the unfounded lialities on the pension plans during the past few years-the liabilities have exploded. Sure the State was better off with more revenue to use to pay its bills but the progress was marginal. Given the anticipated Supreme Court decision what is needed is State-wide salary caps on how much local school boards can pay to all pension participants including administrators. Capping salaries would not trigger the impairment clause and it would drive down the unfunded liabilities. Does anyone think it would be hard to find administrators without paying them 300 plus as is routinely done in the suburbs or teachers less then 100k
Comment by Sue Tuesday, Jan 20, 15 @ 5:01 pm
- Sue - Tuesday, Jan 20, 15 @ 4:39 pm:
Yes, the GA increased spending some … but they also managed to make the required pension fund payments and pay down some of the debt
Comment by RNUG Tuesday, Jan 20, 15 @ 5:04 pm
Sue:
The state was paying the full pension payment due the past few years. You are confusing apples with oranges when you try to equate the pension payment with unfunded liability.
Comment by Demoralized Tuesday, Jan 20, 15 @ 5:05 pm
==Sure the State was better off with more revenue to use to pay its bills but the progress was marginal. ==
And what do you think would have happened without the tax increase?
The facts are that the increased revenues went to pensions and paying down some old bills.
Comment by Demoralized Tuesday, Jan 20, 15 @ 5:07 pm
== Capping salaries would not trigger the impairment clause ==
Don’t bet on it. There were a couple of ISC pension clause cases about changes that, in effect, capped the amount of slary or the time to earn credits … and they were found unconstitutional.
Comment by RNUG Tuesday, Jan 20, 15 @ 5:07 pm
Not talking about capping the amount of salary which can be counted for pension credit-I mean capping salaries period. If the GA were to limit salaries which could be paid you could count 100 percent of salaries for the pension credit and avoid the constitutional issue completely. Does anyone have sympathy for NS superintentants making hundreds of thousands of dollars and then retiring at 70 percent of that number for 30 or more years with. 3 percent cola
Comment by Sue Tuesday, Jan 20, 15 @ 5:28 pm
Sue, how much money do you estimate that would save the state? Do you really think people would stand by and let the state just not pay them at a time of an improving economy? Do you think any given supt, or any other state employee is interchangeable? Rauner, if he actually attempted what your fantasy ideology envisions would plunge this state into chaos in record time. We’ll see what happens but I doubt Rauner is as I’ll advised as would be necessary as to follow your foolish game plan which would cost the state both financially and through quality of service declines.
Comment by PublicServant Tuesday, Jan 20, 15 @ 6:30 pm
– When the state owes money to its pension funds it can choose to ignore the obligation until it elects to
pay the funds–
Sue, bringing it old school!
Has this been tried anywhere before? Were there problems down the road?
Sue, I bet you think that idea is “conservative.”
Hows about you just admit your another deadbeat looking to get out of paying a bill?
Comment by Wordslinger Tuesday, Jan 20, 15 @ 6:59 pm
Sue, did you not know that while the tax rate was at 5% pension payments were made in full? I’m surprised you didn’t know that. So, yes, with the tax increase, bills were paid, progress was made.
Comment by Anonymous Tuesday, Jan 20, 15 @ 7:22 pm
Love AZ Bob’s comment at 12:41 about how we need a change in political culture. Would he possibly mean finding honest, ethical, constitution-honoring politicians to elect? Good luck with that one. Who knows any?
Comment by Anonymous Tuesday, Jan 20, 15 @ 8:07 pm
It’s nonsense to claim full pension payments were made when the tax increase was in effect. RNUG, you especially know how wrong that is. We made the statutory minimum payments which are not sufficient even to keep the unfunded liabilities from rising, even assuming the phony assumptions that go into the state’s projections. And it’s all calculated in violation of generally accepted actuarial standards of practice. See what TRS’s actuary said about “Illinois Math” and your supposed “full payments” here: http://trs.illinois.gov/pubs/actuarial/2014PreliminaryValuationRept.pdf. See what the Auditor General’s actuary said here: http://www.wirepoints.com/wp-content/uploads/2014/10/2013-State-Actuary-Rpt.pdf
Comment by WirePoints Tuesday, Jan 20, 15 @ 8:43 pm
@anon
=This is an admission that Republicans are no better than Democrats. The Dems in the GA can’t force the Republican governor to spend money, as I’m sure AB knows.=
You’re right in your first statement, but absolutely wrong in your second.
Can you say “Vetoproof Majority?”
Comment by Arizona Bob Tuesday, Jan 20, 15 @ 9:30 pm
@anonymous
= Would he possibly mean finding honest, ethical, constitution-honoring politicians to elect? Good luck with that one. Who knows any?=
Actually I know quite a few….IN ARIZONA!
Comment by Arizona Bob Tuesday, Jan 20, 15 @ 9:47 pm
- Walker - was on fire. Well done.
To the Post,
Rich has been saying through all the campaign rhetoric, on both sides, legislative and executive offices, that the numbers don’t add up, it’s bad, and it’s going to get far worse before it gets better at the rate things are/were going, and the campaign “answers” aren’t /weren’t going to work given the realities of today.
All that said, the report isn’t “the sky is falling” puffery, and neither were the warnings.
The goal is shared sacrifice, but let’s not think this is a great opportunity to impliment solutions geared solely for political gains if the end game solution of getting Illinois back on her feet isn’t realized.
That is what Rich Miller and a vast majority of commenters are looking for; answers, solutions, and looking at this as real, not theory or coffee house, dorm room, 5 minute solution time.
We are all past that, and Rich warned us the day was coming.
Comment by Oswego Willy Tuesday, Jan 20, 15 @ 10:09 pm
===We made the statutory minimum payments ===
Yep. And that hadn’t been done in a long while.
Also, where do you propose to come up with the money for actuarially sound minimum payments when you hate the tax hike and are dumbfoundingly blind to fiscal reality?
Just wondering.
Comment by Rich Miller Tuesday, Jan 20, 15 @ 11:47 pm