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Lots more budgetary pain on the way

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Illinois

As Illinois prepares for Governor Bruce Rauner to unveil a proposed budget next week, the worst-rated state is already awash in billions of dollars of red ink, according to Comptroller Susana Mendoza.

Lawmakers and Rauner will have to contend with deficit spending in the current fiscal year as they work to craft a spending plan for next year, according to Mendoza, a Democrat whose office is charged with paying the state’s bills. She outlined the shortfall in an interview at her office in Chicago:

* $2.3 billion of deficit spending in the form of unappropriated liabilities held at state agencies as of Dec. 31
* $8.4 billion of unpaid bills as of Feb. 7
* $1.03 billion of late-payment interest fees incurred as of Dec. 31, 2017 - Note: At least $143m has been paid
* $1.7 billion general fund deficit, according to the governor’s office of management and budget

Rauner on Feb. 14 is scheduled to present his spending plan for the fiscal year that begins July 1. The Republican, who is up for re-election this year, has pledged to roll back an income-tax hike enacted by the legislature in July over his veto. That revenue boost ended an unprecedented two-year budget impasse, which had threatened to send the state to junk-status. Lowering taxes even just a quarter point would shave an estimated $1 billion off the state’s projected revenue, according to the comptroller’s office.

* The Bloomberg story was published before the governor’s budget director testified yesterday with some updated numbers. Monique Garcia and Bill Lukitsch at the Tribune…

[Budget director Hans Zigmund] said the lawmakers’ budget plan was nearly $1.7 billion out of balance, but that number has been whittled down to $600 million through a combination of spending cuts, borrowing from specialized accounts and more revenue coming in than expected.

So, the budget passed over the governor’s veto is $600 million out of whack, which isn’t gigantic.

* However…

Then [Zigmund] detailed looming problems, including the state’s roughly $8.3 billion pile of unpaid bills. Of that, $1.1 billion is tied to what Zigmund called “unappropriated liabilities,” or money the administration spent without permission from lawmakers as it sought to keep the prison system and Medicaid program afloat during the impasse.

Zigmund said Rauner would propose a way to address the combined $9 billion shortfall next week.

Zigmund’s unappropriated liabilities number is less than half the comptroller’s, so I’m not sure what’s going on there.

* The SJ-R’s Doug Finke explains those “unappropriated liabilities”…

The state did not have a budget in place for the 2017 fiscal year but kept spending money through a variety of court orders, consent decrees and automatic spending.

About 85 percent of the supplemental spending request is for expenses for Corrections and for Medicaid.

Sen. Heather Steans, D-Chicago, who chairs one of the Senate Appropriations committees asked how soon the money to operate Corrections will run out if a supplemental bill isn’t approved.

“Very quickly,” Zigmund replied. “Right now, we are having to very actively manage (the bills) that are going over to the comptroller, to do things like make sure the prisoners are fed, make sure the garbage is taken out, make sure the water and lights are running.”

“Unappropriated liabilities” also includes running up the state’s tab by signing contracts without authorizing appropriations.

* And none of this includes GOMB’s previously projected $2.15 billion deficit for FY 2019, which starts July 1.

However, not all of those unpaid state bills are actually overdue. A few billion or so are likely within the normally acceptable bill-paying cycle. So, the hole, including next fiscal year’s projection, is maybe somewhere around $8 billion. Hooray!

* Keep all that in mind when the Illinois Policy Institute claims it has a balanced budget proposal. The institute says it has found $2.173 billion in alleged savings, some of which are impossible to accomplish with Democrats in charge and some are fiscally iffy to say the least.

Either way, the plan addresses only next fiscal year’s problem while seemingly ignoring the carry-over from this fiscal year.

posted by Rich Miller
Thursday, Feb 8, 18 @ 11:19 am

Comments

Rich, the difference between the $1.1 billion in unappropriated liabilities that GOMB states and the $2.3 billion is group health insurance. The Governor is seeking a supplemental to cover those FY 17 liabilities for everything other than group health (since any liability incurred there can be paid out of FY 18 appropriations, which would not be the case for DOC and some other items.

Comment by Juice Thursday, Feb 8, 18 @ 11:32 am
Anxiously awaiting what fictional explanation Rauner will use to claim a balanced budget.

Comment by Norseman Thursday, Feb 8, 18 @ 11:32 am
Even with a tax increase, when you short core state responsibilities while still piling on $12B in unpaid bills for 2.5 years, it’s going to take a long time to dig out of the mess.

Thanks, Gov. Fiscal Conservative Businessman.

Comment by wordslinger Thursday, Feb 8, 18 @ 11:32 am
Likely budget address key points:
- Waste and fraud.
- Magic beans.
- Oh look, a squirrel.
- Blame Madigan.

Comment by Keyrock Thursday, Feb 8, 18 @ 11:39 am
I saw this movie. Peter Pan used magic dust. Governor Rauner is going to need Tinker Bell to work overtime making dust, so he can balance the budget. Look out folks, a long list of lies is in our future.

Comment by Retired Educator Thursday, Feb 8, 18 @ 11:46 am
Give Hans, credit, he’s going big, $9 billion big.

Zigmund said Rauner would propose a way to address the combined $9 billion shortfall next week.

Comment by Michelle Flaherty Thursday, Feb 8, 18 @ 11:47 am
Let’s put that in perspective. Lots of rounding here to yo make it simple. We’ll say each 1% increase in the income tax yields $5B in revenue. And we’ll say that $10B is needed to catch things up so we can have a normal budget (whatever that is).

That means we need a 1 year increase in the income tax to 7% just to play catch up.

Comment by RNUG Thursday, Feb 8, 18 @ 11:50 am
All of this carnage and during an economic expansion with low unemployment. Think what the next recession will do to us ! And its everywhere. Springfield is 11 million in the red. Washington is about a trillion down. We are on a cliff…Wil E Coyote moment…

Comment by Anotheretiree Thursday, Feb 8, 18 @ 11:51 am
I’m of the sincere belief this is what could likely happen…

Rauner can’t sign a budget that uses the current tax increase to make the budget balance. It would run countrrvto his narrative, and he’s be using the tax increase while campaigning against it.

The budget problems will be the problem of the thoughtful legislators as Rauner will veto (again) the budget bills, forcing the GA to impliment a budget Rauner will run against…

… as Rauner, again, will veto everything, and no one, politically, will call him on this on the trail.

“Rauner vetoed that”

Rauner needs these problems to be resolved after his vetoes, so even his state agencies, vendors including social services, and higher education will need the GA to make the state work again.

As warped as it is, Rauner, as a governor, can’t run the race he wants with a first signed full year budget.

Stories like this post aren’t as important to Rauner than “blame Madigan”

Comment by Oswego Willy Thursday, Feb 8, 18 @ 11:53 am
That $600 million is the rosy picture. Bravo to Hans, but that number is going to get bigger.

Comment by Anonymous Thursday, Feb 8, 18 @ 12:16 pm
$9 Billion is about 25% of the revenue.

Those must be some incredible beans.

Comment by JS Mill Thursday, Feb 8, 18 @ 12:17 pm
Looks like the state needs jobs, industry, and tax revenue. I wonder if legalized cannabis could help that?

Comment by Illinois Resident Thursday, Feb 8, 18 @ 12:25 pm
@RNUG

And keep it at 7% for the next decade or so to deal with pensions?

Comment by Ebenezer Thursday, Feb 8, 18 @ 12:25 pm
–Washington is about a trillion down.–

That’s just for this year. The federales are fixing to borrow one trillion dollars this year, nearly double that of last year. T-Bond futures will be jumping at CME.

If you think Republicans in DC or Springfield give a hoot about deficits, I have a bridge in Brooklyn I’ll sell you cheap. It’s amazing and galling that they even have the chutzpah to pay lip service to “fiscal responsibility.”

https://www.washingtonpost.com/news/wonk/wp/2018/02/03/the-u-s-government-is-set-to-borrow-nearly-1-trillion-this-year/?utm_term=.dc97621d41a3

Comment by wordslinger Thursday, Feb 8, 18 @ 12:28 pm
What will be interesting to see is if Rauner’s successor can submit a balanced budget. I believe the debt is so far gone what the reason Illinois hasn’t had a balanced budget for so long is because it’s impossible. Unless the constitution is going to be opened up and changed I don’t anticipate a balanced budget for 2019 or 2020 or 2021, etc etc.

Comment by Maximus Thursday, Feb 8, 18 @ 12:52 pm
== And keep it at 7% for the next decade or so to deal with pensions? ==

All I was shooting for was perspective on getting back even.

But if wanted to keep it in place for the pensions, you would need to ensure that $10B a year was IN ADDITION to the already scheduled ramp payments. Otherwise, you could end up with it like the Lottery, where GRF money was withdrawn from the schools at the same rate Lottery money went in. And I would want it to sunset at a specific point, either 10 years or 80% funding or something along those lines.

Comment by RNUG Thursday, Feb 8, 18 @ 12:56 pm
I always enjoy looking at the IPI’s budget “solutions” every year. I certainly hope the people that draft these things don’t make a lot of money because they aren’t earning it if they do.

Lets highlight a few of the things in their report.

1. Savings at “major” agencies.

==the Insititute’s analysis has revealed several major agencies where expenditures have far exceeded the state’s ability to pay for them==

They identified 5. Guess who two of those are? The Department of Agriculture and, wait for it, the Illinois Arts Council. That would be a not so veiled attack on Speaker Madigan, not a serious budget proposal. Identifying the Arts Council as a “major” agency is a joke.

Aside from their inability to know what a major agency is, they also propose these savings simply by arbitrarily limiting growth at these magic 5 agencies to the growth rate of the Illinois economy. Their list includes DoC. They give no thought to the realities of funding needs based on prison population, etc.

2. Savings from AFSCME

This is fake savings. Wishing for something doesn’t make it an actual budget solution. So, that’s $610 million in “savings” to take out of their number.

3. “Reform” collective bargaining rules in local governments.

Again, wishing for something doesn’t make it a real solution. This isn’t going to happen. And, it doesn’t save the state any money necessarily.

4. Medicaid “reform”

Again, more wishing. Do they really think that Illinois would ever move to a premium assistance program to replace the current Medicaid program? And they want to save $90 million by kicking the 600,000 people added to Medicaid through the ACA expansion. Again, not going to happen.

Once again the IPI is peddling a document that isn’t worth the paper it’s printed on. It’s not a serious document.

Comment by Demoralized Thursday, Feb 8, 18 @ 12:59 pm
“I’ve been successful at everything I’ve ever done.”

Not quite as catchy as “I’ve got this thing and it’s *bleeping* golden.” but it may be the quote we always remember Rauner by in future years.

Comment by Anonymous Thursday, Feb 8, 18 @ 1:00 pm
Will Democrats and some Republicans to the responsible thing again and override Rauner if he vetoes the budget? If they don’t and decide to let the state stumble through the rest of the year without a budget while running up more debt that would kill any chance of Rauner getting reelected. OTOH it will require even more revenue down the road to pay off our unpaid bills.

Comment by Dude Abides Thursday, Feb 8, 18 @ 1:01 pm
== Unless the constitution is going to be opened up and changed ==

What are you going to change that will make a difference?

The pension debt already exists as a contractual obligation; you won’t he dumping it.

And while a progressive income tax is a possibility, you have to be able to sell it to the voters and get it passed. That will require keeping it around the current revenue level overall … unless you go for a property reduction / income tax increase swap. And even then, you can’t make it too rich or it won’t get approved.

Comment by RNUG Thursday, Feb 8, 18 @ 1:02 pm
Comment too long??

Comment by Demoralized Thursday, Feb 8, 18 @ 1:15 pm
–Comment too long?–

No, it was fine. I read it so I won’t have to read the IPI’s budget “solutions” themselves.

Better thee than me. Appreciated.

Comment by dbk Thursday, Feb 8, 18 @ 2:13 pm
Love me those IPI budget solutions

Grad school — A
Real life — F

Comment by Langhorne Thursday, Feb 8, 18 @ 2:52 pm
The tax hike is permanent. What does Rauner not figure out about this.

85% of supplemental funding for prisons and Medicaid??? Every dime that can be rounded up should go to paying the backlog of bills.

As to Medicaid, it almost always gets virtually all of any supplemental funding. Purposely underfunded in the budget it relies on bailout money later. And over the last four decades has bee the real budget buster although no one will face up to that. Easier to blame pensions.

Comment by Realistic Thursday, Feb 8, 18 @ 3:58 pm
Does anybody know if the healthcare plans proposed by Pritzker/Biss will be part of Medicaid expansion. Also, will the state be on the hook for the 10% state portion in 2020?

Comment by blue dog dem Thursday, Feb 8, 18 @ 7:47 pm