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State admits to $1.2 billion structural deficit

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Illinois

The Illinois budget labeled as “balanced” by Democrats and Republicans alike has an estimated $1.2 billion structural imbalance, according to the state’s new offering statement.

* From the state’s offering statement…

The Fiscal Year 2019 General Funds budget has an estimated underlying structural deficit of $1.2 billion. To avoid future structural deficits, the Governor and the General Assembly would, among other potential solutions, need to reduce expenditures, adjust revenue collections or approve a combination of revenue adjustments and reductions in expenditures. The State provides no assurances as to how, when or in what form this structural deficit might be addressed.

According to the state’s report, the structural deficit results from one-time things like $800 million in interfund borrowing and $300 million for the sale of the Thompson Center. But there’s also the matter of $400 million in raises the state must pay, but never appropriated. Then there’s the hoped-for $400 million for pension savings from a buyout program…

“While these buyout programs have yet to be implemented, it is expected to create savings for the state in the long term,” state budget director Hans Zigmund said in a recorded investor presentation. “The state can provide no assurance as to the amount of savings actually realized from the implementation of such programs.”

* And despite the governor’s continued trash-talking of the tax hike, here’s his capital markets director…

“Several developments which have taken place since the beginning of fiscal year 2018 are putting the state on an improved trajectory for the future,” state capital markets director Kelly Hutchinson says in a recorded investor presentation, saying the permanent income tax hike “helped drive a 21% increase in general fund revenues.”

The report and the investor presentation are both here.

Director Hutchinson also made a good point during the presentation that the state’s GO bond program has a “perfect” repayment record since it was established in 1900. That’s 118 years.

posted by Rich Miller
Monday, Aug 20, 18 @ 1:47 pm

Comments

Those official statements really cut through the b.s. Highly recommended reading for anyone who’s serious about this stuff.

–Director Hutchinson also made a good point during the presentation that the state’s GO bond program has a “perfect” repayment record since it was established in 1900. That’s 118 years.–

Which begs the question: Why aren’t GO bonds AAA?

Comment by wordslinger Monday, Aug 20, 18 @ 1:52 pm
Imagine where we could be with a governor engaged in managing the state for success instead of trying to torpedo it. Thank heavens for the tax hike, which has helped stabilize this situation caused by Rauner’s mismanagement.

Comment by Precinct Captain Monday, Aug 20, 18 @ 1:57 pm
Illinois Bonds: We’ll pay you before we pay our bills!!!

Comment by Anonimity Monday, Aug 20, 18 @ 1:58 pm
==That’s 118 years.==

Seasons change…

Comment by City Zen Monday, Aug 20, 18 @ 2:05 pm
-“perfect” repayment record since it was established in 1900. That’s 118 years.-

It was a little easier to make payments before 1970 when (1) voters had to approve issuance of state debt so there wasn’t anywhere near as much, (2) the State wasn’t suffering from liquidity problems due to pension payments, health insurance premiums, and chronic structural deficits, (3) the State didn’t have to pay $4.4 billion in debt service.

Sure, it’s 118 years, but I take that track record with a grain of salt, especially with the people who run the show these day.

Comment by ImNotTaylorSwift Monday, Aug 20, 18 @ 2:11 pm
Good work by Hutchinson. Contrast that with Rauner’s talking points on taxes that he spouted to Mark Maxwell on Capitol Connection.

The tax increase was needed. How do we know this? Because the state needed to spend every dime of it, and we’re still in the hole.

I don’t just blame politicians who promise voters they’ll cut taxes when it’s mathematically impossible. I also blame the voters who believe them.

Comment by Can Monday, Aug 20, 18 @ 2:13 pm
It’s almost like if you want a civilized society where people are given an opportunity to do well, it requires a certain amount of taxes…

JB would do well to offer some hard numbers for his progressive income tax proposal. Obviously the wealthy will pay more than they do now, but what about the poor and middle class? Even if they would face a higher rate than they do now, that might be acceptable if there is a corresponding decrease in property taxes. But he should be clear about where he stands.

Comment by Techie Monday, Aug 20, 18 @ 2:16 pm
Illinois is 200 years old. The only debt Illinois should have is for capital expenditures.
It’s all Rauner’s fault.

Comment by Hickory Monday, Aug 20, 18 @ 2:19 pm
“Imagine where we could be with a governor engaged in managing the state for success instead of trying to torpedo it.”

And how do you explain the economic time bomb that is the City of Chicago?

Comment by Downstate Monday, Aug 20, 18 @ 2:24 pm
“A Duke has been sitting on this exchange since it was founded.”

Mortimer Duke, Trading Places

Past performance is no guarantee of future results.

Comment by City Zen Monday, Aug 20, 18 @ 2:27 pm
===State admits to $1.2 billion structural deficit===

The necessary first step on a long path to recovery.

Comment by 47th Ward Monday, Aug 20, 18 @ 2:33 pm
Which begs the question: Why aren’t GO bonds AAA?

“Past performance may not be indicative of future results.”

Comment by TominChicago Monday, Aug 20, 18 @ 2:43 pm
=It’s almost like if you want a civilized society where people are given an opportunity to do well, it requires a certain amount of taxes…=

“Taxes are what we pay for civilized society…”

Oliver Wendell Holmes, Jr
and (apparently) many others

Comment by TinyDancer(FKASue) Monday, Aug 20, 18 @ 2:44 pm
“$1.2 billion structural imbalance”

The 1 accomplishment that 1.4% can run on.

Comment by Huh? Monday, Aug 20, 18 @ 2:46 pm
Cannabis legalization will cover over 50% of the shortfall. Good thing JB is winning this fall.

Comment by Illinois Resident Monday, Aug 20, 18 @ 2:47 pm
I wonder, Techie, if J.B.does not paint himself into a corner as you suggest, is your answer 4 more years of Rauner? That’s the choice, the only choice, J.B as is, or Rauner as is.

Comment by wondering Monday, Aug 20, 18 @ 2:50 pm
Higher taxes mean higher spending in Illinois. Chicago has never been so “civilized” with more and more revenue to spend at CPS.
http://www.chicagotribune.com/news/local/breaking/ct-met-chicago-schools-sexual-abuse-report-20180816-story.html

Comment by Steve Monday, Aug 20, 18 @ 2:50 pm
More spending, with no cuts is a sure road to disaster, for the state of Illinois. A progressive tax on just the rich will not be enough. The middle class will pay.

Comment by Anonymous Monday, Aug 20, 18 @ 2:51 pm
–Sure, it’s 118 years, but I take that track record with a grain of salt, especially with the people who run the show these day.–

They’re GO bonds. By law, every dime the state collects is committed to paying them first. The revenue coverage is exponential.

Hence, 118 years.

Comment by wordslinger Monday, Aug 20, 18 @ 2:54 pm
–Sure, it’s 118 years, but I take that track record with a grain of salt, especially with the people who run the show these day.–

You did notice that Rauner quadrupled the backlog of unpaid bills to more than $16 billion in just 2.5 years?

Guess who got paid first, in full, on time?

Comment by wordslinger Monday, Aug 20, 18 @ 2:55 pm
If you don’t understand that GO bonds are paid first, maybe you should sit out a few plays.

Comment by Oswego Willy Monday, Aug 20, 18 @ 2:57 pm
And the rich investors get richer and the poor Illinois tax payers get poorer. This is what borrowing, to spend does.

Comment by Anonymous Monday, Aug 20, 18 @ 3:00 pm
JB. You sure you want this gig?

Comment by BlueDogDem Monday, Aug 20, 18 @ 3:32 pm
I am glad we learned our lesson from that time we got sued.

Comment by Anon Monday, Aug 20, 18 @ 3:38 pm
How does the $1.2 billion compare to estimates in past years?

Comment by Jay G Monday, Aug 20, 18 @ 4:14 pm
It appears we’re making glacial progress on unloading the JRTC.

Comment by Arthur Andersen Monday, Aug 20, 18 @ 4:15 pm
IPI had this scoop before it was even passed in the House:

https://www.illinoispolicy.org/illinois-senate-passes-cullerton-budget-out-of-balance-by-as-much-as-1-5b/

Comment by Phil King Monday, Aug 20, 18 @ 4:15 pm
Which begs the question: Why aren’t GO bonds AAA? Answer, the are ripping us off, because they can.

We should revisit the idea of a state bank. People are always complaining that Illinois should save money. Here is one way to save some money. Control our own money. Save on interest and fees. And if we ever legalize marijuana the companies are going to need a bank.

North Dakota has state bank.North Dakota borrows from its own bank. Now Los Angeles is forming one, with maybe a California state bank down the road.

http://www.publicbankinginstitute.org/llinois_state_legislators_advance_public_banking_bill

Comment by Da Big Bad Wolf Tuesday, Aug 21, 18 @ 6:59 am
==Past performance may not be indicative of future results.==

Tell that to a future landlord, while he is looking at your application with a bad credit score. LOL.

Comment by Da Big Bad Wolf Tuesday, Aug 21, 18 @ 7:32 am
=North Dakota has state bank.=

IRRC Colorado is looking at a state bank for the legal marijuana industry, would be a good for the med marijuana people in Illinois.

Comment by JS Mill Tuesday, Aug 21, 18 @ 8:22 am
==Tell that to a future landlord, while he is looking at your application with a bad credit score.==

Your landlord has to play the stock market to hedge against Illinois’ usurious property tax rates.

Comment by City Zen Tuesday, Aug 21, 18 @ 8:53 am
==Past performance may not be indicative of future results.==

How do you think your credit score is determined?

Comment by wordslinger Tuesday, Aug 21, 18 @ 8:58 am
Default on the debt, lower taxes, cut spending.

Comment by GenX Wednesday, Aug 22, 18 @ 9:43 am