As Governor Pat Quinn is about to deliver his annual Budget Address, State Rep. Mike Tryon lays out some background information:
As we prepare to hear Governor Quinn’s annual Budget Address on Wednesday, I thought it would be appropriate to provide a summary of our budget process and information about how Illinois has reached its current financial condition.
It is no secret that Illinois is in horrible financial shape.
Today we are known as the state with the worst-funded pension system, the lowest bond rating, and the worst budget deficit of any state in the nation.
Illinois currently has 210,000 unpaid bills totaling $9 billion.
The debt per person in Illinois is over $21,000 per man, woman and child.
These are sobering statistics.
How Did We Get Here?
The pension liability is the single issue that places the most pressure on the budget.
Simply put, the pension payment takes up so much of the available funds that there is not enough money left to pay for all the items in the rest of the budget.
For many years, legislators made only partial pension system payments or skipped them altogether.
During my eight years in the House I have never voted for anything less than a full pension payment.
However, those poor decisions by the majority of lawmakers, combined with benefit perks that were not actuarially calculated to ensure future sustainability, and increasing life expectancies for pension recipients, has created a $97 billion pension liability that grows by a staggering $17 million every day.
The second primary cause for the state’s financial problems relate to the shell games and fund “sweeps,” where money earmarked for one program has been moved around and used for other purposes.
Over time, the result was expenditures that outpaced available resources (in some years by billions of dollars), a growing backlog of bills, and an accumulation of bonded debt.
How the Illinois Budget is Created
Beginning in FY12, a new budgeting process was implemented in the House. Resolutions are now adopted to set the revenue estimate for the coming fiscal year.
Using the revenue estimate as a ceiling for spending, mandatory budget items are funded first when developing the budget.
Much like your household budget where the mortgage, insurance and other required payments are made first, the House funds the non-discretionary items before divvying up the remaining funds for other programs and services.
The non-discretionary, or mandatory, items in the Illinois budget include
- debt services, and
- transfers that the State is obligated to send to local governments.
After mandatory budget items are funded, any remaining funds are then sent to the appropriation committees (Appropriations – Human Services, Appropriations – Higher Education, Appropriations – General Services, Appropriations – Public Safety, and Appropriations – K-12 Education) for funding non-mandatory budget items line by line.
Difficult decisions are made at the appropriations committee level, as the amount of money left after the mandatory items are funded is decreasing every year.
For FY14, estimated general revenues will be $35.081 billion, an increase of about $1 billion from this current year.
With that revenue estimate in place, attention will now turn to determining the non-mandatory spending levels.
The required pension payment for FY14 will increase by an estimated $1 billion, thereby consuming most or all of the increased available revenue.
Additional items, such as
- Medicaid spending and
- the State Employees Group Insurance program
will also require additional mandatory allocations.
As a result, the appropriations committees will have more difficult decisions to make as their share of the pie is decreased even further.
The “Temporary” Income Tax Hike
Beginning in FY15, the income tax increase implemented in 2011 will begin to phase down.
As a result, general funds are currently estimated to decrease in FY15 by $1.7 billion compared to FY14.
Unless reforms are made to reduce the amount of funds which must be allocated to mandatory budget pressures, such as pensions, this would require the reductions to be made at the appropriations committee level.
I look forward to the Governor’s speech on Wednesday, and hope to hear a solid, conservative plan that does not increase the state’s level of debt while addressing the backlog of unpaid bills. You may watch the address at noon at this link: http://www.ilga.gov/house/audvid.asp.
Michael W. Tryon, State Representative, District 66