Though spending on government-worker salaries and pensions has grown at a rapid rate, many service providers and grant recipients are still awaiting payment.
Illinois state government ended 2016 with nearly $11 billion in unpaid bills, and the total is expected to hit $14 billion by summer 2017. However, with money from a June stopgap funding agreement set to run out by the new year, nonprofit service providers and students receiving state grants may view it more as a lump of coal.
Funding for service providers hasn’t been a priority for the General Assembly for quite some time. Service providers wait, on average, nearly a year to be paid. Illinois politicians have been delaying payment to service providers since 2002, valuing increases in government-worker salaries and pensions more than compensating those who aid the most vulnerable Illinoisans. Spending on state-employee pension benefits increased 586 percent from 2000 to 2015, yet funding for human services only increased by 10 percent during that time.
Funding for student grants and education has also been at the bottom of Springfield’s priority list. K-12 education has seen a steady increase in funding since 2006, rising at an annual average rate of 6.2 percent. However, most of this is being swallowed up by ballooning pension costs, leaving funding for classrooms and other educational operations virtually flat. At the higher education level, over half of the state’s funding for state colleges and universities is being spent on employee pension and retirement costs.
The state’s total pension debt has swelled to $130 billion, up 17 percent since 2015. If the debt is divided by household, it amounts to $27,000 per family. Pension spending now accounts for 25 percent of the state budget, consuming funds that could be spent in other critical areas. Most other states do not have this problem. The median rate for state pension spending nationwide is only 4.1 percent.
Illinois’ tax revenues have increased 70% more than inflation over last 3 decades
A lack of revenue is not driving Illinois’ pension problem.
Tax revenues have consistently grown over the years. Since 1983, Illinois’ tax revenues have grown 70 percent more than inflation plus population. Illinois has collected $265 billion more over the last 33 years than it would have if revenues had just been growing at the rate of inflation. One of the key problems behind Illinois’ budget crisis and the bill backlog is the state’s out-of-control spending on pensions.
Politicians will be tempted to address Illinois’ crises by increasing revenue through more property or income tax hikes on ordinary Illinoisans. But this will not fix the systemic fiscal problems reflected in the bill backlog. Rather, the General Assembly needs to tackle the bill backlog by passing a sustainable, balanced budget and reforming the massive cost drivers that drain the resources of Illinois taxpayers and divert funding from core government services.