Illinois spent 6% more than it took in for 15 years, so COVID-19 hit it harder

Illinois spent 6% more than it took in for 15 years, so COVID-19 hit it harder

From 2005-2019, Illinois revenues totaled just 94% of expenses. The state ran deficits in each of the 15 years prior to the COVID-19 pandemic. Only New Jersey overspent more.

Illinois was one of only eight states to see spending outpace its revenues from 2005-2019, leaving it fiscally ill-prepared to deal with the tumultuous COVID-19 pandemic, according to new data from The Pew Charitable Trusts.

Illinois ranked No. 2 for overspending.

According to the report, Illinois took in just 94.1% of the revenues it needed to cover its expenses from 2005-2019. That number was second worst in the nation, coming in just ahead of similarly troubled New Jersey.

Illinois and New Jersey were the only two states to run deficits all 15 years during that period, highlighting the existence of serious structural spending problems. While the information in the Pew report only goes back to 2005, Illinois has not had a truly balanced budget since 2001.

Analysis from the report concluded:

“States can withstand periodic deficits without endangering their financial health, but long-running imbalances can create an unsustainable fiscal situation, pushing off to future taxpayers some past costs for operating government and providing services. Although most states collected more than enough aggregate revenue to cover aggregate expenses, the eight states that had a deficit – or a negative fiscal balance – carried forward deferred costs of past services, including debt and unfunded public employee retirement liabilities.”

Like Illinois, New Jersey is also facing a potential pension disaster because of years of mismanaged finances and poor fiscal policy. Pension debt at both the state and local level continues to drive fiscal problems across Illinois, leading to higher taxes and reduced services as spending more on debt crowds out other priorities. According to financial watchdog Truth in Accounting, each Illinois taxpayer now owes $57,000 just to pay off the state’s bills. Rising debt and large spending increases to match that debt show Illinois has a spending problem and not a revenue problem.

Illinois’ tax revenues have continued to rise even during the pandemic. With a huge influx of federal aid, Gov. J.B. Pritzker has been quick to celebrate what he calls the state’s “improvement” in the structural deficit, despite those “improvements” resulting almost entirely from the one-time flood of federal aid. That money includes $8.1 billion in funds with few restrictions on their use. Revised projections from the Governor’s Office of Management and Budget show improved numbers from prior forecasts, including a surplus of $418 million in fiscal year 2022. The projections also show deficits promptly returning in 2023 and continuing through 2027.

Given the latest projections, Pritzker said the state has “made tremendous progress in putting Illinois on the right fiscal path, supporting small businesses and creating good jobs in every part of our state. I am committed to building on this significant progress while tackling our remaining fiscal challenge.”

Most of the improvement for Illinois’ finances has been the result of that unprecedented one-time federal aid for COVID-19 relief, which is set to run out by 2024. Claiming the state’s made a miraculous turnaround is more mirage than miracle. Simply covering costs by transferring debt from the bill backlog into other state accounts, bonds, or covering costs with borrowed money does not mean the state’s fiscal health is improving.

Also, Illinois budget forecasts are not always accurate. Estimates from the state legislature’s Commission on Government Forecasting and Accountability and GOMB rarely hit their marks, often resulting in forecasts that wildly miss actual revenues.

From 2008-2017, GOMB revenue forecasts were only considered to be “on target” twice. In 2013 and 2014, GOMB underestimated revenues by more than $2 billion and $1 billion, respectively. In 2016 and 2017, its forecasts overestimated revenues by more than $1.3 billion each year.

Illinois’ poor revenue forecasting has contributed to its lack of balanced budgets during the past two decades by giving politicians and the public a poor barometer of the state’s fiscal situation.

One achievement Pritzker can lay claim to is generating new revenues through more taxes and fees. Pritzker spent millions trying to pass a graduated income tax in 2020, but the measure was rejected by voters.

Despite his loss on the progressive tax, Pritzker has still added more than $5.24 billion to the tax bill for Illinoisans through 24 increases during his term. Those increases include doubling the motor fuel tax, a $50 increase in the vehicle registration fee, and tax hikes for parking, cigarettes, marijuana, gambling and online shopping.

The large increase in revenue is still not enough to satisfy Springfield’s out-of-control spending sprees. Pritzker and too many Illinois lawmakers continue to see tax increases as the only solution to the state’s fiscal issues.

No tax increase can resolve Illinois’ pension problems, bad budgeting practices and chronic overspending in Springfield. Only significant structural changes such as establishing a spending cap and a constitutional amendment to allow true pension reform can put the state’s finances on a sustainable path forward.

The only way necessary pension reforms can happen is through a constitutional amendment lawmakers must allow the people to vote on. Illinoisans deserve to have their say at the ballot box on the solution to one of the state’s longest and most costly problems.

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