Watchdog: Illinois fiscal health 2nd worst in nation
Illinois received an F grade in fiscal health from a government accounting watchdog, with each taxpayer on the hook for $52,600 in debt.
A government accounting watchdog has slapped Illinois with an F grade in finances, ranking the state’s fiscal health second worst in the nation.
Truth in Accounting’s annual “Financial State of the States” report this year ranks Illinois 49th in the nation for fiscal health, earning the designation of “Sinkhole State.” With a debt standing at nearly $224 billion in fiscal year 2018, according to the report, each Illinoisan is on the hook for $52,600, a metric Truth in Accounting calls “Taxpayer Burden.”
Illinoisans’ burden slightly worsened since last year, the report found, up from $50,800 in fiscal year 2017. To boot, the state was extraordinarily late in issuing its Comprehensive Annual Financial Report, or CAFR. The Government Financial Officers Association’s timeliness standard for a CAFR’s release is within 180 days of the end of a state’s fiscal year. Illinois took 418 days – more than twice as long – to issue its report, the least timely of all 50 states.
Between fiscal years 2013 and 2018, Illinois saw its shortfall – the difference between the state’s obligations and its ability to pay them – increase to $223.9 billion from $169 billion. The main driver of that shortfall? Nearly $140 billion in unfunded pension liabilities.
Illinois politicians have too often ignored the necessity of true pension reform and instead opted for tax hikes. Meanwhile, some political leaders in the only state to rank worse than Illinois are sounding the alarm. New Jersey’s Democratic Senate President Steve Sweeney has been calling for reforms to his state’s pension system and government worker health care. “I’m not supporting a budget that includes new taxes without a solution,” Sweeney told Politico in March.
Unsustainable pension costs are not only wreaking havoc on state finances – local governments are feeling the pain as well. In May, Truth in Accounting released a report ranking the fiscal health of the nation’s 10 most populous cities. The report calculated the total burden local taxpayers face from debt held by the state and all relevant local layers of government. Chicago ranked worst in the nation, with each Chicago taxpayer on the hook for nearly $120,000.
Unsurprisingly, pensions were also the biggest chunk of city taxpayers’ debt burden. At the time of the report’s release, Chicago owed $28 billion in unfunded pension liabilities. Chicago Mayor Lori Lightfoot has acknowledged the city cannot just tax its way out of its pension shortfall. “We can’t keep taxing the hell out of all of our people who make substantial incomes,” Lightfoot told the Chicago Sun-Times editorial board. While she has not taken a property tax hike off the table, Lightfoot has been reluctant to raise property taxes, saying she has heard “loud and clear” that Chicagoans oppose higher property taxes.
Lightfoot inherited a massive pension debt, and it’s encouraging that she has signaled she understands the city cannot depend on indefinite tax hikes. The only serious option for the mayor is to join calls for an amendment to the Illinois Constitution that would protect both retirees and taxpayers, as former Mayor Rahm Emanuel did in his last months in office.
East St. Louis – an impoverished community in southwestern Illinois – became the latest city to face an interception of state funding to pay down its local pension debt on Sept. 17, after years of failing to meet its pension funding requirements.
Tax hikes have continually failed to restore the state’s fiscal health, and will only continue to harm overburdened Illinoisans – and the state economy. The only solution to Illinois’ growing pension debt is the same that would offer long-term protection to both taxpayers and government workers’ retirement security: constitutional pension reform.