Illinois has one story for voters and a different story for bond investors when it comes to its budget. That’s because you get sued for lying to investors but not for lying to voters.
Remember the bipartisan high fives and back slapping a couple months ago after Illinois passed its “balanced budget”? Officeholders too numerous to list were bragging about how they balanced the state’s new budget. They included Governor Bruce Rauner and legislative leaders from both parties. Much of the press carried the same message.
But now comes the state’s latest offering statement — the disclosure document for an upcoming bond issue. It says Illinois actually has a $1.2 billion structural imbalance. That structural deficit is among “investment considerations” investors are warned about. A Bond Buyer article linked here has the details.
In fact, if you spent a little time looking, it was apparent from the start that the budget wasn’t balanced. We told you why at the time.
Keep in mind that even that $1.2 billion deficit described to bond buyers is based on the usual budget accounting which, as we’ve explained often, is nearly meaningless. It’s really just a prediction of where the cash will come and go for the year.
Honest budget accounting would reflect what gets accrued in ever growing debt, including unfunded pension liabilities. By that measure, Illinois’ budget has been routinely unbalanced by roughly $10 billion per year — over a third of its total tax revenue.
In other words, Illinois doesn’t keep its story straight even using phony budget accounting.
*Mark Glennon is founder and Executive Editor of Wirepoints.