If you thought last year’s tax increase would reduce Illinois’ backlog of unpaid bills, you were wrong.
It’s gotten worse by $1.2 billion if you ignore the results of borrowing to pay off that debt, as you should.
But $8.8 billion of that improvement had nothing to do with the tax increase. We borrowed $6 billion through a bond offering and applied it against the bill backlog. Some of those payments triggered automatic additional federal reimbursements, which also were applied against the backlog, taking the total bond impact to $8.8 billion.
That $8.8 billion alone should have our balance down to $5.9 billion today, but the balance is $7.1 billion today — $1.2 billion worse than it should be given the results of the bond offering.
The state is taking in more than $5 billion per year because of the tax increase – at least for now (the longer term damage to the tax base caused by more flight remains unseen as of yet). While it’s certainly fair to say our bill backlog would be worse without that new money, it’s important to keep that in perspective: The tax increase simply didn’t result in any reduction in unpaid bills. It was the same story with the temporary income tax increase that expired in January 2015. It was supposed to reduce the bill backlog, but didn’t.
And the pile of unpaid bills will reach $24 billion in five years, according to a new projection released last week.
Keep in mind that our bill backlog isn’t a good index of how well the state is doing. It’s just one of many accounts. Those other accounts included unfunded pension liabilities and bonded debt. To aggregate all those accounts you have to look at the state’s actual financial statements.
They show a far worse picture, with the state losing roughly $10 billion per year over the last ten years. The new tax increase won’t end those losses. See the new article by my colleagues, Ted and John, on projected five-year structural budget deficits.
It’s a bottomless pit without many drastic, structural reforms.
–Mark Glennon is founder of Wirepoints.