By: John Klingner
No matter what budget politicians might pass this time, it’s going to be a sham.
Some lawmakers will inevitably call it “balanced.” Others will call it a fitting end to a successful legislative session. And yet others will say that this is how a budget is done – in contrast to the antagonistic, no-budget years of Gov. Rauner.
Illinoisans shouldn’t be fooled by that rhetoric. Passing yet another budget with more spending, more deficits and no reforms is not an accomplishment.
Illinois finances are still a mess. The state is still one notch away from a junk rating. And Illinois’ worst-in-the nation retirement crisis still imposes $75,000 in debt on every household outside of Chicago and $145,000 on every household in Chicago.
The reality is the budget won’t be close to being balanced. No matter what accounting tricks lawmakers use – and no matter how much in surprise revenue they include – the state will still be stuck with at least $10 billion in structural deficits. That’s a quarter of the current budget.
That $10 billion represents the additional amount of money Illinois should be paying for the true costs of pensions and retiree health insurance, plus the cost of annual overspending and unpaid bills.
The budget they pass will likely include about $8 billion for pensions, which is based on the state’s broken funding ramp and unrealistic investment assumptions.
That’s far short of the $13 billion-plus the state really needs to pay for pensions in the absence of reforms. Wirepoints calculated Illinois’ true yearly pension costs based on equal annual payments, 100 percent funding by 2045 and more realistic investment assumptions (See Exhibit 1). Paying the true cost of pensions would add $5 billion to the budget deficit.
And properly paying for retiree health insurance would add another $3 billion to the deficit. Right now lawmakers only contribute about $1 billion to retiree health, the minimum pay-as-you-go amount. The state’s actuaries say the actuarial amount needed is closer to $4 billion (See Exhibit 2).
Then there is another $2 billion in deficits to account for structural overspending and the cost of paying down a part of the state’s billions in unpaid bills.
In all, that’s a structural deficit of $10 billion that politicians will ignore when they “balance” the budget.
And that deficit is the best-case scenario for Illinoisans. Pritzker has promised to spend much more than his first budget proposes.
It looks like the budget is going to be passed at the last second, as usual. That means no transparency for taxpayers and no time for lawmakers to actually read what they’re voting for.
In other words, nobody will know the true damage until it’s too late.
Read more about why the state’s annual budgets don’t matter:
- Why Warren Buffett is right to warn about Illinois: The state’s true retirement costs now total 50% of annual budget
- Why some Illinois Republicans are making the wrong argument against a progressive income tax
- Illinois’ crisis: 20 facts Pritzker doesn’t want ordinary Illinoisans to know
- If a decline in births is a problem nationally, it’s a full-on crisis in Illinois
- Every Illinoisan Must See These Two Charts In The Wall Street Journal