The political struggle between Democratic legislators who control the General Assembly and a Republican governor who took office in January 2015 has put this State in the worst financial condition it has ever been. Their standoff has left some of the most vulnerable citizens without assistance, some even homeless, and the grim possibility that schools may not open in the fall. Organizations have closed because they have not been paid by the state and can no longer afford to take on debt to pay their employees. Some of the poorest senior citizens will not be able to eat because Meals On Wheels programs have not been funded. Parents of children with disabilities can’t work, given that social service agencies have discontinued respite and after care programs because of a lack of funding from the State.
Many of us question how did Illinois get into such a financial crisis? As much as we want to blame it all on Governor Rauner, it did not start with him. However, the Governor has a constitutional responsibility to present a balanced budget each year for the General Assembly to vote on. The Illinois Constitution requires legislatures to make appropriations for all expenditures of public funds by the State and those appropriations can’t exceed funds estimated to be available during the fiscal year.
Illinois’s current revenue plan does not generate enough income to cover expenses and sustain this state. Illinois legislators are spending $38.2 billion dollars but are only taking in $32 billion in revenue each year. Illinois’ financial crisis also stems from a failure to plan for and deal with revenue losses caused by the partial rollback of income tax rates in 2015. On January 1, 2011, individual income tax rates were increased to 5% from 3% and corporate tax rates were raised to 7% from 4.8%. This was done to offset the loss in revenue during the recession between 2008-2011. After the rate increase, tax revenue more than doubled to $19 billion dollars. Tax rates rolled back to 3.75% for individuals and 5.25% for corporations halfway through the fiscal year on January 1, 2015. Once taxes rolled back the state lost more $1.7 billion dollars in tax revenue in FY2015.
There is an overriding elephant that has been dancing around the General Assembly floor in Springfield for decades. That elephant is the unfunded pension program owed to State employees when they retire. Over the years, the State increased benefits to employees without increasing revenue to pay for those benefits. Illinois pension has an unfunded liability of $129.8 billion as of June 30, 2016, according to the Institute for Illinois Fiscal Sustainability. That number will double in 2017.
At the end of fiscal year 2015, the year Illinois actually enacted a full budget, there was a $6.2 billion-dollar deficit. That deficit is expected to be closer to $15 billion dollars in fiscal year 2017. In addition to this deficit, Illinois is paying millions of dollars each day in late fees because we’re behind on our bills.
President Trump is cutting over six billion dollars from its HUD budget. These cuts will impact affordable housing and community development programs. Some of the very poor will lose housing assistance and their jobs as part of these federal changes. Trump’s justification for cutting spending is to put more responsibility on States. Illinois is not in a position to handle additional fiscal responsibilities from the government.