In recent weeks, the Gov. Rod Blagojevich sideshow has attracted an international audience, with its latest twists and turns now regular fare on the BBC’s world news broadcasts.
While becoming an international laughingstock is certainly embarrassing, the unwanted attention also has created an unwelcome distraction from the grave problems facing the state and its citizens.
Case in point: A few days before the Illinois House impeached Blagojevich, with everyone wondering whether the vote would be unanimous, hardly anyone took notice of the latest grim diagnosis of the state’s fiscal health detailed by Comptroller Daniel Hynes.
During the first six months of the current fiscal year, Hynes reported, base revenues into the state’s main checkbook account were down $477 million — 3.6 percent — from receipts in the first half of last fiscal year. At the same time, general funds spending increased $796 million — 5.8 percent — from expenditures in the first six months of the last budget year.
Moreover, the backlog of unpaid bills in the comptroller’s office was more than $1.8 billion, some $120 million more than a year ago, and the delay in paying bills was 48 business days, compared with 34 a year ago, both record highs for the midpoint of a fiscal year.
The trends suggest revenues will decline for the year, while spending is set to increase significantly, Hynes said. “Without a dramatic change in the economy or spending, it appears that the state will end the fiscal year in dire circumstances,” he warned.
How bad? When the previous fiscal year ended June 30, 2008, the state had $141 million in its checkbook and outstanding bills totaling some $975 million, resulting in an $834 million budgetary deficit. That deficit — the fourth largest in history — could pale in comparison to what might face the state this coming June 30, when Hynes says more than $3 billion might be owed.
“Using $3 billion of next year’s revenue to pay current-year liabilities, with the possibility that next year’s revenues could also decline, creates a fiscal situation that may be unmanageable, especially for the fiscal year 2010 budget,” he said.
“Unmanageable” is an understatement.
Consider: Current law mandates a $1.2 billion increase next year in contributions to the five state-funded retirement systems to help pay down a more than $54 billion shortfall between liabilities and assets, according to the Legislature’s Commission on Government Forecasting and Accountability. The FY 2010 contribution is some $510 million more than calculated just a few months ago, the commission noted, largely because pension system investments took a bath, along with everyone else, last year. The statute is written so that the payment is automatic; even if the budget doesn’t include the money, the law requires the comptroller to shift the funds into the retirement accounts.
One doesn’t need to be an Einstein to realize that if you have to spend $1.2 billion more for pensions next year while you’re taking in less money than this year, already awash in red ink, the numbers just won’t work.
How to manage the fiscal crisis is one of the most daunting tasks facing the 96th General Assembly, sworn in last month. One tempting step might be to revise the pension payment schedule to reduce the FY 2010 contribution, extending the deadline for reaching a 95 percent funding level for the five systems beyond 2045, as current law envisions.
Yet even if the law were changed and pension payments held steady in the coming year, lawmakers could be hard-pressed to keep current programs going without finding additional revenues. While state officials across the nation are hoping the final version of President Barack Obama’s economic stimulus package will include some relief for state budgets, no one expects a bailout of the magnitude Illinois needs. Nor, one would hope, will lawmakers want to embrace more of the smoke-and-mirrors budgeting practices that Blagojevich — with the legislature’s connivance — relied on to mask the state’s fiscal woes.
So is the time right for wholesale revision of the state’s tax structure, including higher income tax rates, an expanded sales tax base, lower property taxes and increased credits for middle- and lower-income taxpayers, as advocates have been pushing for years?
Conventional wisdom holds that taxes shouldn’t be increased during a recession, but some economists argue tax hikes, especially those targeting higher-income individuals, are less harmful to a recovery than cutting programs and services — and thus disposable income — for middle- and lower-income folks.
While fiscal circumstances make a sound argument for revamping the state’s tax structure, even during a recession, the political climate is not particularly favorable. Public opinion surveys find voters deeply disenchanted with political leaders of all stripes, and the whole, sad Blagojevich affair has deeply damaged the public trust.
Repairing that breach is the second major challenge for lawmakers this spring, a necessary step if the public is to accept the tax increases that will be required to restore the state to sound fiscal footing without damaging critical services.
A good place for lawmakers to start would be overhauling the state’s virtually anything-goes system of campaign finance. A recurring theme in the federal government’s allegations against Blagojevich is that as governor, he was eager to trade jobs, contracts, appointments, regulatory decisions — almost any official act — for campaign cash.
As of January 1, major contributors no longer are eligible for state contracts awarded by the beneficiaries of their largesse. That’s a good start toward rooting out the state’s “pay-to-play” culture, but more should be done, including imposing reasonable limits on contributions, banning contributions from unions and corporations, and requiring more frequent and detailed disclosure by political committees.
Restoring the state’s fiscal health and reviving the public’s trust in government are interlinked challenges. How well state leaders respond could determine whether Illinois can move beyond its current notoriety.
Case in point: A few days before the Illinois House impeached Blagojevich, with everyone wondering whether the vote would be unanimous, hardly anyone took notice of the latest grim diagnosis of the state’s fiscal health detailed by Comptroller Daniel Hynes.
Charles N. Wheeler III is director of the Public Affairs Reporting program at the University of Illinois at Springfield.
Illinois Issues, February 2009
