New Report Shows Illinois’ Finances Could Go from Bad to Worse
A new report projects Illinois’ state budget will go from bad to worse if legislators don’t address some key issues. If things stay as they are, Illinois can expect to see more money devoted to rising pension costs and more bills go unpaid, according to a new report by The Civic Federation, a financial watchdog group.
The report says pension contributions are eating up money for other essential government programs and will go from $5 billion this fiscal year to $7 billion five years from now.
“Illinois is in a horrible financial situation,” said The Civic Federation’s Laurence Msall. “It is continuing to get worse and we’re at the breaking point where core government services will not be able to be funded if we are going to maintain the existing pension structure.”
Legislative leaders have not been able to agree on the best way to pay for state employees’ pensions. They have disagreed on everything from which plan is considered to save the most money, to the legality of certain proposals, since the state constitution says a pension cannot be “diminished or impaired.”
The Civic Federation’s report says another factor why the state is expected to continue to struggle financially is the personal income tax rate. Gov. Quinn raised it from three percent to five percent two years ago, but the rate is scheduled to go down in 2015. Corporate taxes were also raised to seven percent. Those are also scheduled to be cut in 2015.
The decision to keep the income tax rate where it is or cut it is expected to be a big part of next year’s governor’s race.
“We might not be able to make it to 2015 if the state doesn’t address the pension crisis and reduce that $97 billion in unfunded liability,” Msall said.
Msall’s report also details the consequences of the state’s financial problems. Illinois is expected to have a backlog of unpaid bills owed to vendors of $21.7 billion in five years if the pensions stay where they are and the tax rates are cut. The state has $7.8 billion in unpaid bills in fiscal year 2013.
Quinn is scheduled to give his budget address next week.