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Lawmakers: Wake up and smell the report
Illinois state government should take seriously a report issued last week warning that the state is headed for a "financial implosion."
The report was released by the Civic Committee of the Commercial Club of Chicago while most of us were in the midst of dealing with the ice storm and its aftermath. That unfortunate bit of timing does not reduce the significance of the report and the warning bell it sounds for state government.
The report, in summary, warns that the state's liabilities and unfunded commitments exceed its assets by more than $100 billion. Included in that number are the state's pension and health care obligations to employees and retirees, Medicaid money owed to health care providers and the failure to fund K-12 education at the "foundation" level.
The problem, according to the report, is that the state continues to spend billions more than it brings in but doesn't address the unfunded commitments. According to the committee, the state would need $34.7 billion in revenue to cover its commitments in the current fiscal year. The amount of revenue controlled by the state this fiscal year is about $28.8 billion.
The report suggests that the state needs to drastically reduce its spending by bringing retirement and health care benefits more in line with those in private businesses by outsourcing more services and generally tightening the state's spending practices.
That still won't be enough, so the report states that a tax increase may be inevitable. However, the committee emphasizes that taxes should not be increased until the state's spending is in line, that any increase in education funding should be tied to accountability and results and all new tax dollars should be used to fund the state's commitments and not to create new programs.
It's a pretty dismal picture.
The response to the report by Gov. Rod Blagojevich's office can be summed up in three points: one, it's not our fault; two, we're doing some things to address the issue; and, three, the report is flawed.
There may be some validity to all three points. The Blagojevich administration inherited many of these problems from previous administrations. This fiscal crisis wasn't created in the last four years.
The administration also has taken some steps to reduce liabilities, for example, decreasing the pension obligation by a small amount. But that was accomplished with the borrowing of $10 billion. So the pension system looks better, but the state still owes the money. But improvements in one area often have been overshadowed by spending more money in another area. At its best, the Blagojevich administration has not improved the state's overall financial situation.
Blagojevich's office also argues that the report is flawed because some of the numbers are incorrect. But even if you take the Blagojevich numbers, the unfunded commitments are huge.
The problem doesn't belong to just the governor. The state has, for two years in a row, passed a budget that spends more than it brings in. That is fiscally irresponsible in the best of times and totally unreasonable when a financial crisis is looming. Legislators, however, continue to clamor for more programs and more pork-barrel spending without any way to pay for their wishes.
Whether the civic committee's report is overblown or not, the problem is a real one. The governor and the legislature should begin immediately to take real steps to put the state back on firm financial footing.
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