The Civic Federation recently published an analysis of the 2015 Illinois state budget, examining operating and capital budgets enacted for fiscal year 2015, which began July 1, 2014 and ends on June 30, 2015.At the forefront of pressing budget issues was how to supplement the expected $1.9 billion in lost revenue when the phased roll back of the temporary income tax begins on Jan. 1, 2015.Here’s more from the Civic Federation’s executive summary on the 2015 state budget:
Rather than keeping the higher rates or cutting spending, the enacted General Funds budget for FY2015 relies on short-term measures—including borrowing and shifting revenue from FY2014—to cover operating expenses. After adjusting for shifting of funds from year to year and among State accounts, net spending in FY2015 increases by $528 million from FY2014.
Despite these increases, the budget underfunds known costs, including payroll, by an estimated $470 million. It also increases the State’s backlog of unpaid bills by approximately $390 million to $6.4 billion at the end of FY2015.
This stopgap budget represents a return to detrimental fiscal policies for the State. In the past few years, Illinois has made strides by reining in agency expenses, reducing the unpaid bill backlog and fully accounting for previously hidden costs. The gimmicks used in FY2015 will make it even harder to balance the budget in FY2016, the first full fiscal year with lower income tax rates.
Here are 13 absurd findings by the Civic Federation:
1. Unpaid bills and other General Fund liabilities are expected to increase from $6.0 billion in FY2014 to $6.4 billion in FY2015, marking the first year-end increase since FY2012 when the backlog was roughly $8.8 billion.
2. General Funds revenue to decline by $1.7 billion to $35.1 billion in FY2015, which includes $402 million in income tax diversions.
3. The 2015 budget will borrow $650 million from the state’s Special Funds, a sum that must be repaid within 18 months in order to boost General Funds assets to $35.8 billion.
4. While General Funds expenditures seemingly decline by $1.1 billion in FY2015, spending will actually increase by $528 million as a result of the shifting of funds.
- General Funds expenditure increases in FY2015 include $221.5 million related to new Medicaid legislation, $119 million for group insurance, $57 million for State pension contributions, $50 million for the Chicago Public Schools’ pension fund and $35 million for construction of a public school on Chicago’s Southwest Side in the legislative district of [House Speaker Michael Madigan].
5. The Governor’s Office estimates the 2015 budget will insufficiently fund state agencies’ operational costs by $470 million, including $130 million for the Illinois Department of Human Services, $90 million for Department of Corrections and $60 million “related to mental health grants at the Department of Human Services.”
6. Medicaid costs will increase by $2 billion in FY2015, largely because of Medicaid expansion under the Affordable Care Act, however those costs will be covered by the federal government and won’t impact General Funds.
7. State contributions to group insurance costs will increase following the Illinois Supreme Courts ruling that health insurance premium increases for retirees is unconstitutional.
8. While state pension contributions were expected to decrease with the passage of the pension reform law in December 2013, an injunction ordered by a Sangamon County judge halted the law from taking effect on June 1, which will likely lead to a significant increase in pension spending in FY2016 from FY2015, “due to reductions in the assumed rate of return on investment by the State’s largest pension funds.”
9. For a second consecutive year, the General Funds cost for capital purpose debt service is expected to increase. In FY2015, the amount of General Funds allocated to cover capital purpose bonds increased by $92 million in FY2015 to $717 million, compared to an increase of $74 million to $625 million in FY2014.
10. Total General Funds debt service costs in FY2015, including pension bonds, total $2.2 billion or 7.2 percent of total State-source General Funds revenues, which is down slightly from the total of $2.3 billion in FY2014.
11. In FY2015, the State owes a total of $3.9 billion in debt service due on $31.3 billion of principal owed for all outstanding General Obligation Bonds and Build Illinois Bonds. It will pay $16.4 billion in interest on these bonds through FY2039 for a total outstanding debt service cost of $47.7 billion.
12. The State’s enacted capital budget for FY2015 totals $21 billion, of which $16.9 billion relates to reauthorized projects from previous years and $4.2 billion involves new projects. The State has sold nearly $12 billion in bonds to support the capital budget since FY2010, and in FY2015, the Capital Projects Fund is expected to have a $288.5 million shortfall in revenues to pay for the debt service cost related to these bonds, which will be paid for with General Funds.
13. Illinois is the lowest rated state by all three major bond rating agencies with a negative outlook from each. If the State is downgraded four levels by Moody’s (below BBB) or three by either Fitch or Standard & Poor’s (below BBB), it would face termination of its swaps portfolio and an estimated liability of $123.7 million as of the most recent valuation on June 30, 2013.
NEXT: Brace yourself for the big tax and fee hikes to come, no matter who wins
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Kevin Hoffman is a Reboot Illinois staff writer who graduated from the University of Iowa with a degree in journalism, political science and international studies. He believes keeping citizens informed and politicians in check is the best way to improve Illinois and bring about common sense reform. Follow us on Facebook.