CHICAGO — Illinois finished its last fiscal year with the worst overall net financial position of any state reviewed by the state auditor general.
The state was one of only two that recorded a net negative position, according to Illinois auditor general William Holland's
Eight states were not included in the comparison because Holland said their CAFR was not available by Feb. 28. Texas recorded the strongest net position of $109.7 billion followed by Arkansas at $74 billion and Florida at $57.3 billion.
Illinois' audit displayed mixed news on the state's position.
The state reduced its general fund deficit by $1.7 billion for a final figure of $7.3 billion of red ink in fiscal 2013, but its overall net position deficit for accounting purposes rose by $1.2 billion to $47.8 billion.
The state did manage to slow the rate of deterioration in its net position. It grew by $3 billion a year earlier and $6.1 billion in the previous year. Its steepest jump was from $29.5 billion in 2009 to $37.5 billion in 2010.
In response to Holland's report, Gov. Pat Quinn's administration sought to stress strides since the close of the last fiscal year which include passage of pension reforms in December and a reduction in the state's bill backlog as well as the economic benefits of the state' capital program. " 'Net financial position' is only one measure of a state's fiscal health and it counts as a negative Illinois' landmark capital program rebuilding infrastructure that other states neglect," said deputy budget director Abdon Pallasch. "The CAFR covers a period in time ending last summer before the General Assembly passed and Governor Quinn signed comprehensive legislation to correct Illinois' pension problems."
"Over time, increases and decreases in net position measure whether the state's financial position is improving or deteriorating," Holland wrote.
The state's general revenue fund deficit was $9.1 billion in fiscal 2012, $8 billion in fiscal 2011, $8.8 billion in fiscal 2010 and $7.4 billion in 2009. In prior years it had ranged from $3 billion to $4 billion.
The state closed out fiscal 2013 with nearly $4.1 billion of unpaid bills approved for payment, underscoring its ongoing cash flow struggles. About $2.6 billion was owed to outside vendors and the remainder to state agencies and to cover mandated transfers. Those figures don't include bills for fiscal 2013 expenses that were submitted for payment after the fiscal year ended on June 30.
"Due to the state not being able to pay external vendors in a timely manner, the state paid approximately $318 million in interest payments during fiscal year 2013," the auditor's report said.
Illinois Comptroller Judy Baar Topinka announced the release of the CAFR on Wednesday, noting it was the earliest distribution since 2006 and came out three months earlier than the fiscal 2012 report. It was signed Feb. 28.
"It is important that we get these reports out in a timely manner to give lawmakers, the governor and taxpayers time to get a clear picture of the state's finances when preparing the budget for upcoming fiscal years," Topinka said.
Increases in the state's liabilities came from a rise in the state's net pension obligation of $1.7 billion and other post-employment benefits obligations of $1.75 billion, Topinka said.
The state carried $100.5 billion of unfunded pension obligations and $34.5 billion of OPEB liabilities. Both numbers should come down in the future if the courts uphold past retiree healthcare reforms and a pension overhaul passed last December.
Loop Capital Markets LLC's municipal research group released a commentary to clients highlighting information in the CAFR including a rise of 2.2% in revenue and a decline of expenses by 1.1%.
The Loop commentary noted continuing underlying financial weakness in deferred liabilities and ongoing operational concerns on cash management due to accumulated bills carried over into the next fiscal year. It also highlighted the state's lagging numbers on job creation with unemployment rising during the year to 9.1% from 9 % while the national rate declined to 7.5% from 8.2%.
"A concern for municipal bond analysts and Illinois taxpayers alike is that the backlog of unpaid bills exists 2.5 years after Illinois legislature increased individual and corporate tax rates by 67% and 46%, respectively -- specifically to pay down unpaid bills," says the report from Christopher Mier, a Loop managing director.
"The results do not appear to alter the current prevailing view of the credit in either direction," Mier said. The state carries the weakest rating among states at the A-minus level.
The temporary income tax hike partially expires on Jan. 1 and lawmakers and Gov. Pat Quinn have not said how they intend to make up for a $1.6 billion loss in revenue. The governor will release his fiscal 2015 budget later this month.
The state ended the fiscal year with $30 billion of general obligation and special obligation debt and paid a total of $3.3 billion in principal and interest.
