CHICAGO – Illinois is awash in red ink and it's expected to spread, according to series of bleak fiscal reports this week that illustrate the toll of a 21-month-old budget stalemate on state finances.
The dim news came in reports Tuesday that present an overview of the state's finances in the last fiscal year, its near-term revenue picture, and a broader view of its overall condition.
"Volumes of research go into this report, but I can summarize our state finances in one word: abysmal," Illinois Comptroller Susanna Mendoza said in a statement accompanying the release of the state's fiscal 2016
According to the new reports, Illinois' general fund deficit grew by $2.7 billion in fiscal 2016 to $9.5 billion from $6.8 billion in 2015; the state's net position of governmental activities eroded by $6.3 billion from fiscal 2015 to fiscal 2016 driving the net position deficit up to $131.6 billion; and state revenue collections are off by about $674 million from previous projections.
In addition to the 375-page CAFR, Auditor General Frank Mautino and the General Assembly's Commission on Government Forecasting and Accountability released
The reports come as the state remains locked in a budget stalemate with a sweeping fix proposed by the Democratic majority and Republican minority leaders of the Senate in a holding pattern. Gov. Bruce Rauner has praised the so-called "Grand Bargain" package but insists that it needs more work.
In the meantime, funding for higher education and social services ground to a halt Jan. 1 while the state continues to spend beyond its means in other budget areas due to court orders, consent decrees, and continuing appropriations for items like debt service and pension contributions.
Mendoza, a Democrat elected in November, laid the blame squarely at the Republican governor's feet.
"During Governor Rauner's first two years in office, our state moved from a budget impasse to a budget crisis," said Mendoza, who has struck a more political tone than many of her predecessors since she took office.
"This third year of his administration has the makings of a complete financial meltdown…it looks like Governor Rauner is trying to drive our state into bankruptcy," she said.
The Rauner administration, which has been sniping with the comptroller's office over how some bills and payroll are paid, shot back.
"As a decade-long member of the General Assembly, Comptroller Mendoza was a leader in passing the very policies that helped plunge our state into its dire fiscal situation," said Rauner spokeswoman Eleni Demertzis. Mendoza is a former state lawmaker and former Chicago city clerk.
"Instead of issuing press releases and pointing fingers, Madigan's Comptroller should be urging her former colleagues in the General Assembly to help us pass a truly balanced budget and much needed structural changes," she added.
The partial expiration of the state's 2011 income tax hike in January 2015 cost the state $3 billion in fiscal 2016 revenue. The general fund deficit of $9.6 billion exceeds a prior high of $9.1 billion in fiscal 2012. It improved to $7.3 billion in 2013 as collections from higher income tax rates began to pour into state coffers.
The state's $30.7 billion of bond debt costs $1.5 billion to service. Mendoza warned of rising debt costs due to downgrades over the last year that have left the state's general obligation rating at the Baa2/BBB level, the lowest among states.
The state is on Fitch's negative watch and carries a negative outlook from Moody's Investors Service and S&P Global Ratings with warnings from Fitch and S&P that action is needed to shore up the state's finances by the end of fiscal 2017 June 30.
The auditor
The $9.6 billion added to the net position deficit is the largest single increase dating back to at least 2009, according to a report chart.
The total deficit landed at a negative $131.6 billion in fiscal 2016, $125.3 billion in fiscal 2015, and $121.2 billion in 2014 when it took a dive from $47.9 billion in 2013.
Other states in the red when looking at their net position include Connecticut, Delaware, Hawaii, Kentucky, Maryland, Massachusetts, and Rhode Island although none come close to the size of Illinois' gap. The nearest is Massachusetts with a $58.6 billion net deficit. A dozen states were not included in the auditor general's comparison because their CAFR was not available by Feb. 28.
The net financial position based on governmental activities measures a broad range of assets against liabilities, providing one measure of the state's fiscal health. It counts liabilities such as bonded debt and pension obligations against assets such as cash, investments, and other state holdings. Illinois has more than $100 billion in unfunded pension obligations.
The auditor reported that the state ended fiscal 2016 with $5.1 billion in unpaid bills. The current backlog stands at a record $12 billion.
In the latest Commission on Government Forecasting and Accountability report, revenue manager Jim Muschinske wrote that, "like a broken record, monthly declines reflected weaker income taxes along with poor federal sources."
The commission shaved $674 million of its projected fiscal 2017 revenue estimate and revised its projected fiscal 2018 estimates.
The commission previously projected $31 billion in revenues for fiscal 2017, a $510 million increase over the previous year based on modest growth assumptions.
"Even those very modest expectations have failed to materialize thus far in FY 2017," the report said. The commission now expects just $30.2 billion of revenue this year.
The commission now expects revenues of $31.1 billion in fiscal 2018, up $938 million from the revised fiscal 2017 figure of $30.2 billion that's expected this year.
That differs from Rauner's proposed fiscal 2018 budget which projects $32.4 billion in revenues based on the proposed sale of the state's downtown Chicago headquarters and other assumptions.
Base personal income tax collections are expected to increase just 2.5% while sales tax expectations will remain modest in the 2% range. The "Grand Bargain" proposes raising income tax rates.
