Editorial Board: Illinois Budget is Back to the "Good" Old Days

 (Patrick Emerson/Flickr)

(Patrick Emerson/Flickr)

Au Contraire

Back to the “good” old days. For the past two years, the General Assembly and Governor were castigated for failing to produce a budget. The basic reason for the failure is that Governor Rauner was adamant that, as part of a budget deal, he was going to get some reforms to improve the functioning of the state and make Illinois a more attractive place for business. At the same time, Mike Madigan was equally adamant that that wasn’t going to happen. One of the two had the votes to force his will on the other. I won’t tell you which one, but he has the size and ethnicity of a leprechaun.

This time around, Rauner knew he wasn’t going to get any reforms, and he knew that, in an election year, he would be the focus of voters’ displeasure with our dysfunctional state government, particularly when his opponent would promise an ability to get along with the General Assembly. Rauner drastically lowered the bar for his approval of a budget: the reforms disappeared, and all Rauner would require was a balanced budget that wouldn’t necessitate another tax increase. Madigan gave his blessing to a “bipartisan” budget. So, by lopsided votes in each house, and Rauner’s pen, we have a budget. There was an orgy of self-congratulation. Rauner called it “a great bipartisan effort.” House Minority Leader Jim Durkin saw the budget as a “turning point” for the legislature. Democratic chief budget negotiator Heather Seans claimed that the process was “what it should be.” Illinois had gotten past the daily warfare in Springfield. Happy days were here again!

I’m sorry to poop all over the party, but inside that silver budget lining, there’s a deep, dark cloud. The budget is a financial Potemkin Village. There’s nothing new about it, just a return to the days before the Rauner-Madigan face-down when both Republicans and Democrats annually agreed on a budget that they could sell to the public with sort-of straight faces as balanced without getting laughed out of the room where they announced it.  

Here’s what’s wrong with the budget, courtesy of the Illinois Policy Institute. First, it’s balanced only if their assumptions turn out to be valid. There are three assumptions, all of which are as probable as a Cubs-Sox World Series this fall. First, they assume $444 million in pension savings, which would result from two buyouts of pensions. The assumption is problematic. For one, the buyout which would trigger 90% of the savings is unlikely to be accepted by the public employees; and even if they accepted the buyout, the state would have to issue about $1 billion in bonds (which would have to be repaid with interest) in order to finance it.

Second, they assume that this year the state will sell Thompson’s Folly for $300 million. That’s the same building the state was trying to sell for the last three years, and there is no buyer in sight. Could the very conservative estimate of $328 million in deferred maintenance costs have anything to do with it? Even assuming the state got its $300 million for the building, the state offices that currently fill the building need to operate somewhere. They can either relocate at tremendous cost and inconvenience, or they can stay and pay rent to the new owner, who is likely to perform the required maintenance to preserve the asset. Unless the new owner is Santa Claus, that deferred maintenance cost will be passed on to the tenant State of Illinois) in the form of higher rent. So, the state makes $300 million on the sale and loses even more in higher rent. Granted the repairs won’t be made in one year, but the state will be paying for them long after it has spent the $300 million it takes in this year.

Third, the budget makes mention of union contract benefits costing about $400 million, promised by Pat Quinn, which the courts have ordered the state to pay.

Fourth, the budget counts on fund sweeps to make the budget balance. That practice takes money out of special accounts (over 600 of them) which are earmarked for special purposes (many of which are generated by some sort of assessment) and uses it for general purposes. An example given by IPI is the routinely swept State Crime Laboratory Fund, which is run on money generated by circuit court assessments. Where is Gil Grissom when you need him?

Finally, the state budgeting process uses cash accounting. Expenses are budgeted in the year they are paid, not the year they are incurred.  Budget in the red at the end of the year? Delay paying some bills until the next fiscal year. Voila! The budget is balanced.

The budget process itself was ugly and deceptive enough; it’s really unbalanced by $700 million to $1.14 billion.  Equally important is what the budget did not do. The first and most fundamental omission was its failure to seriously address the unfunded public pension issue. The pension problem isn’t like junk not cleaned out of an unused bedroom that will always be there whenever you get the motivation to clean it out. It’s more like a malignant tumor that grows daily, in this case at the rate of $13 million each day. Ever wonder why you don’t seem to see any benefit from your tax dollars?  One reason is that so much of the budget is already spent on unfunded pensions, expensive benefits for state workers, and paying interest on money already borrowed. It’s getting close to 30% of the budget, which is triple the median level for other states.

The other thing the budget didn’t do is pay down any of the state’s unpaid bills. You remember the previous 60% income tax increase, the temporary one? That was supposed to pay off the states unpaid bills. Guess what: they’re still there, and none of the increased revenue from this year’s tax hike was earmarked for bill payment; it was all budgeted for new spending.

All the hand-wringing done over the last two years over the absence of a budget was misplaced anxiety. The lack of a budget was never the problem. Failure to address the pension, debt and employee benefits was the problem; it still is. It is a scandal and a tragedy that our public officials can pat themselves on the backs and pop corks on champagne bottles to celebrate just the latest dereliction of duty. The budget is all for show. They know it, and now so do you.