The state’s fiscal crisis is only going to get worse, and the solution is becoming more difficult by the day.
As you know, the General Assembly and the governor have not agreed on a full state budget. But because of various federal judicial orders, a signed education funding bill and several ongoing statutory “continuing appropriations” (debt service, pension payments, legislative salaries, etc.), state government is on pace to spend billions of dollars more than it will bring in during the fiscal year that began July 1.
Guesstimates have been tossed around by various folks that the state could run out of money by March or maybe April if no formal budget agreement is reached. That’s because all the judicial orders, etc., are based on last fiscal year’s budget, but that budget was based on revenue from a 5 percent income tax rate that automatically fell to 3.75 percent as of Jan. 1.
The long-term financial picture is dark, but it also is in the short term.
On Aug. 18, U.S. District Judge Sharon Johnson Coleman gave the state three days to make July’s $120 million payment for services to developmentally disabled people.
But Illinois Comptroller Leslie Munger claimed that there wasn’t enough money in the state’s “checking account” to meet state payroll; make required bond, pension and school payments; fund other federal consent decrees and comply with Coleman’s order.
A partial payment of $70 million was made last week and then the rest was paid a few days later after Coleman threatened the state with a contempt of court citation.
And things are only going to get worse. The comptroller’s people say their office sets aside about $540 million a month for state pension payments. By November or December, the state will not have enough money in the bank to make those payments, according to the office.
But the governor and legislators can’t even start working on a fiscal solution until Gov. Bruce Rauner’s demands regarding his anti-union “Turnaround Agenda” are met.
And the problem with agreeing to any of Rauner’s ideas is that everybody figures he will attempt to hold up next year’s budget for even more anti-labor concessions.
One theory (on both sides) has long been that this thing has to play itself all the way out so that we don’t have to go through it ever again. Therefore, the Democrats may wait to see what the governor does when the state’s prisons run out of food or the state literally runs out of money.
On the other hand, Rauner may wait to see what the Democrats do when private human service providers fold en masse.
So they’ll likely keep circling each other, throwing jabs and issuing taunts. They’re basically just attempting to run out the clock on each other, creating diversions until “doomsday” is finally reached.
But every day they wait will make it that much tougher to craft a final budget deal because basic math is not on their side.
Rauner essentially agreed in private months ago to a one-percentage-point income tax increase to 4.75 percent — provided that the warring sides can first reach a deal on his “Turnaround Agenda.”
Let’s just say a miracle happens, and they come to terms by the first week of September. To bring in the same amount of revenue as a full-year, one-percentage-point tax hike, the effective tax rate over the fiscal year’s remaining 10 months would have to be significantly higher than 4.75 percent.
And now factor in candidates filing their petitions for office, which began Tuesday and runs through Nov. 30. How do you persuade Republicans and Democrats to vote for a higher income tax while their petitions are on the streets?
That’s why Senate Republican Leader Christine Radogno, of Lemont, said recently that she didn’t see a resolution on the budget until December.
But if they wait until December, when a three-fifths majority would still be required to approve a new budget, why not just wait until January, when only a simple majority would be required?
If that happens, then the income tax rate on Jan. 1, halfway through the fiscal year, would have to be 5.75 percent to produce the same revenue as a 4.75 percent rate since July 1.
And what if they wait until the state runs out of money, sometime after the March primary elections are over? Trust me, you don’t even want to know what the tax rate would have to be.
The other option is to not raise the income tax that high and postpone billions of dollars in state bill payments.
I’m not sure which is worse.
Rich Miller also publishes Capitol Fax, a daily political newsletter, and CapitolFax.com
