K-12 Tax & Spending Climate: US budget wars reach nadir in Illinois

Lindsay Whipp:

Republican governor Bruce Rauner and Democratic House speaker Michael Madigan have refused to budge in their battle over how to eliminate the deficit — estimated to be $6.6bn according to the National Conference of State Legislatures. Meanwhile, Illinois’ pension liabilities have hit $110bn; the state has racked up nearly $8bn in unpaid bills and $9.7m in fines for late payments, according to the state comptroller.

The dysfunction has pushed Illinois’ credit rating to the lowest level among the 50 US states. Fitch recently put Illinois’ BBB+ rating — just three rungs above junk — on negative watch over the implications of an extended budget impasse.

“It’s fairly clear to most people that you could not balance this budget with budget cuts alone, so there needs to be a meeting of minds on how to balance the budget — how to raise taxes,” said Karen Krop, a senior director at Fitch.

Policymakers finally agreed on Thursday afternoon on a stopgap budget to fund schools for the year starting on Friday, without which they would not have been able to open in the autumn. However, the rest of the stopgap budget only lasts six months and does little to address most of the key issues.

Money has been distributed through a series of ad hoc measures, creating a sense of uncertainty over funding, raising fears of school shutdowns and leaving a distrust in the state government that will be difficult to eliminate.

Illinois’ extensive financial problems have been a long time in the making. A pension bill passed 15 years ago delayed responsibility to pay into the fund and even now the requirement is not for full payments, Fitch said. An income tax increase had started to chip away at the unpaid bills and helped balance the budget but it was discontinued more than a year and a half ago.

The Climate of Opinion in Illinois 2008- 2016: Roots of Gridlock.