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spending, key areas were not addressed, according to the report.
The state's budget has remained consistently out of balance, the report states. The deficit was $4.16
billion at the end
of FY03. At the end of FY07, it was nearly $3.6 billion, based on preliminary, unaudited estimates.
"During this period of national economic growth, many states took advantage of their increased revenues to
stabilize
their financial positions," Hynes told legislators. "By contrast, Illinois retained its status of having the worst deficit
in the nation for the fourth year in a row," he said.
According to the report, the state continues to abuse the loophole that allows Medicaid and other healthcare
bills to be
paid from the following year's appropriations - which in turn contributes to persistent structural deficits, payment delays
to state vendors and limited access to quality health care. These liabilities were over $1.8 billion in FY03 and had
increased to nearly $3.4 billion at the end of FY07, based on the comptroller's preliminary unaudited estimates. The report
further details how issues of critical importance have gone largely unaddressed, as revenue growth was directed primarily
toward new spending.
The state's five retirement systems remain among the most poorly funded in the country, according to Hynes.
Even with the
infusion of the $10 billion pension funding bond proceeds in 2003, the funding ratio remains in the mid sixties - well below
the 75 percent level reached prior to the last recession. Meanwhile, pension liabilities of the system continue to grow, and
nothing has been done to address a growing liability for retiree health insurance benefits that was estimated to be $43
billion to $53 billion in a 2006 report by the Civic Committee of the Commercial Club of Chicago.
Although education has received significant funding increases, investment in education is still below
recommended levels
- and the state's education finance system remains unchanged, resulting in continuing funding disparities in school
districts across the state, according to the report. Higher education will actually receive less in FY08 than it did in
FY03. Further, despite major spending increases on health care, by some estimates the number of uninsured Illinoisans has
increased.
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Hynes predicted "difficult" days ahead as a new budget is crafted, in part because Medicaid and pension liabilities alone
are expected to consume all FY09 revenue growth.
At the same time that these fiscal problems loom, the economy appears to be slowing, said Hynes. Corporate
income tax
collections are down and sales tax revenues are well below projections. Payment delays and bill backlogs stood at record
levels at the end of the first half of the fiscal year, the report said. With unemployment rates rising in Illinois, there
is a concern that income tax revenues may also be impacted in the coming years. On top of this is the governor's promise to
expand healthcare programs without a permanent revenue source to pay for them, said Hynes.
"The fiscal outlook for Illinois is not optimistic," said the comptroller. "The state has made no effort to
build up
reserves or address the underlying structural problems of the state's budget. This lack of reserves and the Medicaid and
pension payments 'albatrosses' will be a drag on the state when it faces an inevitable economic downturn, likely already
under way."
Tom Johnson, president of the Taxpayers' Federation of Illinois, agreed. He said that the state's been
spending more
money than it's been taking in for several years. Johnson said the state has been doing that by shortchanging its pension
and retiree healthcare funds and by delaying payment to healthcare providers. Rather than looking to increase revenues, the
state should be looking at making changes to these systems, according to Johnson.
The state needs to reform its retiree benefit programs to be more in line with programs in the private
sector, Johnson
added, and there needs to be more sharing of healthcare costs with employees. But, he said, change won't come easy.
"The difficulty in cutting government back dramatically," said Johnson, "revolves around where most money
goes in state
government. It goes in two areas - education and health care. If the state didn't pay healthcare costs for many of our
citizens, who would pay those costs? It's an easy thing to say that there should be cost reductions, but where do they come
from? Obviously, if a government is not paying for those who are not able to pay, then the private sector has to pay in a
different way. Maybe that's in premium cost to employers or to individuals who carry health insurance or other things. I
think it's an easy thing to say, 'Let's reduce programs or cut costs,' but the question I have is, 'Where do you do that?'"
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