Illinois bill backlog expected to reach $14 billion

Brendan Bakala, Illinois Policy Institute Sep. 6, 2016, 2:09pm


Illinois’ unpaid bills are expected to reach $14 billion by summer 2017, according to a new report from Moody’s Investors Service.

Gov. Bruce Rauner reached an agreement in June with Democrats in the General Assembly on a stopgap budget to fund state operations through the November elections. But the stopgap budget was a temporary measure to keep the state running; it was not a full budget and did not include structural or spending reforms. Consequently, Moody’s has speculated the state will manage its mounting bills in its usual way: by borrowing money.

“Moody’s does not anticipate Illinois would suspend its statutory debt service requirements to continue funding operations,” spokesman David Jacobson said, according to the Chicago Tribune. “But if the bill payment backlog becomes sufficiently large, the state could resort to borrowing from debt service funds for operating needs. That or similar actions would signal a deterioration in Illinois’ credit position.”

As the state’s budget backlog grows, Illinois House Speaker Mike Madigan has pushed reinstating and making permanent the 2011-2014 state income-tax hike. In 2011, the Illinois General Assembly passed, and former Gov. Pat Quinn signed, a law temporarily raising the personal income tax to 5 percent from 3.75 percent and the corporate income tax to 7 percent from 4.8 percent. At the time, politicians heralded the tax hike as a way to combat Illinois’ growing debt problem. However, after taking in an additional $32 billion in revenue, the state barely made a dent in its unpaid bills, which were over $8 billion in 2011. And the state’s pension debt, which stood at $83 billion in 2011, had reached $111 billion as of 2015. The 2011-2014 tax hike only took money out of Illinois residents’ pockets, driving many of them to leave the state. It did nothing to right the state’s fiscal ship.

And more tax hikes will not solve the problem now. Illinois already imposes on its residents the nation’s fifth-highest state-local tax burden. The main cause of Illinois’ budget woes is not a lack of revenue, but rather unsustainable spending – particularly on government-worker pension costs, which now make up 25 percent of the state budget.

Raising taxes would not only hurt middle and working-class families, but would also be counterproductive. Fueling Springfield’s overspending with more taxpayer money would do nothing to fix the structural problems that have created the current fiscal crisis: unaffordable government-worker pensions and salaries and a shrinking tax base.

Moody’s bleak forecast should serve as a wakeup call to Illinoisans. The state needs a balanced budget, not an annual cycle of unsustainable borrowing and spending that leads to growing debt and more credit downgrades.

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