Can it get worse? Oh, yeah!
The light at the end of the budget tunnel is a train that’s picking up speed.
An editorial published Oct. 28 and headlined “Public Enemy No. 1” made the argument that Tuesday’s election would mark an end of the political happy talk that characterizes campaign seasons and put the state’s serious financial problems back on the radar screen.
It was a pessimistic discussion of the financial challenges that lie directly ahead – $130 billion in underfunded pensions, a string of deficit state budgets going back to the early 2000s, unpaid bills that total $6.9 billion, as of Friday, and politicians who have made a long-standing habit of doing their best to avoid those issues.
This being Illinois, it turns out that the pessimistic prognosis was too optimistic.
It suggested reality would intrude after the Tuesday election. Instead, it didn’t wait that long to bang down the door.
Last week, the executive director of the Teachers Retirement System announced the General Assembly will have to make $4.8 billion in contributions to the TRS for the fiscal year that begins July 1, 2019.
That’s a roughly $400 million increase over what the legislature appropriated last year to TRS.
If that sum isn’t enough to curl a reader’s hair, get a load of what else Richard Ingram had to say. He noted that the $4.8 billion is the statutorily required contribution and the actuarial contribution level should be nearly $7.8 billion.
So that’s one step forward and two steps back?
“TRS investments had a good year, but we cannot invest our way out of this problem. The unfunded liability is too large and grows every year,” he said.
Let’s put that proposed spending in context.
Last year, the General Assembly passed a $38.5 billion budget that was described as balanced. In fact, it was not balanced, for a variety of reasons actually running an estimated $1.2 billion deficit.
The $4.4 billion TRS contribution in that budget represented about 11 percent of the total.
The TRS is just one of five underfunded pension systems. Public pensions represent just a small piece of the state’s overall obligations that include education, roads, social services, law enforcement, prisons and on and on. Every budget constituency will want more in the upcoming budget year.
Governor-elect J.B. Pritzker has promised to bring to the budget table a variety of new social-spending programs that include, among other costly things, state-provided health insurance.
Given the state’s low unemployment rate and the strong national economy that is benefiting Illinois, the state should enjoy a strong increase in revenue, particularly considering last year’s increase in the state income tax to 4.95 percent.
But the question is whether those new revenues will be consumed by the growing demands for existing programs at the same time the state already is awash in debt.
That, in fact, is putting it too kindly. Illinois is effectively bankrupt, although it can’t file for legal bankruptcy.
The new budget year is 8 months away. But state officials will start laying the groundwork far ahead of the start date – July 1.
That’s why Ingram put down his marker last week. Others will follow. Bit by bit, they’ll generate a flood that crushes everything in its path.
Doesn’t sound too appetizing, does it? People can only hope this new round of pessimism, like the last one, isn’t too optimistic.