 Social service agencies in Illinois, such as The Center for Youth and Family
Solutions, on average wait almost a year to get paid for the services they
provide to the state’s low-income families, disabled and seniors. Many agencies
have closed their doors, unable to pay their employees and rent.
One of the reasons the state can’t pay these vendors – or many of its other
bills – is that the rising annual cost to pay down its debt is crowding out
spending on most other programs. Illinois is sitting on a mountain of debt worth
$204 billion.
Illinois owes so much money to its bondholders, vendors and pension funds that
it now spends more on paying off its loans than it does on its human services
programs. Unless the state cuts back on its debt, social service providers and
other state programs will continue to bear the brunt of Illinois’ fiscal mess.
Pensions, health insurance and bonds: Debt drivers that squeeze out money for
social services
In 2008, Illinois spent $500 million more on human service programs than it did
on paying back its debt.
By comparison, annual debt payments in fiscal year 2017 are approximately $1
billion more than the $5.1 billion the state will spend on human services.
Illinois spends so much on debt that those costs now consume almost 18 percent
of the state’s general fund budget.
Illinois’ backlog of unpaid bills is what often gets the most public attention.
While significant – the money due to vendors reached $9 billion in November – it
only makes up a small part of Illinois’ total debt.
The real burden lies in Illinois’ $28 billion in bonds and its $111 billion
unfunded pension liability. The $139 billion total is double what it was just 15
years ago.
And yet another $56 billion is owed on government-worker retirement health
insurance liabilities.
Combined, these debts all add up to $204 billion. And that’s the rosy scenario.
If more realistic investment-return assumptions are used, Illinois’ pension debt
nearly doubles.
The driver of Illinois’ debt is its overly generous pension benefits. In 1987,
the state owed its workers and retirees just $18 billion in total benefits
earned.
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 By 2015, the state owed those retirees and workers $190 billion –
a 900 percent increase.
That unprecedented growth rate far surpasses the growth rates of
state revenues, inflation and taxpayer incomes during the same
period. That growth is the reason debt costs have taken over the
state’s budget.illinois bonded debt payments
Unfortunately, the state has just $79 billion in assets to meet its
$190 billion obligation, leaving a $111 billion hole for taxpayers
to pick up.
In addition to its pension debt, the state owes billions more in
bonded debt. That debt has jumped primarily due to the government’s
borrowing to pay for pensions.
Former Gov. Rod Blagojevich borrowed $10 billion in 2003 to help
prop up the state pension funds. And former Gov. Pat Quinn followed
suit and issued more pension debt – $3.5 billion in 2010 and $3.7
billion in 2011.
In total, the state now owes nearly $30 billion – that’s up 30
percent from 2008.
The state’s growing debt is crowding out payments to social service
agencies. Instead of pension reforms to lower the amount and cost of
debt, politicians continue to call for tax hikes to pay vendors.
That’s led to record property-tax hikes and utility-tax increases in
Chicago, increased sales taxes in Cook County and statewide
proposals for a progressive income tax, a millionaire tax and higher
gas taxes, just to name a few.
Illinoisans already bear some of the highest state and local tax
burdens as a percentage of their income, and that includes the
highest property taxes in the nation.
The real problem isn’t that government doesn’t have enough revenue –
it’s how the state spends the tax dollars it already has.
Illinois needs to reform its pensions and stop borrowing money.
Until then, social service agencies will continue to feel the pain
of the state’s fiscal mess.
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