Grim fiscal forecast awaits Illinois' new governor

[November 17, 2018]  CHICAGO (Reuters) - Illinois' new governor faces a budget deficit that could triple in size, as well as a backlog of unpaid bills that could surpass the state's record high, according to a new five-year fiscal forecast from outgoing Governor Bruce Rauner.

The Republican governor lost his bid for a second term in office to Democrat J.B. Pritzker in the Nov. 6 general election in what was the most expensive governor's race in U.S. history.

In January, Pritzker, a billionaire heir to the Hyatt Hotel fortune, will inherit a state with credit ratings just a notch or two above junk due to chronic unbalanced budgets and a $129 billion unfunded pension liability.

The Rauner administration's economic and fiscal policy report dated Thursday estimated the gap in the current general funds budget could top $1 billion if Illinois is required by a labor relations board to pay as much as $500 million to members of its largest public-sector labor union.

The five-year forecast shows the budget deficit jumping to $2.7 billion in fiscal 2020, which begins on July 1, and to $3.4 billion in fiscal 2021. Illinois' pile of unpaid bills, which reached a record-high $16.67 billion in 2017, would climb from $7.8 billion at the end of fiscal 2019 to $10.6 billion in fiscal 2020 and to $17.3 billion in fiscal 2022, according to the forecast.

There was no immediate reaction to the forecast from Pritzker's team on Friday. Following the election, Pritzker said his top priority was a balanced budget as he unveiled a 17-member bipartisan committee on fiscal issues composed of current and former state lawmakers, along with government finance experts and union and business representatives.

Managing Partner of The Pritzker Group J.B. Pritzker speaks at the Clinton Global Initiative America meeting in Chicago, Illinois, June 13, 2013. REUTERS/Jim Young

As for the $38 billion fiscal 2019 budget, actual savings from a voluntary buyout of pension benefits may fall short of an anticipated $400 million, according to the report. With the fiscal year nearing its December halfway point, Illinois' three largest retirement systems have yet to launch the program.

On the revenue side, $300 million in one-time revenue from a stalled sale of the main state office building in Chicago has been removed from the budget, while Illinois is banking on increased sales taxes due to a recent expansion of collections to out-of-state internet retailers, the report said.

(Reporting by Karen Pierog in Chicago; Editing by Matthew Lewis)

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