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ILLINOIS’
FINANCIAL CONDITION WORSENS DESPITE RECEIVING BILLIONS IN FEDERAL AID
Illinois Policy Institute/
Justin Carlson
A new report from watchdog Truth in
Accounting shows each taxpayer’s share of state debt has nearly doubled
since 2009 to $57,000 as total debt increased by $10 billion—mostly due
to pension obligations.
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 Fiscal watchdog Truth in Accounting crunched the numbers for
Illinois and gave the state an F grade in its latest Financial State of the
States report. The report showed Illinois had just over $36 billion in assets
available to pay bills totaling more than $272 billion, leaving the state
needing $236 billion in additional assets to pay its bills.
Each Illinois taxpayer now owes a $57,000 share of that mounting debt, nearly
double what it was just a dozen years ago in 2009. That means every Illinois
taxpayer would have to send that much money to Springfield to eliminate the
state’s debt burden on top of what he or she already pays just so the state
could pay its bills. That amount represents a $5,000 increase from the fiscal
year 2019 report despite Illinois receiving billions in federal relief money due
to the coronavirus pandemic.
Truth in Accounting’s Research Director Bill Bergman noted the burden doubling
over the past dozen years is concerning. “The beginning of that period was in
the middle of the worst economic and financial crisis since the Great Depression
and Illinois has only deteriorated since then despite the massive recovery in
financial markets since 2009. That’s scary.”
The state received more than $8 billion in flexible budgetary relief from the
federal government along with billions of dollars more to cover pandemic-related
expenses, but its financial condition continued to worsen over the past year.
Total debt ballooned another $10 billion, mostly a result of increasing pension
costs, which remain the key driver of the state’s failing fiscal health. Not
even this unprecedented level of federal spending could help stabilize the
state’s finances. Despite the billions in aid money, Illinois lawmakers passed
another out-of-balance budget for fiscal year 2022, the 21st time they have done
so since 2001.
Illinois isn’t the only state struggling with huge debts and high taxpayer
burdens. The report noted just 11 states have a taxpayer surplus rather than
burden. However, only taxpayers in struggling New Jersey and Connecticut faced
higher taxpayer debt burdens than Illinois. Of the states that had deficits,
Illinois’ debt per taxpayer burden is more than 3.5 times higher than the
average of roughly $15,500.
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Unfortunately, Illinois’ pension debt continues to
rise. According to Moody’s Investors Service, it reached a record
high of $317 billion in June 2020. Such massive debt is having great
effects on the rest of the state. Illinois has one of the highest
state and local tax burdens in the nation, crushing residents under
increasing taxes that are going toward paying pension debts rather
than paying for badly needed programs and services. Illinois also
has the second-highest property taxes in the nation, leaving
homeowners struggling to pay tax bills that are constantly
increasing, yet still seeing cuts to core government services.
Kiplinger (a financial magazine) recently named Illinois the least
tax-friendly state for middle-class families. The report names the
state’s income, sales and property taxes as drivers of its status as
a hostile state for middle-class families. Perhaps the only silver
lining for Illinois is that neighboring Iowa, Wisconsin and Michigan
all made the top 10 list as well. Unsurprisingly, seven of the
states on Kiplinger’s list are also in the bottom half of the
Financial State of the States report.
The high taxpayer debt burden in Illinois shows how serious the
state’s debt problem has become and that the solution requires more
than any bailout could provide. The only viable solution to turn the
state’s fiscal future around is a comprehensive pension reform plan.
The hold harmless plan proposed by the Illinois Policy Institute
would preserve earned benefits but slow future growth in benefits
for existing workers and retirees. This plan protects earned
benefits, ensures future benefits will be stable, and saves the
state $50 billion through 2045.
Lawmakers should allow Illinoisans to vote on a constitutional
amendment for pension reform. Illinois has a problem with rising and
unsustainable pension costs that are crushing the state and
threatening the economic security of current and future generations.
Pension reform is the only way for the state to secure a better,
more prosperous future for all Illinoisans.
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