Illinois’s comptroller, Daniel W. Hynes, picks the papers off his desk and points to a figure in red: $5.01 billion.
“This is what the state owes right now to schools, rehabilitation centers, child care, the state university — and it’s getting worse every single day,” he says in his downtown office.
Mr. Hynes shakes his head. “This is not some esoteric budget issue; we are not paying bills for absolutely essential services,” he says. “That is obscene.”
For the last few years, California stood more or less unchallenged as a symbol of Democrat fiscal irresponsibility.
Now, Illinois’ dysfunctional Democrats are challenging California’s position by refusing to pay the state’s bills and refusing to take the painful steps — cut spending — to close a deficit of at least $12 billion, equal to nearly half the state’s budget.
Then there is the spectacularly mismanaged pension system, which is at least 50 percent underfunded and, analysts warn, could push Illinois into insolvency if the economy fails to pick up.
Legislators left the capital this month without deciding how to pay 26 percent of the state budget.
The governor proposes to borrow $3.5 billion to cover a year’s worth of pension payments, a step that would cost about $1 billion in interest. And every major rating agency has downgraded the state; Illinois now pays millions of dollars more to insure its debt than any other state in the nation.
“Their pension is the most underfunded in the nation,” said Karen S. Krop, a senior director at Fitch Ratings. “They have not made significant cuts or raised revenues. There’s no state out there like this. They can’t grow their way out of this.”
The state pension system is a money sinkhole and the most immediate threat. The governor and legislature have shortchanged the pensions since the mid-1990s, taking payment “holidays” with alarming regularity.
Last month, local governments nationwide shed more than 20,000 jobs. Should “irresponsible out of control spending” California, New York and Illinois lay off tens of thousands more in coming months and try to balance their budget or just default on payments?
In Illinois, from suburban Elgin to Chicago to Rockford to Peoria, school districts have fired thousands of teachers, curtailed kindergarten and electives, drained pools and cut after-school clubs in an effort to be fiscally responsible. Hundreds of young teachers moving out of state.
Drug, family and mental health counseling centers have cut their work forces, although not enough. They are still borrowing money to operate.
In Beardstown, Ann Johnson, 53, plans to shut her century-old pharmacy because of late state payments. She is going to work at Wal-Mart.
In Chicago, funeral homes wonder if they can keep burying people for free, as the state has fallen six months behind on its free $1,103 funerals.
In Peoria, the city faced a $14.5 million gap this year and could face an additional $10 million budget hole next year.
The city of Rockford plans to close fire stations and lay off firefighters rather than eliminating social spending.
Public colleges and universities made it through without $668 million expected from the state.
Decatur however did eliminate free meals to 180 seniors.
Legislators made no pretense of promising to pay these bills soon. Instead they authorized colleges to borrow against the expected state payments. Classic Democrat – tax, borrow, or print money for ever. But never reduce spending!
In 2006, the Illinois unemployment rate stood below 5 percent; now it is near 11 percent, and the percentage of long-term unemployed exceeds the national average. Major manufacturers have moved thousands of jobs elsewhere, and the state ranks in the top 10 nationally in foreclosures.
Five years ago, the Chicago suburb of Tinley Park issued about 650 home building permits; last year it processed one.
Few budget analysts are surprised to see Illinois edge close to the abyss. Two of the last six governors have served jail terms, and a third is on trial.
The state’s last elected governor, Rod R. Blagojevich, is on trial for racketeering and extortion. But in 2003, he persuaded the legislature to let him float $10 billion in 30-year bonds and use the proceeds for two years of pension payments. Blagojevich was not a tax-and-spend governor; he was a spend-and-borrow governor.
That gamble backfired and wound up costing the state many billions of dollars. Illinois reports that it has $62.4 billion in unfunded pension liabilities, although many experts place that liability tens of billions of dollars higher.
“We are a fiscal poster child for what not to do,” said Ralph Martire of the Center for Tax and Budget Accountability. “We make California look as if it’s run by penurious accountants who sit in rooms trying to put together an honest budget all day.”
Illinois’s fiscal practices are thoroughly fractured. For years, the Democratic-controlled legislature has passed social safety net budgets that are, in effect, in deficit.
Democratic lawmakers routinely skip around the state’s balanced-budget law, with few consequences. (Republicans are harmony in voting against any tax increases and borrowings.)
The state’s income tax burden is high and its government is large. The budgets in New York and California, per capita, are even larger. If the state cut out all family and human services spending, it would eliminate half of the budget deficit.
The Democrat legislature’s instinct is to borrow. This year, leaders gave the governor authority to move money around and left town to campaign. Getting reelected is their primary goal!
State representative Barbara Flynn Currie, one of the Democratic leaders in the statehouse, says, “In the long run, we’ll muddle our way through.”
Most analysts, liberal and conservative, warn of a far grimmer reckoning — Greece by Lake Michigan. Borrowing costs are rising and the state’s pension costs and unpaid bills balloon each month. Last year, the comptroller’s office paid $55.3 million just in interest on two short-term borrowings to pay the state’s bills.