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Illinois has a structural deficit – there isn’t enough money to go around

Illinois Comptroller, Judy Baar Topinka has projected that the state of Illinois will be in deficit by $8.3B by the end of its fiscal year, June 30, 2011, despite raising the individual income tax rate by 67% and the corporate tax rate by 45%. The tax increase has already been spent.

Ms. Topinka says that the state has over 208,000 bills outstanding totalling $4.5B, that are owed to hospitals, schools, social agencies and businesses for past services. There are $3.8B in bills due this current fiscal year and the state usually makes it through by borrowing and postponing bills to the next year, but Ms Topinka says that the state can no longer kick this can down the road.

With all the talk of increased gambling in the state to raise more revenue, do you want to bet? Illinois owes over a billion in corporate tax refunds and other debts. The income tax increase only reduced the debt by $1B, so the state hasn’t been made fiscally sound due to the tax increase.

The state has the worst pension funding percentage in the U.S. at 51% funded. The state is already selling the assets of some pension funds because their investments have lost money, except IMRF. The IMRF pension is the reason the average funding is over 50%. Some of the pensions are funded at just over 40%.

The state has even skipped pension payments while promising workers even bigger benefits. To make up for funding deficiencies, the state is investing in more risking private equities and foreign investments to make up the shortfall in their pension funds.

Illinois also owes 100′s of millions to the federal government for unemployment compensation – the state has even had to borrow the money from the federal government in order to pay the unemployed workers.

Governor Pat Quinn didn’t tell voters the whole story during the election, but when did the last governor of the state tell the whole story to its citizens? He needed to cut the budget but has actually wound up increasing spending.

Quinn’s spokesperson for the budget office, Kelly Kraft, says that, “Illinois has a structural deficit that has been created over decades of fiscal mismanagement.” Hope she is including the current occupant of the governor’s mansion.

The spokesperson was also quoted, “There’s simply not enough money to go around.” Now that sounds a bit closer to the truth - but the truth doesn’t always cut both ways – it didn’t cut spending $1B more than last year by our newly elected governor!

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7 Comments

  1. NAVYFLYER09

    ILLINAUSEA!! What a lousy state run by lousy corrupt politicians with selfish lousy poor-performimg union government workers that the lousy corrupt ILLINAUSEA politicians refuse to take on and,amazingly enough, still bestow even more of the taxpayers’ hard-money upon.

    A 67% tax increase and they still can’t pay the bills!! Bend over citizens and companies of ILLINAUSEA it is only going to get worse.

    The question each of you need to ask yourself is: “How much more of this can I take before I decide to leave this lousy corrupt state?”

  2. I conclude that the deficit will not be resolved by any Democratic Governor now or in the future. Democrats are simply too beholden to the unions to make the drastic cuts necessary to solve this problem,

    Instead, we’ll just rock along, living on credit, kicking that can down the road, toying with nickel and dime savings scheme’s, until we reach the point of financial collapse.

    We will then either see MASSIVE tax increases, or perhaps a takeover by the Federal Government. Who knows? It’s never happened before. The bottom line is the number of poor people is growing both through enonomic failure and the influx of illegal immigrants. Poor people vote for Democrats because Democrats promise everything for free. Republicans are too lazy and stupid to care, or to vote. This viscious cycle will keep repeating itself. As far as I am concerned, there is no hope for Illinois.

    I am making every preparation I can to bail out.

  3. It is so sad, I used to be proud I was from Illinois and grew up in Rockford….no more

  4. So Ted, do you think it is time to move out of Illinois?

  5. It is too bad that the citizens of Illinois can’t have the Governor, and the majority leaders of both the House and Senate impeached for malfeasence. If this state was a business, the corporate officers would be arrested for their financial dealings.

  6. Obviously, I agree with Ted and all of the comments above. Since there will be no effort to control spending, the next step will be yet another tax increase. I would expect a tax on pensions fairly soon. John Cullerton (the second highest ranking member of the Illinois junta–behind only Mike Madigan) floated the idea himself, so it is certainly on the agenda.
    As John says above, financial collapse is inevitable, it’s just a matter of when investors stop buying Illinois debt.

  7. Walnut

    Here is an interesting link:

    Illinois Scrambles as Sears Looks for an Exit
    http://www.showmedaily.org/2011/05/illinois-scrambles-as-sears.html

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