Illinois, like the U.S. government has spending problem

A recent post discussed the perennial debate between those who advocate for smaller government and those who advocate for bigger government. The debate usually centers on the question, “Does the government have a spending (debt) problem or a revenue (income tax) problem?”

The U.S. government has seen its revenues increase in the last five years from $2.015T to $2.9T, an increase of almost 38% or 7.5% per year, while federal government spending increased over 8% on top of the revenue increase, for a total increase in spending of 46%!

How many taxpayers do you think got a 7.5% raise in each of the last five years and wouldn’t be able to live within their means?

Illinois’ proponents have a similar debate and the state’s debt and subsequent credit downgrades place it at the bottom of the overspending pile of states.

In 2012, the state collected more than $35B in tax revenue, a 43% increase from 2010, a three year period. Buoyed by the tax increase in 2011, personal and corporate income tax revenues collected by the state increased by 79%.

The entire tax increase is going to the state’s underfunded pensions. In 2012, the state collected almost $20B dollars in personal and corporate income tax revenue. However, the state’s backlog of unpaid bills increased by 60% and the unfunded pensions went up by 13% over that same period.

The state has obviously got a spending problem as has the federal government. The temporary 2011 increase in state income taxes is scheduled to be reduced from 5% starting in 2015 and ultimately reduced to 3.25% in 2025.

A bill has already been introduced by Lou Lang (D-Skokie) to make the temporary 2011 personal and corporate tax increase permanent – no honor among thieves.

Representative Dan Kotowski, (D-Park Ridge) isn’t even satisfied with the funding received by the state in the last few years. Representative Kotowski thinks that some of the special funds, approximately $2B, should be raided to pay some of the state’s bills and to stop the $400M cut in education funding.

Most of the increase in income tax revenue for 2013, another $1B over last year, will only pay for the increase due in public union pensions again this year. The current funding is about $8B per year going into the 5 pension funds.

The annual increase in pension payments is taking money away from all other areas of state government and will continue to do so, until the legislators reduce the pension plan benefits or raise the income taxes even higher.

Boards of Education around the state have been warned that a 9% reduction in General State Aid is forthcoming, and it’s not all going to the pension funds. The governor is now rumored to be giving a 4% wage increase to the American Federation of State, County and Municipal Employees, the AFSCME union.

It’s obvious that Illinois, like the federal government, has a spending problem, not a revenue problem and what they are doing to the residents of this state borders on malfeasance in office.




  1. monkey

    Same old blather, Ted. Tell us something new. We know we have a pension funding problem. How would you cut it? What other programs and agencies would you cut? You talk about a spending problem but you never get specific on what you’d cut. So, what would you cut? Specific programs. Agencies. Name some things that we can cut. I’m not saying there’s nowhere to cut but I’m tired of the wingnuts talking about spending cuts w/o ever talking about what to cut. That’s at the state and national level. Go. . .

  2. Cutting politician’s salaries and pensions might be a good starting point, since most of them haven’t earned it.

  3. Speaking of revenue two-thirds of Illinois corporations pay no state income tax. That information is provided by the Dept of Revenue, but unfortunately by law that’s all they can share. It would certainly be enlightening if taxpaying citizens of Illinois knew exactly what percent all corporations contibute to the state. Sources through SEC filings indicate that over 12 years in Illinois major corporations paid an effective state tax rate on average of ……………2.07%. Allstate paid zip while Exelon at the high end paid 4.54%.

  4. Well obviously the pensioners are not contributing enough. We know this to be true because “they don’t get paid diddly” as they always tell us. But when they retire they literally walk away with a million dollar lotto spread over 20+ years. They certainly never contributed anywheres near that. The math is $90B lopsided. I’m sure the dems realize this and why they are dragging their feet “reforming” the system.

  5. Wasn’t that deal done to keep many of those businesses from moving to States with a more favorable business climate?

  6. Illinois has even more problems than you might think. Shouldn’t this have been front-page news?

    SEC Charges Illinois for Misleading Pension Disclosures

    Washington, D.C., March 11, 2013 — The Securities and Exchange Commission today charged the State of Illinois with securities fraud for misleading municipal bond investors about the state’s approach to funding its pension obligations.

    An SEC investigation revealed that Illinois failed to inform investors about the impact of problems with its pension funding schedule as the state offered and sold more than $2.2 billion worth of municipal bonds from 2005 to early 2009. Illinois failed to disclose that its statutory plan significantly underfunded the state’s pension obligations and increased the risk to its overall financial condition. The state also misled investors about the effect of changes to its statutory plan.

    Illinois, which implemented a number of remedial actions and issued corrective disclosures beginning in 2009, agreed to settle the SEC’s charges.

    “Municipal investors are no less entitled to truthful risk disclosures than other investors,” said George S. Canellos, Acting Director of the SEC’s Division of Enforcement. “Time after time, Illinois failed to inform its bond investors about the risk to its financial condition posed by the structural underfunding of its pension system.”

    Elaine Greenberg, Chief of the SEC’s Municipal Securities and Public Pensions Unit, added, “Regardless of the funding methodology they choose, municipal issuers must provide accurate and complete pension disclosures including the effects of material changes to their pension plans. Public pension disclosure by municipal issuers continues to be a top priority of the unit.”

    Read more at: http://www.sec.gov/news/press/2013/2013-37.htm

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