Friday, February 06, 2009

Time for some long-term fiscal planning

State Comptroller Dan Hynes already painted a dismal picture of the state's fiscal status with his projection of a nearly $9 billion deficit in fiscal year 2010, which starts July 1. He estimated that could drop to a roughly $6 billion deficit if the state received $3 billion from the federal stimulus package, but the federal bailout amount for states is in flux at this very minute. Adding to the problem is that the current fiscal year 2009 budget keeps getting more and more out of whack. The revenue forecast looks worse than it did in November, according to the legislature’s economic forecasting arm.

Last fall, the bipartisan Commission on Government Forecasting and Accountability said revenues for the current fiscal year 2009 would fall $550 million below the previous year, or $1.34 billion less than the level budgeted.

Part of that spending plan assumed the state would collect $435 million by selling the state’s 10th riverboat license, but the winning bid for the license came in at only $125 million — and it won’t be available in time to ease this year’s budget crunch. According to the Illinois Gaming Board, the money could come in two chunks, one in fiscal year 2010 and the rest in 2011.

In short, the current year’s revenue picture “worsened virtually over night to nearly $1 billion less than the previous year,” the commission said in its January revenue forecast.

The commission added that it may need to make further adjustments when state income and sales tax revenues decline as the national recession unfolds. The cumulative damage: at least $1.6 billion by March.

As all four legislative leaders met with Gov. Pat Quinn this past week, talk of tax increases and budget cuts circled the Capitol. Public administration professor David Merriman at the University of Illinois at Chicago said even if the state gets $3 billion in federal bailout money, cuts spending and increases the state income tax by 1 percentage point, it's still going to be a rough road ahead. "The state needs to do long-term fiscal planning, and they need the legislature to take that seriously," he said.

Watch for more context and analysis in the March edition of Illinois Issues magazine.

1 comment:

Capitol View said...

If the feds disappoint us on Economic Stimulus dollars for Illinois state government, I will be delighted. I worry that this one time federal funding would delay Illinois addressing its own revenue structure. Now that the feds are not the short term solution, Illinois lawmakers and our new governor have only one responsible strategy -- go for a revenue update that reflects the current Illinois economy and society. That means two things -- expand the sales tax onto more services, and change the Constitution to allow a graduated income tax rather than our antiquated flat tax.