Monday, October 04, 2010

Budget deficit could reach $15 billion

By Jamey Dunn

Illinois could be facing an even larger stack of unpaid bills next fiscal year, as well as a $15 billion deficit, according to the quarterly report on the state’s finances by Comptroller Dan Hynes.

The state rolled an unprecedented $6.4 billion in unpaid bills over from fiscal year 2010 to the new fiscal year, which started in July. Legislators extended the cut off for paying those bills from August to December, and Gov. Pat Quinn has vowed to have the backlog paid down by the new deadline.

According to Hynes, 23 percent of FY 2011 revenues will be needed to pay off obligations from last year. A short-term loan the state took out in July for $1.3 billion, which will come due next spring, already went toward payments to vendors and service providers.

Hynes said in order for Illinois to pay down the backlog by December, the estimated $1.2 billion would have to come in from the plan to sell bonds against money the state received in a tobacco settlement. The state would have to shift $1 billion from other funds into the general revenue fund, and the tax amnesty plan would have to successfully bring in revenues. While the report does not specify how much the state has to bring in during the tax amnesty period — which started on October 1 and ends November 8 — Hynes says the plan is not likely to bring in the original estimate of $200 million.

However, Kelly Kraft, a spokesperson for Quinn’s Office of Management and Budget, said an analysis by the legislature estimated the amnesty would bring in $250 million. She said in a written statement that it is too soon to predict the exact number, but added: “The hundreds of millions of dollars in expected revenue will be significant to help the state pay its bills and keep people employed.”

Hynes estimates that $8 billion in overdue payments could carry over from the current fiscal year to FY 2012 because so much of this year’s money will be needed to pay down last year’s bills. A total of $3.5 billion in unpaid bills from this fiscal year have already piled up. From the report: “Absent any other changes, payment delays will be extended from the historic levels seen recently. This will lead to more providers facing financial hardship and further threaten both the level and quality of services provided to Illinois citizens.”

While income tax revenues saw a small increase, sales taxes where down. According to the report, Illinois cannot count on an economic rebound to bail out the budget in the near future.

Hynes’ report says all this bleak budget news — along with the loss of federal stimulus money and the state’s low credit rating leading to larger interest payments on borrowing — could culminate in deficit of at least $15 billion by the time lawmakers are hammering out a new budget early next year. If that happens, the state’s debt would represent more than half of the money currently in the general revenue fund.

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