Illinois made the Top 10 last month.
Not Bruce Weber’s Fighting Illini, a disappointing 4-2 and unranked through the first six games of the young basketball season.
Rather, the Prairie State itself, tied for ninth with Wisconsin in a national ranking of states on shaky financial footing. The top spot went to California, so Illinois’ elevated status is nothing to brag about.
The ratings were compiled by the Pew Center on the States, a nonpartisan think tank that provides research and analysis on state issues, and published in a 65-page report entitled “Beyond California: States in Fiscal Peril.” The full report can be accessed at www.pewcenteronthestates.org/beyondcalifornia.
“California’s fiscal problems are in a league of their own — but the Golden State is hardly alone,” wrote Susan Urahn, the center's managing director, in a foreword to the study. “Some of the same factors driving California toward the brink of insolvency also are hurting an array of other states.”
To determine which states are in greatest jeopardy, Pew researchers examined half a dozen criteria, which together have “pushed California to the brink of insolvency,” according to the report. The factors include state revenue losses, budget shortfalls, rising unemployment, high foreclosure rates, obstacles to balanced budgets such as extraordinary voting requirements for tax increases, and poor money-management practices.
The researchers assigned point values to each criterion and then scored all 50 states on the six criteria, using the best available data as of July 31. Based on their analysis, Arizona and Rhode Island were close on the heels of California, followed by Michigan, Oregon, Nevada, Florida, New Jersey, Illinois and Wisconsin.
Focusing on Illinois, the researchers noted the ongoing recession has slammed the state’s diverse economy, with unemployment hitting 10.5 percent in September (the jobless rate reached 11 percent in October) and the housing market collapse saddling the state with the seventh highest foreclosure rate among all states for the first quarter of 2009. The downturn has been reflected in a drop of more than 10 percent in state revenues, chiefly income and sales taxes. Still, most of the other states on the at-risk list fared worse in those areas. Unemployment grew more steeply and revenues dropped more sharply in eight of the nine others; six had higher foreclosure rates.
While Illinois’ budget situation “has gone from shaky to unsustainable” during the recession, the researchers said, the state’s fiscal woes “began long before this downturn,” thanks to the state's long record of spending more than comes in.
“What puts Illinois squarely in the company of California is its lack of fiscal discipline to balance its state budget,” they wrote. “That was apparent even before the latest recession. In 2008, the Pew Center on the States’ Government Performance Project graded states on how well they manage their money. Illinois received a C-. Only California and Rhode Island scored lower.”
The poor grade largely reflected state leaders’ ongoing disinclination to make tough choices — either by raising taxes, cutting spending, or a combination of the two — to balance the budget. The state has run deficits every year since fiscal year 2001, including an eye-popping $3.5 billion for the budget year that ended last June 30.
"Several states on the top 10 list were unable to muster the political resolve to make long-term fixes to their fiscal problems,” the researchers noted. “Virtually every state had to make tough decisions this year about where to cut and how to raise additional revenues, including through taxes or fees.
“But in some states, lawmakers punted the responsibility — either by asking their voters or governors to make the call, or by relying heavily on borrowing or accounting methods that put off harder decisions until later,” they wrote.
In Illinois, the Pew researchers said, political leaders have used all sorts of short-term approaches to address the budget gaps, “but two of the most significant and consequential are to put off paying bills and skimp on the state’s annual pension payments.”
While California issued IOUs when it ran out of money earlier this year, researchers said Illinois repeatedly since 2001 “has let doctors, pharmacists, social workers and other contractors simply wait for compensation as lawmakers put off paying bills.”
The Pew analysis should be no surprise for anyone paying attention in Illinois. Lawmakers sent Gov. Pat Quinn an FY 2010 budget that was more than $2 billion out of balance, relying heavily on borrowing ($3.5 billion for pension payments) and paying bills late ($3 billion backlog and three-month wait at the end of September, according to state Comptroller Dan Hynes.) Factor in reliance on one-time, nonrecurring revenues — stimulus, anyone? — and the current budget gap, $13.2 billion at the time the Pew researchers were crunching numbers, was one of the three biggest in the country. Only California and New York had larger shortfalls, and Illinois’ gap trailed only the Golden State’s as a percentage of the overall general funds budget.
And next year seems sure to be as bad if not worse. Recent estimates peg the shortfall going into FY 2011 at roughly $14 billion, or almost 54 percent of this year's total $20.1 billion general funds. Another way to look at the projected deficit: Gov. Pat Quinn and Illinois lawmakers will have to come up with $14 billion in new money next spring to keep spending at current levels throughout FY 2011.
“With 37 governors’ seats up for election and 46 states choosing legislators in November 2010, political leadership will be a potent factor in shaping how states meet their fiscal challenges going forward,” the Pew report notes in a classic understatement.
Here in Illinois, the challenge for voters is to acknowledge the state’s precarious fiscal position, for which the Pew report is merely the latest documentation. Then, citizens need to seek out candidates who articulate real solutions involving increased revenues and/or major reductions in widely popular programs such as health care and education — not simplistic “cut-the-waste” bromides — and put those realists in charge of the state's affairs. The state can’t afford the alternative: two, even four, more years of the current slide into California-style insolvency.
While Illinois’ budget situation “has gone from shaky to unsustainable” during the recession, the researchers said, the state’s fiscal woes “began long before this downturn,” thanks to the state's long record of spending more than comes in.
Charles N. Wheeler III is director of the Public Affairs Reporting program at the University of Illinois at Springfield.
Illinois Issues, December 2009
