The state continues to fall deeper and deeper into debt. The Illinois debt burden continues to bedevil lawmakers, who cannot agree on a solution to the crisis bedeviling the state. By the beginning of 2013, contractors, vendors and agencies are owed almost 7 billion dollars worth of unpaid bills.
By January 2013 there were more than 210,000 unpaid bills awaiting payment. The new state House that returned on January 30 and the Senate that returned on February 5 face the same funding questions that the last general assembly failed to resolve. The biggest burden is the worst funded pension system in the nation.
Data compiled by Bloomberg reveals state plans had less than 44 percent of assets to cover obligations. By 2013 this unfunded liability boondoggle had grown to over 95 billion dollars. If this problem is not settled before current legislative session terminated in May, the unfunded liability figure is going to be expanded by another 2.4 billion. This outsize burden is caused by a convergence of several factors. Workers are living longer, for decades payments have been skipped or underpaid. Economic recessions have also brought investment shortfalls. Chickens have come returned to the roost in a big way.
The result is that the yearly pension fund payment sum will rise by almost 1 billion in the upcoming fiscal year that commences in July to almost 7 billion. This huge sum now constitutes over a 15 percent portion of the general funds budget. It has been a steep rise from 2008, when it was 6 percent of this budget.
Freezing of cost of living adjustments, getting more contributions from employees and making them work longer are among options on the table. Unions object to these options. Leading Democrats and the Governor favor shifting teacher pension expenses to school districts. Both Republicans and some Democrats oppose this as they fear tax increases will result.
While a resolution remains elusive, pension payments have cut into other program funding. As the share for pensions has expanded, other areas have seen reductions. For instance, in 2008, education got 30 percent and health care received 28 percent from general funds budget. This year, both beneficiaries saw a reduction in their percentage of budgetary funding.
Local governments have used interlocal cooperation to defray the effects of a funding squeeze. For instance, DuPage County closed its juvenile detention center and entered into a contract with its neighbor Kane County to house its juvenile offenders. State level problems have also affected municipal bond issues. County issued bonds for a storm water project required a higher interest rate despite the county having a AAA bond rating. The municipal market has become a less hospitable place for local issuers who are paying for what has become known as, the Illinois effect.
There are several reasons for this Illinois debt crisis, which mean that an ultimate fix requires more than mending its pension tangle. A huge issue is a severely restricted revenue base. In a service sector dominated economy, sales tax extends to a limited number of services. Only seventeen services are taxed, leaving it among a small minority since only three states have a smaller net. The nationwide norm is fifty six, with neighboring Iowa exceeding national average and taxing ninety four services. Another elephant in the room is an exceedingly large number of local government units, more than any other state. It is time to get serious to build a sustainable fiscal foundation.
By January 2013 there were more than 210,000 unpaid bills awaiting payment. The new state House that returned on January 30 and the Senate that returned on February 5 face the same funding questions that the last general assembly failed to resolve. The biggest burden is the worst funded pension system in the nation.
Data compiled by Bloomberg reveals state plans had less than 44 percent of assets to cover obligations. By 2013 this unfunded liability boondoggle had grown to over 95 billion dollars. If this problem is not settled before current legislative session terminated in May, the unfunded liability figure is going to be expanded by another 2.4 billion. This outsize burden is caused by a convergence of several factors. Workers are living longer, for decades payments have been skipped or underpaid. Economic recessions have also brought investment shortfalls. Chickens have come returned to the roost in a big way.
The result is that the yearly pension fund payment sum will rise by almost 1 billion in the upcoming fiscal year that commences in July to almost 7 billion. This huge sum now constitutes over a 15 percent portion of the general funds budget. It has been a steep rise from 2008, when it was 6 percent of this budget.
Freezing of cost of living adjustments, getting more contributions from employees and making them work longer are among options on the table. Unions object to these options. Leading Democrats and the Governor favor shifting teacher pension expenses to school districts. Both Republicans and some Democrats oppose this as they fear tax increases will result.
While a resolution remains elusive, pension payments have cut into other program funding. As the share for pensions has expanded, other areas have seen reductions. For instance, in 2008, education got 30 percent and health care received 28 percent from general funds budget. This year, both beneficiaries saw a reduction in their percentage of budgetary funding.
Local governments have used interlocal cooperation to defray the effects of a funding squeeze. For instance, DuPage County closed its juvenile detention center and entered into a contract with its neighbor Kane County to house its juvenile offenders. State level problems have also affected municipal bond issues. County issued bonds for a storm water project required a higher interest rate despite the county having a AAA bond rating. The municipal market has become a less hospitable place for local issuers who are paying for what has become known as, the Illinois effect.
There are several reasons for this Illinois debt crisis, which mean that an ultimate fix requires more than mending its pension tangle. A huge issue is a severely restricted revenue base. In a service sector dominated economy, sales tax extends to a limited number of services. Only seventeen services are taxed, leaving it among a small minority since only three states have a smaller net. The nationwide norm is fifty six, with neighboring Iowa exceeding national average and taxing ninety four services. Another elephant in the room is an exceedingly large number of local government units, more than any other state. It is time to get serious to build a sustainable fiscal foundation.
About the Author:
When you need more information about Illinois debt, click on the links at www.rebootillinois.com today. Tips and news about money, finance and jobs is available at http://www.rebootillinois.com now.
No comments:
Post a Comment