Hard Times in Illinois - by Stephen Lendman
With America's worst budget crisis per capita, Illinois reflects the crushing nationwide burden facing most states. As a result since 2008, they raised taxes, made big cuts in health care (including Medicaid), education and other social services. They also laid off thousands of state workers, cut pay and benefits for others, and plan more of the same going forward.
Collectively in FY 2011, state governments face about a $140 billion deficit, besides major shortfalls in large and small cities. In fact, according to Nick Johnson of the Center on Budget and Policy Priorities, this year "will actually be the most difficult budget year for states ever," and 2012 may be as or more challenging.
Moreover, unlike 2010, little or no federal aid is planned with Washington in discretionary spending austerity mode. It means states and working Americans will largely be on their own to cope.
On January 5, New York Gov. Andrew Cuomo's State of the State address suggests what's coming nationwide. Facing a projected $9 billion deficit, he outlined proposed draconian cuts in education, health care, and state payrolls, including pay and benefits, saying "New York spends too much money." So to curb it, he also wants a 20% reduction in state agencies, authorities and commissions, while pledging to keep New York "business friendly," meaning workers will feel pain, not fat cats.
Accordingly, he announced no tax increase for the wealthy and will let a so-called temporary "millionaire's tax" surcharge on $200,000 a year or more earners expire, depriving the state of $1 billion annually.
Illinois in Deep Crisis
The University of Illinois' Institute of Government & Public Affairs (IGPA) headlined a recent report, "Illinois Budget Woes: Titanic and Sinking," stating:
State problems aren't new, but lawmakers haven't "developed a strategy for resolving the situation and it is rapidly growing worse." Moreover, IGPA analysts say:
"the state's fiscal disaster is even worse than commonly believed, will take years or even decades to remedy and can be fixed only by large and fundamental changes in both spending and tax policies...."
With spending exceeding revenues, and obligations not postponed, unpaid bills are growing "at a frightening rate. For instance, IGPA's Fiscal Futures Model indicates (they) could reach $40 billion by July 1, 2013, with an associated delay in paying those bills of more than five years."
Besides its $13 billion deficit and $6 billion in unpaid bills, its pension fund is about $130 billion in the red - a red flag that state workers may lose out altogether, wiping out their promised retirement savings. Overall, achieving a balanced 2012 budget requires one or a combination of three alternatives, including:
-- enormous increases in personal and corporate taxes to 7.1% and 11.3% respectively;
-- raising the current 6.25% sales tax to 13.5%, and/or
-- cutting spending across the board by 26%, exclusive of debt service, pensions and transportation.
Moreover, IGPA concludes that state fiscal problems "are so enormous that no single tactic will be enough to balance the budget....We start so out of balance that even an absolute freeze on all spending will not achieve balance (over) a 10-year time horizon. Bringing Illinois to fiscal solvency will require state government to implement multiple and massive policy changes. If nothing is done soon, (Illinois) faces a very bleak future."