Even if the nation is not yet officially in "recession," many states -- Illinois among them -- might as well be. Today the National Council of State Legislatures (NCSL) released a survey of legislative fiscal directors indicating that numerous state economies are currently in crisis. The economic trouble is being felt especially in state budgets, as money brought in through taxes is not keeping up with spending:
Because most FY 2008 budgets were built on revenue forecasts that are not materializing as expected, budget gaps have grown. In November, seven states and Puerto Rico reported shortfalls. That number rose to 16 states and Puerto Rico by mid April. Collectively, these gaps totaled at least $11.7 billion. The situation is worse for FY 2009: Budget gaps have emerged in 23 states and Puerto Rico, and collectively they exceed $26 billion. Again, slowing or declining revenue is the principal reason. In fact, two-thirds of the states are concerned about FY 2009 revenue performance. Four states are pessimistic.
Illinois is listed among the 34 states "concerned" with the 2009 budget gap, but it is also one of only four states that refused to estimate how big that shortfall might become. Instead the Illinois respondent wrote that:
The revenue picture for FY 2009 is far from clear. It appears that limited base growth is the best officials can hope for. Unfortunately, appetites for expanded health care, education, capital needs, and other worthy programs continue to build. Add to that the continued pension funding pressure and bills incurred but unable to be paid, and the resulting budgetary difficulties continue to build.
The "bills" in question include over $700 million the state owes in new pension payments, as well as millions of other expenses for Fiscal Year 2008 that the state will have to figure out how to pay for if it does not want to run a serious deficit. Speaking earlier this year about the 2008 budget, State Comptroller Dan Hynes has already noted that:
Fiscal spending pressures include more than $700 million in new pension payments for state workers and $500 million in rising Medicaid costs. Add in $400 million for education -- a typical annual boost for schools - - and the overall new costs for those three major spending areas alone could hit $1.6 billion in the new budget, Hynes said. That would be twice as much as what the governor expects this year in revenue growth.
According to the NCSL, states are facing their respective budget crises in different ways. Eight of them are considering an income tax hike, while others are looking at deep budget cuts and dipping into states "rainy day funds" to weather the storm.
Illinois did not list any of these options in its response, despite several proposals to revamp the state's regressive flat income tax. Instead, the state pointed to "closing loopholes in the corporate income tax, changing riverboat taxes, and selling the lottery and other state assets" as possible solutions.
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