Ralph Martire, CTBA Executive Director, will join Carol Marin on WTTW Channel 11's "Chicago Tonight" this evening at 7:00 p.m. to discuss Gov. Pat Quinn's Budget Address. (If you cannot watch the show directly, WTTW often posts it later at http://chicagotonight.wttw.com/)
Recent projections show that the State of Illinois will run a deficit ranging from $7.59 to $7.96 billion in Fiscal Year (FY) 2014.1 This is, however, nothing new. According to the Comptroller’s Office, the state has run a deficit in its General Fund every year since at least FY1991.2 This creates genuine cause for concern, since over $9 out of every $10 spent through the General Fund goes to four core service areas: education (35 percent), healthcare (29 percent), human services (20 percent), and public safety (6 percent).
Given
that the state’s General Fund deficits have been sustained over such a long
period of time, many believe that spending on those core services in Illinois
must be exceedingly high, and hence a major reason why the state experiences
recurring budget shortfalls. The data on spending, however, paint a very
different picture. When considered over the long-term, it is clear that General
Fund spending on services in Illinois is actually declining in real terms after adjusting for inflation… Real,
inflation-adjusted dollars, overall General Fund spending on services will be
significantly less in FY2014 than it was in FY2000, irrespective of the
inflation metric used.
Reducing
spending in real terms over time could be an appropriate path to follow if
service spending in the state was exceptionally high or overly generous
compared to service spending in other states. However, under any objective
evaluation, Illinois ranks near the bottom nationally in its spending on core
services, which means that reducing investments in real terms over time is not
an appropriate way to deal with the state’s deficits.
There
are three ways to compare Illinois’ General Fund (GF) spending on services to other states: (i) per capita; (ii) as
share of state Gross Domestic Product (GDP);
and (iii) number of state employees per 1,000 residents. Under each metric,
Illinois ranks as one of the lowest spending states in the nation.
Consider
that in 2012, Illinois’ state GDP was approximately $695 billion, which placed
Illinois fifth in the nation, as shown in Figure 2.3
Figure 2: 2012
GDP and Rank of Top 10 Wealthiest States ($ Billions)
State
|
2012 GDP
|
Rank out of 50
|
California
|
$2,003
|
1
|
Texas
|
$1,397
|
2
|
New
York
|
$1,206
|
3
|
Florida
|
$777
|
4
|
Illinois
|
$695
|
5
|
Pennsylvania
|
$601
|
6
|
Ohio
|
$509
|
7
|
New Jersey
|
$508
|
8
|
North Carolina
|
$456
|
9
|
Virginia
|
$446
|
10
|
Source:
US Bureau of Economic Analysis. “2012 State GDP.” Last modified June 6, 2013. http://www.bea.gov/.
As
shown in Figure 3, Illinois’ $695 billion in state GDP was the greatest
in the entire Midwest region in 2012.
Figure 3: 2012
GDP and Rank of Midwest States ($ Billions)
State
|
2012 GDP
|
Rank out of 50
|
Illinois
|
$695
|
5
|
Ohio
|
$509
|
7
|
Michigan
|
$401
|
13
|
Indiana
|
$299
|
16
|
Minnesota
|
$295
|
17
|
Wisconsin
|
$262
|
21
|
Missouri
|
$259
|
22
|
Iowa
|
$152
|
30
|
Source:
US Bureau of Economic Analysis. “2012 State GDP.” Last modified June 6, 2013. http://www.bea.gov/.
However, because population
varies significantly from state-to-state—for instance, Illinois’ population of
12.9 million in 2012 is four times larger than Iowa’s (3.1 million)—a better
metric for comparing the respective wealth of the states is GDP per capita.
Gross Domestic Product per capita is calculated by dividing total state GDP by
population. As shown in Figure 4, Illinois’ GDP per capita is almost $54,000.
Figure 4:
2012 GDP per Capita and Rank of Midwest States
State
|
Total GDP ($ Billions)
|
GDP per Capita
|
Rank out of 50
|
Minnesota
|
$295
|
$54,791.11
|
9
|
Illinois
|
$695
|
$53,998.00
|
12
|
Iowa
|
$152
|
$49,585.81
|
22
|
Indiana
|
$299
|
$45,679.94
|
30
|
Wisconsin
|
$262
|
$45,674.09
|
31
|
Ohio
|
$509
|
$44,125.35
|
32
|
Missouri
|
$259
|
$42,981.16
|
35
|
Michigan
|
$401
|
$40,523.06
|
39
|
Sources:
CTBA analysis using (i) 2012 population from US Census Bureau. “Annual
Estimates of the Resident Population: April 1, 2010 to July 1, 2012: July 2012
totals.” Last updated December 2012. http://factfinder2.census.gov/faces/nav/jsf/pages/index.xhtml;
and (ii) US Bureau of Economic Analysis. ”2012 State GDP.” Last modified June
6, 2013. http://www.bea.gov/.
Hence,
when population is taken into account, Illinois had the second highest GDP per
capita in the Midwest region, trailing only Minnesota. Nationally, Illinois
ranked 12th overall.4 Thus, even after adjusting for
population, Illinois remains one of the wealthier states in the country, with a
GDP per capita greater than 38 other states.
Yet,
despite its relatively large economy, Illinois’ GF expenditures on services
were well below other states for FY2012, the latest year available for a
comprehensive national comparison. Since Illinois cut its GF spending on services
in FY2013 by $377 million from FY2012 levels, and is again cutting
service expenditures in the enacted FY2014 budget by some $173
million from FY2013 levels, there is little reason to believe the state’s
national ranking on GF spending has changed significantly since 2012.5
General Expenditures Comparison Across All 50 States6
General
Fund expenditures compared in this analysis focus on each states’ respective
net spending on core services (i.e. education, healthcare, human services, and
public safety), which collectively constitute the vast majority—90 percent
plus—of all service spending done by all states.
Again,
because states vary widely in population, a simple comparison of aggregate
spending levels—whether by service category or overall—is meaningless. A far
more telling comparison adjusts for population, and, hence uses GF expenditures
per capita. In FY2012, Illinois spent $1,947.46 per resident on core services
through its GF.
Illinois’ spending per capita ranked 28th among all 50 states, well below its rank in both overall population of fifth and GDP per capita of 12th. Moreover, despite having the largest population and second highest GDP per capita in the Midwest, Illinois ranked second lowest amongst the Midwest states in GF spending on services, as shown in Figure 5.
Illinois’ spending per capita ranked 28th among all 50 states, well below its rank in both overall population of fifth and GDP per capita of 12th. Moreover, despite having the largest population and second highest GDP per capita in the Midwest, Illinois ranked second lowest amongst the Midwest states in GF spending on services, as shown in Figure 5.
Figure 5: FY2012 General Fund Expenditures and Rank amongst
Midwest States
State
|
Total GF Spending
($ Billions) |
GF per Capita
|
Rank out of 50
|
Minnesota
|
$16.6
|
$3,088.0
|
9
|
Wisconsin
|
$13.7
|
$2,397.2
|
15
|
Ohio
|
$26.9
|
$2,329.5
|
16
|
Michigan
|
$22.1
|
$2,233.7
|
19
|
Indiana
|
$13.0
|
$1,986.3
|
25
|
Iowa
|
$6.0
|
$1,955.8
|
27
|
Illinois
|
$25.1
|
$1,947.5
|
28
|
Missouri
|
$7.9
|
$1,312.9
|
46
|
Sources:
CTBA analysis using (i) 2012 population from US Census Bureau. “Annual
Estimates of the Resident Population: April 1, 2010 to July 1, 2012: July 2012
totals.” Last updated December 2012. http://factfinder2.census.gov/faces/nav/jsf/pages/index.xhtml;
(ii) National Association of State Budget Officers, Fall 2012: Fiscal Survey of the States (Washington, DC: 2012), 4;
and (iii) state budgets.
Figure
6 compares FY2012 General Fund expenditures per capita for the 10
states that had the highest GDPs in 2012.
Figure 6: FY2012 General Fund Expenditures and Rank amongst
Wealthiest States
State
|
Total GF Spending
($ Billions) |
GF per Capita
|
Rank out of 50
|
State GDP
($ Billions) |
New Jersey
|
$30.5
|
$3,443.0
|
7
|
$508
|
New York
|
$53.3
|
$2,722.3
|
12
|
$1,206
|
Ohio
|
$26.9
|
$2,329.5
|
16
|
$509
|
California
|
$85.9
|
$2,259.0
|
18
|
$2,003
|
Pennsylvania
|
$26.1
|
$2,046.4
|
23
|
$601
|
Virginia
|
$16.3
|
$1,994.3
|
24
|
$446
|
Illinois
|
$25.1
|
$1,947.5
|
28
|
$695
|
North Carolina
|
$18.6
|
$1,908.0
|
29
|
$456
|
Texas
|
$43.9
|
$1,683.8
|
36
|
$1,397
|
Florida
|
$24.5
|
$1,270.5
|
48
|
$777
|
Sources:
CTBA analysis using (i) 2012 population from US Census Bureau. “Annual
Estimates of the Resident Population: April 1, 2010 to July 1, 2012: July 2012
totals.” Last updated December 2012. http://factfinder2.census.gov/faces/nav/jsf/pages/index.xhtml;
(ii) National Association of State Budget Officers, Fall 2012: Fiscal Survey of the States (Washington, DC: 2012), 4;
(iii) state budgets; and (iv) US Bureau of Economic Analysis. “2012 State GDP.”
Last modified June 6, 2013. http://www.bea.gov/.
The
state with the highest GF expenditures on services per capita in 2012 was
Alaska ($6,920.8), while Nevada ($1,075.1) ranked 50th. The national
median expenditure per capita in 2012 was $1,974.5. To rank median in GF
expenditures per capita, Illinois would have had to have spent nearly $350
million more in FY2012 on core services than it did. Increasing Illinois’ rank
in per capita spending is unlikely to occur in the near future, given the
FY2013 and FY2014 budget cuts. Indeed, Illinois’ FY2012 spending on services
was over $400 million less in nominal dollars, meaning without
adjusting for inflation, than in FY2011.7
Examining
GF expenditures on services as share of GDP is another way to compare Illinois
to other states. In a meaningful way, it is actually one of the better metrics
to use because it takes into account a state’s wealth—and hence, ability to
fund core services. Using this metric, Illinois ranks 36th in
spending on services nationwide. This means that despite having a high GDP,
Illinois is in the bottom third for investing in core services. As shown in
Figures 7 and 8, Illinois’ GF expenditures as share of GDP lags behind most
other Midwest and wealthy states.
Figure 7: FY2012 GF Expenditures as Share of GDP amongst Midwest
States
State
|
GF Expenditures as Share of GDP
|
Rank out of 50
|
Minnesota
|
5.64%
|
11
|
Michigan
|
5.51%
|
12
|
Ohio
|
5.28%
|
15
|
Wisconsin
|
5.25%
|
16
|
Indiana
|
4.35%
|
23
|
Iowa
|
3.94%
|
33
|
Illinois
|
3.61%
|
36
|
Missouri
|
3.05%
|
46
|
Sources:
CTBA analysis using (i) National Association of State Budget Officers, Fall 2012:
Fiscal Survey of the State (Washington, DC: 2012), 4;
(ii) state budgets; and (iii) US Bureau of Economic Analysis. “2012 State GDP.”
Last modified June 6, 2013. http://www.bea.gov/.
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