New Report Shows How Illinois Cut Billions in Funding and Grew the Deficit Without Even Taking a Vote (from the Center for Tax and Budget Accountability)

Spending on essential core services [Health Care, Public Safety, Human Services, Higher Education…] cut by billions, yet the state's deficit continues to grow:   CHICAGO - The Center for Tax and Budget Accountability (CTBA) released a new report, Illinois General Fund Spending in FY2016: How Elected Officials Cut Billions in Core Service Expenditures While Worsening the Deficit-All Without Casting a Vote,  which provides a detailed analysis of the FY2016 General Fund budget, as of September 30, 2016. Illinois ended FY2016 without a comprehensive, annual, General Fund budget being passed by the General Assembly and signed into law by Governor Bruce Rauner. Instead, crucial services were funded-or not-through a hodgepodge of court authorizations and a series of partial appropriations. "The normal budgeting process, in which legislators and the Governor publicly weigh priorities and make decisions to which they can be held accountable, for the most part just didn't happen," said CTBA Executive Director Ralph Martire. "As a result, many significant cuts were made to core services like Health Care, Public Safety, and Human Services, without either a vote by the General Assembly, or a gubernatorial proposal or veto. That denied the public the kind of transparency and accountability that's crucial to the budgeting process." CTBA's analysis found that the state authorized $33.555 billion in FY2016 General Fund expenditures. Of that total, $12.071 billion came through continuing appropriations for "Hard Costs," such as debt service, which was authorized by pre-existing legislation. However, of the remaining $21.484 billion, only $7.121 billion-or one-third-was authorized through the standard public budgeting process, which requires both the General Assembly to vote on the appropriations in question, and the Governor to then sign those appropriations into law. That means fully two-thirds of the FY2016 General fund spending on current services was authorized without any elected officials having to take a public position on whether these were the correct funding levels. CTBA's analysis found that, while the General Assembly passed and the Governor signed into law a $1.318 billion, or 67.9 percent, year-to-year cut to Higher Education in FY2016, no elected official had to go on record as supporting: A $467 million, or 27.3 percent, year-to-year cut to Public Safety; A $508 million, or 10.2 percent, year-to-year cut to Human Services. In total, spending on essential core services in FY2016 was down by $2.911 billion, or 12.7 percent, from FY2015. "In FY2016 the State of Illinois has actually made just 93.2 percent of the General Fund expenditures on current services which were authorized for the year, leaving 6.8 percent-or $1.468 billion-unused," said Bobby Otter, CTBA's Budget Director. "Not only does this add to the lack of transparency in the Budget, but of even greater concern, it is not clear exactly who made the decisions to spend less than was authorized by court order and/or consent decree, what legal authority permitted the decision to spend less than authorized, or why the decisions to spend less on certain services rather than other services were made." Finally, despite the cuts in spending on essential core services, the state's fiscal condition continued to weaken. CTBA's analysis found that by the end of FY2016, the accumulated General Fund deficit had reached $9.41 billion, an increase of $3.44 billion from the final FY2015 deficit of $5.97 billion-jumping by over 57 percent. The Center for Tax and Budget Accountability, established in 2000, is a bi-partisan 501(c)(3) research and advocacy think tank that promotes fair, efficient and progressive tax, spending and economic policies.

We hope this report is helpful and informative.  Sincerely, Ralph Martire and Bobby Otter October 27, 2016

You can read the full report here.

The "Safe Roads Amendment" Is Bad Policy for Illinois (from the Center for Tax and Budget Accountability)

CHICAGO - Today, the Center for Tax and Budget Accountability released a Fact Sheet on Constitutional Amendment 36, the so-called "Safe Roads Amendment," explaining why it would exacerbate, rather than improve, Illinois' budget problems.

The SRA would amend the state constitution to require that transportation-related revenues be spent only for transportation-related purposes. Proponents claim the amendment is necessary because the state diverts funds meant for transportation to other purposes, leaving insufficient resources for road and railway maintenance and construction.

While Illinois' transportation infrastructure does need investment, the SRA is not a good solution. The Amendment's text is both sweeping and vague, leaving unclear a) which revenue streams it would lock into transportation uses, and b) what exactly would count as a transportation use. A plain reading of the amendment suggests that it would apply to revenue streams that are not currently used for, or meant to be used for, transportation, diverting money from other crucial programs-including over $240 million from the City of Chicago's general operations, and $30 million from the Illinois Department of Natural Resources.

More fundamentally, the SRA misdiagnoses the reason that Illinois under-invests not just in transportation, but in other important services as well. The state simply does not have enough revenue to cover its expenses, and moving money from one expenditure to another without increasing total resources will not solve the problem.

Finally, using a constitutional amendment to make this change, rather than a regular statute, means that any unintended consequences of the SRA will be very difficult to remedy. In fact, no changes would be possible until the next statewide election in two years. For this reason, using the Illinois Constitution as a budgeting tool is unwise, and will aggravate the problems caused by the SRA if it passes.

For more information, contact Daniel Hertz at dhertz@ctbaonline.org or 312-332-1481.

The Center for Tax and Budget Accountability, established in 2000, is a bi-partisan 501(c)(3) research and advocacy think tank that promotes fair, efficient and progressive tax, spending and economic policies. 

Read the full Fact Sheet here.

Preliminary FY 2018 State Contribution to TRS Set at $4.6 Billion (from the Teachers' Retirement System of Illinois)

SPRINGFIELD, IL – Decades of state government underfunding and weakening investment returns led the Teachers’ Retirement System Board of Trustees to give preliminary approval to a state government contribution for fiscal year 2018 of $4.56 billion – a 14.5 percent increase over the state contribution for the current fiscal year.

The FY 2018 contribution is derived from calculations dictated in state law and falls $2.31 billion below the amount of money that actuaries estimate state government should be paying TRS based on standard actuarial practices.

Evolving actuarial standards indicate the state’s annual contribution to TRS for the coming fiscal year should be $6.88 billion.

“By any measure, $4.56 billion is a lot of money, but that amount is a direct product of the perpetual underfunding of TRS by state government over the last 76 years,” said TRS Executive Director Dick Ingram. “Illinois is reaping what it sowed. Decades of inadequate contributions for TRS mean that now – when investment returns are not robust – big contributions must be made to secure the retirement promises made to generations of teachers.”

Of the $4.56 billion state contribution for FY 2018, only $974 million is needed to pay the anticipated annual cost of TRS pensions during the year. The remaining $3.59 billion in the contribution is dedicated to help pay off the System’s $71.4 billion unfunded liability.

“Most of the FY 2018 contribution is a self-inflicted wound,” Ingram added. “That money could be spent on other priorities today if the State of Illinois had fully met its obligations in the past.”

Another factor in the contribution increase was a reduction in the TRS assumed long-term rate of investment return to 7 percent from 7.5 percent. The reduction in the assumed investment rate was made in August following a recommendation by the TRS actuaries, Segal Consulting, of Chicago.

“An inescapable result of lowering the assumed rate of return is an increase in the state government contribution. Pension math is unforgiving. The benefits that are promised must be paid for,” Ingram said. “TRS and other pension systems across the country are lowering their assumed investment rates because all indicators point to a slowing of investment returns in the future.”

He added that TRS has revisited the rate of return assumption annually, reducing it in 2012 and in 2014. The Illinois State Actuary also has recommended that TRS review its assumed rate of return annually.

“TRS did not rush this decision. This is a very thoughtful, staff-driven process,” Ingram said. “The duty of TRS is to our members and the financial stability of their retirement trust fund. We cannot ignore reality and the reality is investment returns are slowing and we owe 406,000 members more than $118 billion in the future.”

Under state law, TRS must each year deliver a state government contribution estimate by November 1 to state officials and the State Actuary. The job of the State Actuary is to review the actuarial practices and assumptions used to calculate the estimate and to determine whether the process was done correctly. If the State Actuary approves of the System’s methods, the TRS Board gives final approval to the contribution amount early in the next year…

About Teachers’ Retirement System

The Teachers’ Retirement System of the State of Illinois is the 37^th largest pension system in the United States, and provides retirement, disability and survivor benefits to teachers, administrators and other public school personnel employed outside of Chicago. The System serves 406,855 members and had assets of $45.6 billion as of September 30, 2016.