Andy Shaw: New plan to save Illinois takes ‘courage and patience’

Follow @andyshawbga

To be continued.

That’s how I ended last week’s column, which looked at how the Illinois Constitution divides budget responsibilities — annual spending and revenue decisions — between the governor and the state Legislature.

The goal is to produce a balanced budget each year through the give-and-take of the legislative process, but there hasn’t been one since Republican Gov. Bruce Rauner and the Democratic majorities in the House and Senate began a protracted battle over the future of Illinois nearly two years ago.

They did agree on a six-month stopgap spending plan last spring, but it expires in less than a week, and without a new plan on the table from either side, public colleges and universities, some human and social services, and a smattering of additional unprotected programs will begin 2017 in a troubling state of limbo, literally and figuratively.

Even more troubling is Illinois’ broadening and deepening fiscal crisis, today and down the road, and that’s where last week’s column morphs into this week’s.

New projections from the Fiscal Futures Project at the University of Illinois Institute of Government and Public Affairs, based on data from the state comptroller’s office, indicate that:

+ State government is now facing a staggering $13 billion deficit for the current fiscal year, which ends next June.

+ Without a budget deal, the estimated shortfall will hover around $14 billion a year for the next five years.

+ Unfunded liabilities for retiree pensions and health care have ballooned to $174 billion.

+ The stack of unpaid bills owed venders, service providers and others is more than $10 billion.

“The situation is not sustainable,” the report says, “and public policy must change to fix it” because the current uncertainty creates unnecessary anxiety for families and businesses.

The ultimate threat, the report adds, is a crisis so severe government will be unable to function.

The study, authored by U. of I. professors David Merriman and Richard Dye, concludes that even if the governor and the Legislature agree on a remedial package of spending cuts, new and higher taxes, and policies that grow the economy, it will take a decade of “sustained fiscal discipline” — that’s 10 years — to put Illinois back on sound footing.

So what does “sustained fiscal discipline” look like to Merriman and Dye?

+ Cutting discretionary spending — everything but K-12 education, Medicaid, debt service, pension payments and revenue sharing with local governments — by 2 percent a year.

+ Raising the state income tax from 3.75 to 4.75 percent for individuals and 5.25 to 6.65 percent for corporations.

+ Expanding the revenue base by taxing additional services and eliminating or reducing some tax breaks; the report doesn’t recommended specifics here, but two obvious targets are retirement income and residential real estate.

+ Implementing business-friendly policies that can grow the economy, which could include elements of Rauner’s “turnaround agenda.”

Professor Merriman says the remedy will take political courage and patience:

“It’s going to require sustained changes in policy. Probably it’s not realistic to think that it can be done in under about a decade.”

The next decade begins on Jan. 1, which is less than a week away.

Merriman and Dye have provided state lawmakers with a valuable and sobering assessment of Illinois’ fiscal illness — current and long term — and they’ve prescribed the bitter medicine that could lead to an eventual cure.

It’s must reading and hearty food for thought when legislators face the less-than-festive post-holiday music that awaits them at the Capitol in Springfield next week.

Andy Shaw is President and CEO of the Better Government Association.

Email: ashaw@bettergov.org

Follow Andy Shaw on Twitter: @andyshawbga

Tweets by @andyshawbga