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  WINDY CITY TIMES

Open To Thinking: It's Your Money, Illinois
A recurring column
by Nick Patricca
2014-09-03

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The Tea Party would have one believe that fiscal responsibility in government can be understood in the same ways we understand our own personal budgets. Unfortunately, this is not the case.

W.C. Fields, in a famous comedy skit, tries to teach his loutish, spendthrift nephews the basics of economics: more money coming in than going out = happiness; more money going out than coming in = misery. This rule of a Fieldsian 101 econ class does not seem to apply to our Federal government for many reasons, primarily because it has the authority to print money. ( I'll tackle the Federal budget in a future column. ) The Fieldsian rule also does not seem to apply to our state and local governments which do not have this power to print money.

So, as our beloved Daily News columnist Mike Royko used to say: 'OK, boys and girls, time for a civics lesson.'

The constitution of the state of Illinois requires us to have a 'balanced budget.' Again, the meaning of this phrase seems clear enough. You and I know what it means to balance our household budget. Forget that meaning: it won't help you to understand state of Illinois budgeting processes.

ARTICLE VIII [FINANCE], Section 2 [State Finance], sub-section ( a ) obligates the Governor to prepare and submit to the state legislature a budget in which: "Proposed expenditures shall not exceed funds estimated to be available for the fiscal year as shown in the budget." Sub-section ( b ) states: "The General Assembly by law shall make appropriations for all expenditures of public funds by the State. Appropriations for a fiscal year shall not exceed funds estimated by the General Assembly to be available during that year."

Corey Eucalitto, who runs the web site State Budget Solutions ( SBS ), assigns a total debt of over $321 billion to the state of Illinois which comes to a per person debt of almost $25,000. There are other sites which estimate the per person debt at over $40,000. SBS lists c. $255 billion for unfunded pensions; $33 billion for unfunded debts and a similar amount for other unfunded liabilities. In December of 2013, Judy Baar Topinka, the state of Illinois comptroller, issued a report indicating total state bond debt at $127 billion with $1.5 billion interest for debt service.

The consensus of the experts: the outstanding debts of the state of Illinois are the fourth worst in the nation; the pension systems debts are the worst in the nation. The rating agencies keep lowering our credit rating.

So, how is it that we can have a constitution that requires a balanced budget and at the same time have such huge outstanding debts?

I read Judy Baar Topinka's online explanation of the three 'definitions' of a balanced budget. I was not enlightened. It seems to me, for example, that, if the governor does not ask for and/or the legislature does not make an appropriation for an expenditure, then that expense does not show up in the budget. Thus, if the debt payment is not in the budget, then it doesn't exist: a classic case of the ostrich with its head in the hole.

Since the state of Illinois cannot print money to meet its debt obligations, the only way it can generate income is through taxation. Because it is an election year, the state legislature refused to extend the 'temporary' hike of the state income tax from 3.75 % to 5%—making the hole in our budget even bigger.

Rich Miller ( Crain's Chicago Business, Aug. 4 2014 ) suggests it's time for the state to tax retirement income. According to Miller, a state tax on retirement income over $50,000 a year would generate $1.5 billion in-much needed revenues. Such a tax would appropriately fall hardest on those who receive two or more state pensions.

No one likes to pay taxes, especially when we do not trust the ways in which our taxes are spent. But, in this case, perceptions of taxation are greater than the realities. Miller cites a poll showing that the vast majority of Illinois citizens believe their retirement income is already taxed by the state and that the tax rate is too high. In my own informal survey of my friends, 100% believe this non-fact.

Fiscal responsibility in government?! An oxymoron!?

It's time for our gubernatorial candidates to get serious, to help us to understand our state of Illinois finances.

It's time to abandon the fiction of a balanced budget in favor of accurate transparent accounting of actual debts and revenues.

© nicholas.patricca@gmail.com .

Nick Patricca is professor emeritus at Loyola University Chicago, president of Chicago Network and playwright emeritus at Victory Gardens Theater.


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