Wirepoints’ founder Mark Glennon explains the latest “snow job in August” regarding Illinois’ finances:
Here’s a major lesson on how misinformation about our financial crisis is spread.
“Illinois cut its deficit in half in fiscal year 2018, annual CAFR shows.” That’s the headline on the Illinois comptroller’s press release from Aug. 29 about the Comprehensive Annual Financial Report for the state’s fiscal year that ended in June 2018. Many news stories across the state repeated similar headlines.
But what did the CAFR really show? Brace yourself: a record-shattering loss of $47 billion. For some perspective, that’s some $7 billion more than the state’s entire current budget. The $47 billion is recorded in government accounting as a drop in net position, roughly equivalent to a net loss in private-sector accounting. It has been plummeting in Illinois since 2001, when net position was near zero. It’s negative $184 billion today.
No. While that loss didn’t occur in one year, the accounting change properly exposed a huge and growing liability that has been all but ignored before. The present value of the state’s OPEB liability is now $55 billion, according to the CAFR. Those obligations are constitutionally protected against reduction in Illinois, just like pensions. Unlike pensions, however, the liability is entirely unfunded.
The Governmental Accounting Standards Board basically admitted that OPEBs weren’t being fairly reported, so it issued a new standard requiring better disclosure, which is now fully in effect. The state’s true condition is indeed $47 billion worse than most Illinoisans were told a year ago.
Read more: Crain’s Chicago Business
Image credit: Crain’s/Getty Images.