People can’t wise up if they don’t know. There is no better evidence of the failure of Illinois Republicans than our state’s fiscal condition — and the fact that too few people know just how bad things really how. Here is Mark Glennon writing at Crain’s:
Politicians and the media routinely describe state and local budgets in Illinois as balanced, including Crain’s in a recent editorial about Chicago’s. That’s badly misleading. Governments gush red ink while claiming balanced or nearly balanced budgets. The public should understand that most budgets in Illinois aren’t remotely close to balanced under any common-sense approach.
In the phony world of government budget accounting, routine gimmicks include counting borrowed money, asset sales and raids on segregated funds as income. Most important for Illinois and its municipalities, budgets entirely ignore growth in unfunded pension liabilities, which are the primary source of our fiscal crisis.
Consider the state and its five pensions over the last eight years, from 2009 through 2016. While that captured the post-recession bull stock market that helped pensions, unfunded liabilities grew from $77.8 billion to $129.8 billion. That’s $6.5 billion per year, none of which showed up in any budget, yet all those budgets supposedly were balanced. And that’s using official numbers that badly understate pension liabilities by using bogus assumptions, especially on expected rates of return.
Or look more comprehensively by back-testing the entire budgets against audited, historical financial statements. Those statements also have their own share of gimmicks biased toward optimism, but consider the deterioration they nevertheless show in the state’s net position. “Net position” is the government accounting equivalent of “net worth.” Over those eight years, Illinois’ net position went from negative $20 billion to negative $126.7 billion—a staggering loss of $12.5 billion per year—while the state’s budgets were “balanced.”
For a little perspective, that’s about 35 percent of the state’s entire new budget. Is there a corporation anywhere that sustained average losses of 35 percent of its top-line income for eight years? If there is and its officers routinely claimed to have balanced budgets, are they in jail?
Read more: Crain’s
Image credit: Illinois Policy Institute.