The elephant in the room

Everyone pretty much knows the State of Illinois is in poor financial shape. It’s been on the news and in newspapers on a regular basis. Layoffs at school systems, the CTA, police departments ... pretty much everywhere you want to look.

What nobody IS talking about is the numbers ... how big the problem really is, and it’s BIG.  Because the state was so short of cash, it borrowed $3.5 billion to meet this year's pension obligations. Next year, debt service (interest due + loan repayment) on that loan will cost $800 million. That’s right - $800 million.  The State of Illinois cannot even make its current obligations and has withheld payments to school systems, hospitals, and transit authorities. How are we going to come up with that? But wait, there’s more ... the State of Illinois will have more than $4 billion in new pension obligations for fiscal 2011.

There’s a big elephant in the room, but everyone is pretending it isn’t there.

It's really basic business ... you have to make sure your expenses don’t exceed your revenues. Revenues collected by the state through taxes, fees, and other sources were clearly insufficient in the long run to pay for all the programs and benefits that your elected officials have created. Most of these programs ran just fine in years of prosperity (2007), but there’s been a disconnect somewhere. When revenues started showing a decline, immediate action was required.

Rather than confront the issue head on, Springfield “tweaked” the system by projecting unrealistic views of expected revenue. On top of that, money was borrowed with full repayment pushed off years into the future, and multibillion-dollar backlogs of unpaid bills are allowed to sit seemingly forever. The overall revenue picture is not going to change much in the next few years, and may never return to the robust days of 2007.

It is almost impossiblefor the state to totally dig its way out of the hole in one year. But playing catch-up is extremely expensive, and it grows increasingly expensive the longer we delay. It's time to put the State of Illinois on a “crash diet.”