OCPA: Lessons from Big-Spending Illinois

By OCPA President Jonathan Small

 

Oklahoma just completed, with much gnashing of teeth and moaning, a budget year with a shortfall of nearly $1 billion. Imagine, though, facing deficits that total $30 billion or more – and that’s before you even start discussing a $250 billion pension debt.

Such is the case with Illinois, where lawmakers haven’t even managed to pass a budget since 2015, where they have failed to balance the state budget every year since 2001, and where annual tax increases have failed miserably to keep the state afloat.

Why not? Illinois has made the same fatal mistake we saw in Oklahoma this year. They keep raising revenue while refusing to implement most cost-saving reforms.

The Illinois fiscal picture is the stuff of budgetary nightmares. Total state pension debt has been estimated by the Illinois Policy Institute at $250 billion. There are currently more than $14 billion in unpaid state bills, with a deficit for the fiscal year now ending of $6.2 billion. Next year’s deficit is projected to top $7.7 billion.

Illinois is in such bad shape that Moody’s Investors Service recently downgraded the state government’s credit rating to Baaa3, just one notch above the rating for junk bonds.

All this despite a record tax increase in 2011. The four-year income tax boost was supposed to bring in $30 billion by raising the personal income tax rate from 3 to 5 percent. It actually yielded $32 billion, but the state’s bill backlog still stood at $6.6 billion and the pension debt increased by another $25 billion.

What happened? Lawmakers simply refused to stop spending. That sent a pretty persuasive message to Illinois residents. The message was, “Don’t let the door hit you on the way out.”

Between 2013 and 2016, 78,000 people abandoned Illinois. In 2016, another 114,000 bailed out. Chicago is the only major American city to lose population in recent years.

Illinois did do one thing right. They implemented audits of state Medicaid enrollment, a move OCPA recommended for Oklahoma this year.

As you might expect from Illinois, they blindly expanded Medicaid services, only to find immediately they had to cut services to their aged, blind, and disabled populations and their most vulnerable. In Illinois, expanding Medicaid has resulted in the deaths of more than 700 people who were on the waiting lists for those with severe disabilities and severely debilitating diseases.

When they instituted file checks, they found 34 percent contained errors, revealing that some 600,000 people were receiving benefits they were not eligible for – a savings of $430 million.

Of course, that was the proverbial drop in the bucket for a state as badly managed as Illinois. The lesson is clear: Perpetual revenue increases without disciplined, reformed spending reductions is the road to bankruptcy and depopulation.

Hopefully, our lawmakers will study the Illinois experience.


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