PI Original Adam Doster Thursday October 7th, 2010, 2:33pm

Welcome To Illinois: Home Of The Deadbeats

Given Illinois state government's inability to pay its bills, it's no wonder that voter distrust of state government is on the rise, as a new survey finds. But the survey revealed a few hopeful signs, too.

State Comptroller Dan Hynes' latest quarterly report (PDF) detailing Illinois' finances is a sobering, even frightening, document. It states in clear and unequivocal terms that Illinois is a deadbeat state, unable to make good on its most basic obligations.

According to his calculations, Illinois rolled over an unfathomable $6.4 billion in appropriations to schools, municipalities, and social service providers from FY 2010 to FY 2011, which began in July. The state has made a sizable dent in that backlog over the past three months, whittling it down to roughly $2 billion, but will need get lucky if it wants to erase the load entirely by an (extended) December 31 deadline, as Gov. Pat Quinn has promised.

First, $1.2 billion in money the state is getting from the sale of expected tobacco-settlement funds must come through. Then, more money must be transferred (or "borrowed") from special funds. (While $1 billion was budgeted, Hynes says only $263 million has been shifted around thus far.) Finally, the state needs to recoup at least $250 million from its tax amnesty plan, which doesn't seem likely, according to the comptroller's early estimates. If any of those three revenue enhancements come up short, state vendors might be forced to go to court in order to collect money owed.

It's not just a few vendors, mind you, who are waiting anxiously at their mailboxes. A new report (PDF) released today by the Urban Institute shows that 72 percent of non-profit organizations in Illinois reported delays in state reimbursements last year. Almost two-thirds are freezing or cutting salaries as a result. Over half have laid off staff. That makes Illinois the worst state in the nation for late payments to human service providers, which offer vital services to the state's most vulnerable citizens.

Worse still, the General Assembly has already started accumulating more debt in the new fiscal year. Hynes pegs the number at $3.5 billion just this quarter. That figure could grow to $8 billion by the end of June 2011, not including the $3.7 billion owed for the state's annual pension contribution. Because revenues are still very low, up just $3 million through September, making payments next year is going to be just as difficult as it was this year.  More from Hynes:

"The structural imbalance in the current budget, combined with higher debt service costs and the loss of federal stimulus revenues, creates the very real possibility that the Governor and General assembly will face a working deficit of $15 billion or more when the fiscal year 2012 budget is crafted early next year."

Election year politics isn't helping ease the burden. In just the past two weeks, Gov. Quinn has funded two new programs, an extension of Put Illinois To Work and a Neighborhood Recovery Initiative, using resources from the $3.46 billion pot dumped into his lap by the General Assembly in May. As worthy of support as these programs may be (and both look to be very worthy), that money was intended to plug holes in the state's operating budget. In other words, every dollar sent to the recovery initiative means another dollar that won't funnel into the Department of Human Services, which was shorted $1.5 billion and covers established programs in those very same communities targeted.

GOP gubernatorial candidate Bill Brady, meanwhile, has offered no coherent plan whatsoever to balance the budget. The most we can assume is that the Republican wants to wring out some cash from already-withered state agencies, give away some of that revenue in the way of tax cuts for the wealthy, and then pray for some financial miracle to cover the existing obligations.

Perhaps it's not surprising that Illinoisans can't stand Springfield. A new Pew survey of five of the nation's largest and most fiscally dysfunctional states, including Illinois, shows that voters "harbor a deep distrust of state government." Eighty-six percent of Illinois respondents said the state needs to change its budgeting practices immediately.

Ultimately, public frustration with the General Assembly is bad for progressives who think the state plays a helpful role in people's lives. Harold Pollack, writing in The New Republic earlier this year, made the point eloquently. "The embarrassing budget shenanigans that worsen our structural deficit," he said, "also undermine the political legitimacy of the very policies we now need to fix the budget mess."

The Pew survey does underscore a point that's been obvious for a while: voters want to protect state services but don't want to pick up the bill. Seventy-three percent of those polled said they want to balance the budget by cutting spending. Yet 88 percent said they are "very or somewhat concerned" about the effects those cuts would have. Here's that graph:

For those who want to see the state dig itself out of debt by enacting comprehensive tax reform, the Pew survey includes some heartening data. While few want to raise taxes, a majority of those surveyed said they would tolerate a tax increase to protect K-12 education, health care, and human services from cuts. In Illinois, those expenditures make up roughly 85 percent of the General Revenue Fund. Voters also preferred targeted tax increases. The tax plan that the State Senate passed in 2009 (HB 174) would have done just that.

Now we just need some lawmakers willing to sell it.

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