Yesterday, November 14, 2022, Illinois Governor JB Pritzker issued a press release touting the findings of the state's annual Illinois Economic and Fiscal Policy Report (the Economic Report). In the release, he claimed:
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Illinois is in its best fiscal shape in decades
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The state's projected long-term budgetary deficits will be nearly eliminated
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Extra money will be put into the pension systems, and $200 million will be added to the rainy-day fund
This press release and the Economic and Fiscal Policy Report are misleading because it omits material facts about the state's finances, such as:
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Illinois is more than $200 billion in debt.
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Illinois' long-term deficits will continue because the state will continue to short-change its pension systems by billions of dollars.
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The money being added to the rainy-day fund exists because even with the extra money, the state is not paying the minimum on the pension system's credit cards.
The state's last audited financial report indicated Illinois had a negative unrestricted net position of $223 billion, representing the amount of money Illinois needed to pay the non-capital debt it had accumulated to date. In 2009 this amount was $45 billion, so unless, over the last year, the state has paid off its debt, including unfunded pension liabilities, to the tune of $178 billion, it doesn't seem to be in the best fiscal shape in decades.
The Economic Report indicates the state will contribute $5.9 billion to the Teachers' Retirement System (TRS). According to the TRS actuaries, to adequately fund the system $9.1 billion should be contributed. Therefore, the system will be short-changed by $3.2 billion. The actuaries say the total contribution deficiency of all of the state's pension systems is $4.1 billion. The proper funding of these systems would eat up all the $3.5 billion surplus reported in the Economic Report. Without consideration of the pension contribution deficiencies, this report also indicates projected deficits from 2025 to 2028. This seems contrary to the Governor's claim that long-term budgetary deficits will be nearly eliminated.
The Economic Report indicates, "Following an additional $300 million contributed to the systems above certified amounts in the fiscal year 2022, the budget set aside an additional $200 million for payments to the State's pension systems in excess of the statutorily required contributions for the fiscal year 2023." As indicated above, these statutorily required contributions woefully underfunded the pension system. While contributing the additional $200 million is good, it only represents less than 5% of the additional money needed to fund the system adequately. The $1.3 billion that will be put into the rainy-day fund would not exist if the pensions were properly funded.
Here is an explanation of the Governor's claims at a personal level.
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Illinois is in its best fiscal shape in decades.
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This is akin to a person saying they are in good financial shape if you do not look at the $200,000 that has been accumulated on their credit cards.
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The report projected the state's long-term budgetary deficits will be nearly eliminated.
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This is like a person touting they are not going to spend more money than they take in, but they are only going to pay $1,100 a month to their credit card companies, while the minimum payments are $1,500.
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Extra money will be put into the pension systems and added to the rainy-day fund.
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This is similar to someone flaunting they are going to put $1,300 into their savings while they are paying $400 a month less than their credit card minimum payments.
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