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Blue State Governance: Illinois Needs A Half Year of Taxes Just to Pay Late Bills

June 27, 2017, 2:57 pm

Per the WSJ:

This is what happens when a major American state lets its bills stack up for two years.

Hospitals, doctors and dentists don’t get paid for hundreds of millions of dollars of patient care. Social-service agencies help fewer people. Public universities and the towns that surround them suffer. The state’s bond rating falls to near junk status. People move out.

A standoff in Illinois between Republican Governor Bruce Rauner and Democratic Speaker of the House Michael Madigan over spending and term limits has left Illinois without a budget for two years. State workers and some others are still getting paid because of court orders and other stopgap measures, but bills for many others are piling up.

...Susana Mendoza, the state’s Democratic comptroller, is in charge of doling out limited funds to organizations demanding payment—a job she likens to handing out crumbs to starving children. She predicted unpaid bills will soon top $16 billion. “It is almost hard to say those numbers out loud because they seem so insane, but that’s where we are right now,” she says.

For reference, the entire tax revenue of the state of Illinois is just $32 billion a year, so even if the government were to close tomorrow and fire everyone, it would still take 6 months of taxes to just catch up on the bills.  And you can bet this does not include the most common form of borrowing done by most government agencies -- deferred maintenance.  Pretty much every government agency in the country at every level of government does not fully fund the maintenance of its capital assets (from parks to school buildings) preferring instead to fund the maximum salaries and retirement benefits for the maximum number of headquarters staff.

By the way, you may notice at the budget link that the proposed budget still calls for $6 to $7 billion a year in deficit spending, and does not include any provision for catching up on Illinois's sky-high $130 billion in unfunded retirement benefits (a number that represents a full 4 years of tax revenues).  Illinois is functionally bankrupt, and the only good news is that Illinois favorite son Barack Obama is no longer in the White House to bail them out.

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Category: Government

37 Comments

  1. mesaeconoguy:

    IL is now in “too big to fail” territory. They are literally out of money, and stopping construction projects because of it.

    CA is edging closer as well.

    This is the logical outcome of one-party unchecked leftist rule.

    June 27, 2017, 3:05 pm

  2. mlouis:

    I dont see how one takes an ideological side. They either spent too much or collected too little. Either is logically sound.

    June 27, 2017, 3:32 pm

  3. SamWah:

    Obama doesn't want Illinois to be looking for to tax him, so he's got a house in D.C.

    June 27, 2017, 4:45 pm

  4. bobby_b:

    " . . . the only good news is that Illinois favorite son Barack Obama is no longer in the White House to bail them out."

    Do you have any doubt that there will be a federal bailout of Illinois?

    It will be voted in right after the bailout of California.

    Both will happen. They just need to hold out long enough to get the right President/Congress combination.

    June 27, 2017, 4:57 pm

  5. The_Big_W:

    I'd be fine with the Feds bailing out California and Illinois in exchange for them reverting to Territory status for 20-30 years. Bailing them out while still allowing their poor political choices to have power over us will be a path to civil war...

    June 27, 2017, 5:55 pm

  6. The_Big_W:

    embrace the power of AND

    June 27, 2017, 5:57 pm

  8. esoxlucius:

    I live outside chicago.The reversion to territory status idea is fantastic and I wish it would happen. This state sucks and if not for family, we'd be out.

    June 27, 2017, 8:59 pm

  9. kidmugsy:

    " the only good news is that Illinois favorite son Barack Obama is no longer in the White House to bail them out."

    They may yet regret that he didn't hand out a few pardons. maybe some of the crooks should have rushed to get tried just so that he could pardon them.

    June 28, 2017, 4:05 am

  10. Ruggerbunny:

    "and stopping construction projects because of it."

    And incurring even more costs because of it. One of my projects had a $1.5 million change order for the first shutdown and restart. Now they are shutting it down again 6 months after starting it back up. 125 projects throughout the state. Madness.

    June 28, 2017, 5:36 am

  11. Jason Calley:

    Illinois has only two real choices. First, they could pass some legislation overturning mathematics and logic. Once it becomes law that 2+2=5, it is only a small step to getting their budget balanced. Their other choice is to take what little money they have,and invest it in building a time machine. They then simply send someone back in time to shut down all previous gatherings of the Illinois legislature.

    Unscrewing the inscrutable is hard work. Simply put, they have screwed themselves and there is no painless solution.

    June 28, 2017, 6:38 am

  12. CapitalistRoader:

    Ranking the States by Fiscal Condition 2016 Edition

    It looks like Connecticut, Massachusetts, and New Jersey are in even worse shape than IL.

    http://mercatus.org/sites/default/files/FR16-OVERALL-Map-v8_0.jpg

    June 28, 2017, 7:26 am

  13. joe - the non economist:

    Greece -
    Yet Paul Krugman claims the way out of this mess is to increase deficit spending

    Gotta be correct - he is a nobel prize winning economist

    June 28, 2017, 7:41 am

  14. mesaeconoguy:

    You may want to get out now.

    I am encouraging family to do so, ahead of the imminent tax explosion.

    We’re not talking taxes going up a measly 4 or 5%, you’re looking at easily 10 – 25% increases to start with. Then the real pain begins.

    And IL is already #2 or 3 in the country for several taxes, including property.

    June 28, 2017, 8:45 am

  15. SamWah:

    Hey, folks? Hohwzabout we just stop spending for a couple months? Huh? Huh?

    Naaaaaaaaaaaaaaaaaaaah; that'll NEVER work.

    June 28, 2017, 10:51 am

  16. Jason Calley:

    Krugman is the guy who, after the dotcom bust advised that the best way to fix things was to "have another bubble, maybe one in real estate..."

    June 28, 2017, 11:15 am

  17. joe the economist:

    Krugman is the guy who, after the dotcom bust advised that the best way to fix things was to "have another bubble, maybe one in real estate..."

    He has to be correct - after all - he is a nobel prize winning economist

    June 28, 2017, 12:54 pm

  18. irandom419:

    If only a budget was required before taxes could be collected.

    June 28, 2017, 3:28 pm

  19. Dave Boz:

    For those who think the pols will run out of 'other peoples money' - maybe someday, way off in the future. But for now, there is a great deal more of OPM yet to be taken. And it will be taken. This is a wealthy nation and the blue-governed states are wealthy. In a couple of years, Illinois will have a more compliant governor and the legislature will take another great big bite. If a few more people move out of Illinois it won't hurt the overall project all that much. And yes, there will again be a Democratic congress and president, and there will be national bailouts. "There is a great deal of ruin in a country" is a more useful slogan than the famous Margaret Thatcher dictum. France devotes nearly 60% of its national output to government and it still functions. We have a long way to go.

    June 28, 2017, 7:03 pm

  20. Kurt:

    The height of their stupidity is losing the 'Free Money' from the nationwide lotteries; sell lottery tickets, collect the money for the sale, don't forward the share owed the national group, and last don't pay the winners in your state. Get banned from selling tickets, lose 90 million a year.

    Did Al Capone teach them nothing?

    June 30, 2017, 5:19 pm

  21. jimcraq:

    Back in December, Illinois was 574 days behind paying one of the contracted insurance companies to pay hospitals & doctors for treating employees (some providers are willing to wait, but others come after the patient).

    The state continues to fall behind, and as of today they are 680 days behind: goo.gl/KKbwRe.

    Of course, the insurance coverage is very generous.

    July 1, 2017, 6:19 pm