State Budget Director Outlines $4.8 Billion Deficit Facing Illinois

SPRINGFIELD -- State Budget Director John Filan today met with reporters in both Chicago and Springfield to outline the state's $4.8 billion deficit facing Illinois for Fiscal Years (FY) 2003 and 2004. He presented a specific and detailed analysis of the deficit, which revealed how years of unsound fiscal decisions led to this crisis.

Filan, who started his new position February 1st after being appointed by Governor Rod R. Blagojevich last month, told reporters, "Illinois is facing its worst fiscal crisis ever," and added, "this monumental fiscal problem is real and must be dealt with in order to turn our state's economic ship around."

He detailed how overly optimistic revenue projections coupled with falling revenues contributed to the State's deficit. However, he also noted that those steering the State's budget made poor fiscal decisions that added to the deficit—in spite of knowing the State had been operating at a deficit for years and of the slow-down in the economy.

Filan was joined in Chicago by John Rogers, Chairman and CEO of Ariel Capital Management, and in Springfield by David Chicoine, Vice President for Economic Development and Corporate Relations at the University of Illinois. Both are members of the Governor's Council of Economic Advisors.

While "everything is on the table" for review to identify cuts in wasteful state spending, Filan said Governor Blagojevich will not cut essential services to the people of Illinois such as health care, education or public protection. Additionally, he will not place an additional burden on taxpayers by raising the sales or income tax to erase the deficit.

"For too long, working families throughout Illinois have had to bear the financial burden of making up for the poor fiscal practices of the State. Those days are coming to an end," he said. Filan then presented a detailed analysis of the State's budget deficit numbers, which included:

• A brief summary of the State's overall budget sources, outside of the general revenue fund.

• A comparison of revenues vs. expenditures for FYs 1999 through 2003, which reveals that Illinois has actually been operating with a deficit during each of these years—even in 1999, when the country was still in the midst of economic prosperity.

• An analysis on how the State's continued practice of borrowing from the State's pension fund has forced the State to greatly increase its debt. This comes on the heals of legislation that will force the state to further increase its contribution to the Pension fund—to the tune of $1 billion by 2007.

• A chart that describes how the state's debt has increased due to continued borrowing through the years 2000 - 2003, which represents a 41.3% growth in the state's debt service. The amount of debt owed by the state grew during this time from $690 million to $974 million.

• A chart outlining how the State "front-loaded" it's repayment of debt owed due to borrowing from it's General Obligation Bonds. Instead of spreading the majority of this debt over several years—which would save the state millions of dollars—the previous administration decided to repay this debt almost immediately. By doing so, this will force the State to make substantial payments over the next couple of years—while in the middle of a $4.8 billion deficit.

• Another chart that details how the State's deficit didn't begin this Fiscal Year, but, in fact, several years ago. In 2001, the State had a deficit of $391 million. In 2002, a deficit of $870 million. This led to the 2003 deficit of $1.2 billion and 2004's $3.6 billion deficit (the 2003 and 2004 deficits makeup the $4.8 billion.).

• Filan then outlined budget summaries, additional spending pressures, revenue projections and budget comparisons (with other State and independent organizations) for FY 2003 and 2004. Again, expenditures for both of these years exceeded revenues and additional spending pressures (increases in state-funded programs that were above and beyond what they were originally budgeted at) further added to the growing deficit.

Filan reiterated that he and the Governor's budget team are in the process of reviewing all State agency programs, grants, projects and positions to determine where wasteful spending may be. He would not comment yet on the specifics of the upcoming budget process until this top to bottom review is complete and recommendations are sent to the Governor.