Budget Crisis in Illinois

[Randolph Salcido]

Illinois is on the edge to become the first American state to have the highest credit junk. There is the inevitability of a mess financially resulting from the extensive expenditure on services and pensions that were not affordable by the state. The strategy of covering up the disastrous situation by various tricks in the budget makes it messier (Drehle, David, and David Drehle). After a long period of mismanagement of funds in the budget, the state is currently struggling with an average $16 billion of bills that are unpaid. The state is also facing a huge amount of funds that would be owed to the employees of the government on retirement.

The crisis of the budget would force the state to increase the taxes of property to a very high level. The situation only gets worse if the state lawmakers do not compromise and develop a budget (Egan, Matt). In July, the new financial year began without the existence of a budget. For three consecutive years, the state had not been able to pass a budget as per the requirement of the constitution. Despite the budget crisis faced by the state currently, the issue was instigated by the political forces since 1980 involving both political parties. If you want to read more narrowly about taxes in USA you can go to the http://wolfsden.org/ there's many articles on economics for non economists.

The biggest evidence is mainly characterized by the pension crisis. Instead of dealing with the issue the state continued to issue rewards to the powerful state unions with unstinting benefits. The pension problem increased over time and has led to the state having liabilities averaging to $251 billion. In context, the estimation is similar to the market values of a combined Caterpillar, Boeing, Allstate and United Continental market values (Parten, Hallie). The huge liabilities in pensions is due to the tendency of the leaders to defer making objective decisions. The fiscal problems faced in Illinois are additionally attributed to the underestimation of spending needs and the delay in the payment of bills.

The current budget crisis in the state is caused by weaknesses in management and governance. The lawmakers of the state made promises for the increase in benefits to retired police, teachers, firefighters and other employees of the government (Kramer, David 33). This has been driven by the leaders burying their heads in the sand assuming the state was going to perform well with no rational reason for assuming so. The politicians have always known the state is in financial and was bound to end up in financial woes but have consistently procrastinated facing the challenges. 

Process of Research

Research is primarily based on a literature review to make analysis reports from publications by media such as CNN and fiscal policy journals. Budgetary allocation policies and their impacts in the financial woes of the state and the consequent impact on the state’s financial performance. The research also assessed the vision 20/20 policy reform plan. Analysis of the vision plan gave insight on the assumed causes of the financial woes and strategies laid down to manage the challenges the state is facing currently. The most resourceful material was a report by Dabrowski and Klingner (2015) on illinoispolicy.org which examines the history of the fiscal crisis in Illinois (Dabrowski, Ted, and John Klingner).

Thoughts by policymakers in the state such as the “Communications at the Illinois Policy Institute,” to get an introspective understanding of the policies that landed the state in the financial mess and their take on budgetary allocations in the state. The research primary focus was to establish the cause of the financial woes in Illinois (Parten, Hallie). This lead to the foundation of the research paper on budgetary implications that persistently contribute to the state delving deeper in financial crises. This rage form passing of inefficiently funded budget which makes it difficult for the state to make any progress in redeeming themselves. This the $1.11 billion deficient in the State’s pension scheme.

The state unreasonably made $861 million cut in the K-12 education budgetary allocations. Cutting on the expenditure directed to the education of the children simply goes to demonstrate the flawed nature of policymaking in the state (Dabrowski, Ted, and John Klingner). The districts are in a tussle to source funds for their communities while at the same time trying to manage the gap between the “haves” and the “have-nots”. The districts that are endowed with resources are working to make sure they are not siphoned by communities that are competing aggressively. The legislature put forward to mage the distribution of resources was also evaluated to identify mechanisms set up to manage such scenarios within the state

Findings

Emerging Issues: The fiscal challenges Illinois is facing include the high budgetary cuts in the educational programs in the State. The budgetary allocations to tertiary educational institutions dropped by 67.8% accounting for only a third of the Illinois Board of Higher Education (IBHE). Despite Governor Bruce Rauner reaffirming his commitment to remedy the K-12 program the program and lead to only a 1.1% drop in the program funding, there yet to be any efforts from the State governance towards university allocations (Parten, Hallie). The cut in budgetary allocations has led to laying of non-faculty employees, an extortive hike on the tuition, few admission and a dip in the academic course offerings (Drehle, David, and David Drehle). The minority-majority African American students are the most affected by this changes due to difficulty in raising the hiked tuition fee.

Majority of tertiary institutions such as Chicago State University CSU rely mainly on state funding for nearly two-thirds of the university’s budgets. The people are drawn to make an impressive inclination in the management of the peoples facilitates.  The people are also required to make an increased contribution towards the management of institutions budgets. Introduction of a Monetary Assistance Program (MAP) has made it possible for the organization continues admitting low-income students despite the low state allocations (Kramer, David 33). Between 2000 and 2015 in there has been a 41% registered drop in the admissions in universities. This is significantly high compared to other budgetary service allocation.

The lower income earners have always been sidelined in the tertiary institution education in the community and more so with the recent budgetary allocations cuts. The current policies have resulted to further alienation of black adults from tertiary education (Kramer, David 33). Danielle who works with the CTBA in argues that the community is in a better position to redeem themselves from the fiscal woes. Black adults who have a degree have a higher possibility of getting employment compared to their counterparts who do not. Cutting down the tertiary education allocations more than another service in the state has only escalated the financial woes rather than help in remedying them.

The youth between ages 18 and 24 are out of school without jobs which is a resource which is yet to be exploited with a registered 600,000 job opening in industries such as hoteliers. However, failure to tap and develop such potential has been regarded as litigators only “kicking the can down the road” which is bound to result in more challenges (Kramer, David 33). Relying on the established adults to steer the economy is a minimalistic approach to solving the problem. This has held the state in the stale situation since they are more interested in building their reserves economically rather than reinvest their wealth to grow their financial potency. Investing in the younger generations equitably as an alternative would result in a surge in the economic growth over a short period.

Lack of a balanced budget: Illinois has not had a balanced budget since 2001. Political ignorance on the encroaching financial challenges since then have to lead the state to an inventible position, issues which have consistently been rolled over have to be addressed (Kramer, David 33). Misplaces priorities in budgetary allocations have plagued the state for almost two decades. Shifting the budgetary allocations as discussed with education and pushing off unpaid balances such as the retirement benefits have consistently lead the community to financial shambles. Ridiculous fiscal policies such as the 67% hike in income tax and 47& on corporate income tax only wrecked the economy rather than help is rectifying the challenges the community has been facing. The people are also inclined towards the development of 

Further Research

The state has no significant growth in development. The state suffered a collapse of the manufacturing industries between 2011 and 2013. As a consequence, the employment rate dropped with up to 45% in 2014. This is only three years after the enactment of the tax hikes. The money generated from the hikes only went to settle the unpaid bills in pension and other expenditures. Rather than improvise ways of generating income, the money from the tax hikes serviced the state’s debt. The tax hikes are responsible for the subsequent collapse of the industries. The constitutional provisions which necessitate the ascent and approval of budgets which have been fully funded have time and again been violated. The constitutional provisions also required that the budget be balanced. The consistent violation of this standards has contributed immensely to the fiscal woes of Illinois.

The state is tied up since they can no longer borrow with the poor credit rating as a result of the unplanned borrowing of Quinn’s government. In 2007 and 2008, the government borrowed $7 billion which went into funding the pension scheme entirely (Egan, Matt). This only burdened the budgetary payables because the loans were not accompanied by suitable reforms to control the budgetary expenditure. After realizing borrowing was not an option, the exploitative tax hikes were implemented making it difficult for any financial growth.

Fiscal woes have persistently grown despite an incredible $13 billion since 2000. This would account for 3.1% growth annually. Despite the remarkable growth, the state has the poorest performance economic wise due to a heavy expenditure (Parten, Hallie). The unpaid burdens in pension, healthcare insurance, civil servants’ insurance and the state's debt have held back the states economic recovery. The political incessant resistance to the enactment of reforms has greatly contributed to the budgetary constraints. For a real change in the economic performance to occur, the political class has to enact reforms in the state employee insurance, retirement benefits policy and the priorities in budgetary allocation to education and development of the youth.