The latest report from the Center for Tax and Budget
Accountability shows that spending on four core state services in the
governor’s proposed Fiscal Year 2026 budget will be 9.1% less in real dollars
than it was way back in Fiscal Year 2000.
Those four core services are education, health care,
human services and public safety.
The CTBA has been tracking this number for years. And
although they didn’t mention it in their latest report, that 9.1% figure is
actually a remarkable improvement. It’s also food for thought whenever you see
claims that Illinois’ spending is at record levels. For core services, at
least, we’re still far below where we were 25 years ago.
But that gap has closed a lot.
The Fiscal Year 2014 state budget’s core service
expenditures (before the two-plus year state budget impasse) were 285 less than
in FY2000, according to CTBA at the time.
So, the “structural deficit,” as CTBA calls this
comparison to 2000, has fallen by more than two-thirds in real dollars since
2014.
Fiscal Year 2022 ran from July 1, 2021, through June 30,
2022. CTBA reported back then that expenditures on those four core services
were 22.3% below that of FY2000, after adjusting for inflation. That means the
structural deficit will fall by 59 % in just four years, if the CTBA
predictions and the budget hold up through next June 30.
Using federal pandemic money to pay off billions in state
debt was a huge help.
And the state pension funding problem, which has
historically crowded out necessary spending, has stabilized. Yes, the payments
grow every year, but they’ve stayed somewhere around 20% of the total budget
for several years.
Pension payments in the FY16 budget were $6.7 billion.
They’re budgeted this coming year at $10.6 billion. After inflation is
calculated over that 10 years, that’s about a $1.75 billion increase in today’s
dollars (about $175 million a year), and it will be lower than that by the end
of June 2026 when the fiscal year expires.
Speaking of pensions, the governor has proposed spending
an additional $78 million in the coming fiscal year to make sure the state
doesn’t have a “safe harbor” problem with Tier Two retirees.
The state passed what’s called a Tier Two pension plan
because the original plan – which had been grossly underfunded and overpromised
for decades – was simply costing too much to be affordable. The plan reduced
pension benefits in several ways for new hires.
However, under federal law, state pensions have to be at
least equal to Social Security benefits. And when the state lowered benefits,
at least some folks won’t receive that bare minimum when they retire.
The penalty for not meeting the minimum requirement is
severe. All employees would have to be put into the Social Security system and
the state would have to give those workers retroactive Social Security benefits
for up to 10 years, which could be billions and billions of dollars.
In addition, new hires wouldn’t be contributing into the
pension funds, which would deprive those systems of revenue.
The teachers’ unions, however, say they want to go well
beyond that minimum requirement. Taking care of the safe harbor issue would
benefit mainly high-wage employees like principals. They want more money put
into the system to increase benefits to encourage more people to become
teachers in the first place and keep them on the job.
The Illinois Federation of Teachers released a statement
last month saying the governor’s proposal was just “the beginning of a broader
repair to a grossly unfair pension that hobbles Illinois’ ability to recruit
and retain educators. Our members will continue to press for a proper and full
legislative repair to Tier Two pensions this session.” The Illinois Education
Association’s statement last month said it wants “a fix to Tier Two that allows
all those who serve students in Illinois an equitable retirement and that
entices people to stay in the profession.”
That proposal would cost a huge amount of money. A study
done for the Commission on Government Forecasting and Accountability found that
the union proposal would cost the state $1.13 billion extra this coming fiscal
year.
The governor has never seemed enthusiastic about that
plan, hence his $78 million proposal.
This article appears in The state of the state.
