GOMB Releases Five-Year Forecast Showing Significant Long-Term Challenges Without Fair Tax

Statement

Despite making substantial progress on Illinois' fiscal challenges this year, Illinois will continue to face significant financial challenges until it finds a long-term solution to its structural deficit, the annual Economic and Fiscal Policy Report from the Governor's Office of Management and Budget concludes.

The bipartisan, $40.1 billion fiscal year 2020 budget enacted by the Governor and the Legislature - the state's first truly balanced budget in years - begins to pay down Illinois' debt and sets Illinois on a path to return the state to fiscal stability, while making key investments in long-term programs. In fact, the state's projected surplus has increased by $30 million since the budget was enacted, and projected deficits into the coming years are improved from the past administration. But the state must continue to grapple with a multi-billion-dollar structural deficit in nearly all of the out years, which would further exacerbate the state's bill backlog and payment delays. Because of the state's unfunded pension obligations, the deficit is projected to grow faster than the economy, even in good years, diverting revenues away from critical investments in areas such as an educated workforce and strong infrastructure.

As a result, the Governor's Office of Management and Budget is projecting sizeable deficits in the General Funds budget for fiscal years 2021 through 2025. Without changes to the current trajectory of the state's finances, year-end accounts payable will continue to grow year by year, the report states.

"Without structural changes like the Fair Tax, Illinois will continue to struggle to make ends meet, pay our bills on time and deliver vital services, like public education and public safety," said Governor JB Pritzker. "While years of mismanagement has created these issues, we have a strong path forward and solution with the Fair Tax, which will ask the wealthiest 3 percent to pay more while 97 percent of Illinoisans will pay the same or less. Thanks to the bipartisan efforts of the General Assembly, we've already made fiscal progress, and I'm committed not only to stabilizing our budget but also making sure that Illinois grows and creates an economy that works for everyone."

There are few alternatives if the Fair Tax amendment is not enacted, according to the report. Illinois would need to consider dramatic budget cuts of approximately 15 percent to many essential services such as education funding and public safety, or the state would need to raise taxes on all households - not just the wealthiest Illinoisans - by 20 percent under the existing flat tax.

Since taking office in January 2019, Governor Pritzker has taken several steps to control state spending and has ordered agency directors to continue to responsibly manage the limited resources of state government by proposing reductions in their maintenance operations funding for the coming fiscal year, identifying significant efficiency and savings ideas, eliminating or consolidating duplicative programs, reducing funding for underutilized or inefficient services and making improvements in service delivery that streamlines costs.

The Governor's Office of Management and Budget (GOMB) is required to annually submit an Economic and Fiscal Policy Report to the General Assembly outlining the long-term economic and fiscal policy objectives of the state, along with the economic and fiscal policy intentions for the upcoming fiscal year and for the subsequent four fiscal years.

The reports are available to the public online and can be found here:
https://www2.illinois.gov/sites/budget/Pages/PolicyReports.aspx

Source