July 24, 2006
Section: Local & State
Page: 1C, 2C
Analysis:
Aaron Chambers Register Star
Nearly every state, except
Illinois was one of three states to finish the 2005 budget
year with a deficit — of $3 billion, to be exact — in its central checking
account, a Register Star analysis found.
Illinois said its net assets were minus-$17 billion, making
it one of two states — New Jersey is the other — to report a negative figure in
this category.
Gov. Rod Blagojevich's budget director, John Filan, said fiscal health is better than the numbers make
it look. He said the state is taking in enough money to cover annual bills, but
it's burdened by debt that the Democrat inherited when he took office in
January 2003.
"In terms of day-to-day running the joint, so to speak,
we've taken in more money than we've spent in terms of expenditures," he
said.
The figures reflect the state's long-standing struggle to
control health-care bills and pay down pension debt. Comptroller Dan Hynes, a
Democrat, called them "two major obstacles to getting entirely on sound
fiscal footing."
The state was backed up with $1.4 billion in health-care
bills when it ended its last budget on June 30. And as of late last year, its
five pension systems had a $38.6 billion gap between cash in the bank and what
it would cost to cover retirees and current workers' retirement balances.
Health-care providers serving Medicaid recipients often wait
several months for the state to reimburse them for the costs. And when the
state finally gets around to paying them, it usually covers less than 100
percent of their costs.
"Obviously we're paying our staff, we're paying the
dentists, we're paying all of our expenses, our rent and everything for months
before we get paid," said David Wolle, manager
of Dental Dreams in
Dental Dreams is one of a few dentist's
offices in
"We welcome everyone, and we really try to give
everybody a good experience," Wolle said.
The Register Star based its analysis on data from the
Comprehensive Annual Financial Report published by each state.
The CAFR is the definitive report on state finances. Only
Ralph Martire, executive director
of the Center for Tax and Budget Accountability, an
Martire has pushed for a higher
income tax and a broader sales tax — one that would apply to services as well
as goods — to generate more money for public schools and other spending needs.
"Our revenue system is one of the most poorly designed
in the nation, so a growing economy does not eliminate our deficit
problem," he said. "If revenues don't track economic growth every
year, it gets a little bit worse."
Analysts with credit-rating agencies Standard & Poor's
and Fitch Ratings were pragmatic about the
They said they tend to focus on a state's cash balance and
whether it can pay its bills, rather than get bogged down in numbers that can
be outdated by the time they're published.
Still, they said, the Illinois CAFR is consistent with
longstanding challenges.
"You can't explain all of it away," said John Kenward, an analyst with S&P.
"It's still not an ideal situation. It does signal
things to look out for."
The $3 billion deficit reported in 2005 was more than $500
million larger than the previous year.
Filan, the governor's budget
chief, said the earlier deficit appeared smaller because the state borrowed
$850 million at the end of the year, and the state was not actually slipping
into a deeper fiscal hole.
He said $1.3 billion of that $3 billion hole stemmed from an
unusual accounting regulation that requires Illinois to report the anticipated
cost of certain public-school costs — mostly special education — on top of its
current cost. The S&P and Fitch analysts agreed with Filan.
Filan also argued some of the CAFR's figures reflect routine but random budget movement.
He noted that in fiscal 2004, the general fund got more
money from other accounts than it dispensed to them. And if you don't account
for the red ink that started that year, he said, the general fund would have
finished the year with $1.7 billion.
"I would have been happy to announce at the end of
(fiscal) '04 that we had this huge surplus of $1.7 billion," he said.
"But not only would I have been booed out of the room,
I would have risked people spending it."
Staff writer Aaron Chambers may be reached at 217-782-2959
or achambers@rrstar.com.
Where we got the fiscal info from
The Register Star analyzed data from each state's
Comprehensive Annual Financial Report for fiscal 2005, the latest year for
which the reports are available. The report, commonly known as the CAFR,
represents the definitive look at a state's finances.
The newspaper used three figures from each report: the
end-of-year general fund balance or deficit, the all-government-funds balance
or deficit, and the "governmental activities net assets."
Every state but
On the Web
Visit www.rrstar.com to view the Register Star's complete
analysis. We've also posted audio of
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