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State of Illinois Budget State of Illinois Budget
An Uphill Battle
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011$19.00
$21.00
$23.00
$25.00
$27.00
$29.00
$19.90
$21.30
$22.70$23.40
$22.30
$23.50
$23.80
$24.50
$26.00
$27.50
$29.60
$26.00
$26.61
State Spending
In Billions
Give Illinois a nickel, it’ll spend a dime…
Uncontrolled SpendingUncontrolled Spending
FY2003 spending has increased $4.3 billion or 19%!
Borrowing to SpendBorrowing to Spend
Thompson, $300
Edgar $3,672
Ryan $1,000
Blagojevich $8,815
Quinn $3,350
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
In m
illi
on
s
Short-Term Cash BorrowingThompson to Quinn
1983-2002 Since 2003
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011$0.00
$5.00
$10.00
$15.00
$20.00
$25.00
$30.00
$5.27 $5.46
$5.89
$6.60
$7.63
$18.81$19.56 $19.89 $20.25 $19.93 $19.41
$18.40
$24.50
$26.70
General Obligation Bond Debt: Mortgaging the Fu-ture
In Billions
Worst Funded Pension System in the Nation
Worst Funded Pension System in the Nation
UNFUNDED PENSION LIABILITIES
($90)
($80)
($70)
($60)
($50)
($40)
($30)
($20)
($10)
$0
FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 Est.
Billio
ns
$10 B Pension Bonds
Unpaid BillsUnpaid Bills
-$7,000
-$6,000
-$5,000
-$4,000
-$3,000
-$2,000
-$1,000
$0
$1,000
FY2000 FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011
$777
$300
-$1,220-$1,094
-$410 -$474-$291
-$135
-$834
-$3,674
-$6,475 -$6,475
Mil
lio
ns
Governors Discretionary13%
Public Safety5%
Government Services5%
Economic Development & Infrastructure
0.5%
Environmental & Business Regulation
0.2%
Education35%
Human Services41%
Fiscal Year 2011 Appropriations by Major Purpose GRFGRF Total: $26.014 Billion
Sales Tax 23%
Corporate Income Tax6%
Individual Income Tax31%
Public Utility Tax4%
Federal Aid23%
Other Sources7%
Lottery/Riverboat4%
Other Transfers2%
Fiscal Year 2011 Revenue by SourcesPercentage of Total
General Funds: $27.655 Billion
Illinois Citizens Enrolled in Medicaid
1.0
1.5
2.0
2.5
3.0
FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11
Mill
ion
s
There are 2.8 million Illinoisans on Medicaid - that's 1 of every 5 people.
1.2 million people have been added to the program since Democrats took
control, an increase of 75%
Exploding Medicaid GrowthExploding Medicaid Growth
Covers 2.8 million Illinoisans
Covers 1 of every 5 Illinoisans
Covers 1 of every 2 births in Illinois
Covers 2 of every 3 nursing home residents
in Illinois
Covers 1 of every 3 children in Illinois
Medicaid is the Largest Insurer in the State
Medicaid is the Largest Insurer in the State
Medicaid Costs
$6.0
$7.0
$8.0
$9.0
$10.0
$11.0
FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11
Bil
lio
ns
Medicaid costs have escalatedat an average rate of 8%.
At this rate, the program willdouble every 9 years .
More People and Higher CostsMore People and Higher Costs
Borrowed for Pensions$3.5 B
Federal Stimulus $1.5 B
Fund Sweeps, $360 MBond Refinancing, $500 M
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
In M
illi
on
s
Total = $5.8 Billion
FY10 One Time Revenues
Replacement of One-time Revenues, $5.8 B
Pensions, $1.5 B
Medicaid Increase, $500 M
Unpaid Bills, $6 B
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
$16,000
In M
illi
on
s
Total = $13.8 Billion
FY11 Starting Shortfall
Job Growth in Neighboring States since 2003
-3.1%
2.2%
-0.7% -1.0%-1.6%
-4.2%-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
Illinois Indiana Iowa Kentucky Missouri Wisconsin
Lagging BehindLagging Behind
Lagging BehindLagging Behind
Job Growth in Peer States since 2003
-3.9%
0.3%1.1%
10.7%
-4.2%-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
Illinois California New York Florida Texas
Texas added 1 million jobs
If Illinois had simply grown at the national average over this time period, we’d have 350,000 more jobs today.
If Illinois had grown jobs at the rate of Texas, we’d have over 850,000 more jobs today and over $3 billion in associated state revenue annually.
Business ClimateBusiness Climate• Chief Executive Magazine ranks Illinois 46th in the nation
of best states in which to do business. The ranking is done by surveying 600 major company CEOs.
• In this year’s ranking Chief Executive Magazine ranked Illinois as the biggest loser over the last 5 years, as we dropped from ranking 17th to 46th in the last five years.
• Citizens of Chicago pay the highest sales tax (9.75%) of any city in the nation.
• Forbes Magazine ranked Illinois #50 (worst in the nation) for debt burden. According to Forbes, we have the worst debt problem of any state in the country.
Average Worker’s Compensation Costs (per $100 of payroll)
Average Worker’s Compensation Costs (per $100 of payroll)
State Cost Rank
Indiana $1.23 2nd
Iowa $1.86 11th
Wisconsin $2.12 18th
Missouri $2.20 23rd
Illinois $2.79 40th
*Source: 2009 ALEC-Laffer State Economic Competitiveness Index
Overall Economic Performance*Overall Economic Performance*
Source: 2009 ALEC-Laffer State Economic Competitiveness Index
State Economic Performance
Economic Outlook
Kentucky 31st 36thWisconsin 41st 27thMissouri 44th 23rd
Iowa 45th 35th
Indiana 47th 17thIllinois 48th 44th
*Historical measure based on a state’s performance in three important performance variables: Personal Income Per Capita Cumulative Growth, Absolute Domestic Migration and Non-Farm
Payroll Employment Cumulative Growth -- all highly influenced by state policy.
Losing JobsLosing Jobs
• Illinois ranks 47th in the nation in job growth.
– Only three states in the nation have performed more poorly than Illinois over that time period. (Michigan, Ohio & Rhode Island).
• Illinois has LOST almost 250,000 jobs.
– During that same time period, 30 other states added jobs.
• Illinois LOST over 4% of its jobs while the average state INCREASED jobs by 1.7%.
– If Illinois had simply grown at the national average, we’d have 350,000 more jobs today.
– If Illinois had grown jobs at the rate of Texas, which grew jobs at over 10%, we’d have over 850,000 more jobs today and almost $3 Billion in associated state revenue annually.
Credit RatingCredit Rating
• Illinois has the lowest credit rating of any state in the nation.
– Every other state in the nation is operating in the same national economy, yet we are rated worst. We’re not just like every other state. We’re worse than every other state.
• Almost half of all the credit downgrades in the history of Illinois have occurred on Pat Quinn’s watch.
– We’ve been downgraded 8 times in less than two years (of 17 total in history).
• Lower credit ratings mean higher interest payments for Illinois taxpayers.
– These downgrades will cost taxpayers hundreds of Millions of dollars.
• Illinois has one of the highest risks of default of any sovereign government in the world.
– Lately, Illinois regularly ranks in the top 10 highest default risks with countries like Iraq, Greece, Pakistan and Iceland.
History of Illinois Credit Downgrades
6
3
8
0123456789
Before Blagojevich(Prior to 2003
covering 24 years)
Under Blagojevich(2003 to 2009
covering 6 years)
Under Quinn (2009 to Present
covering 18 months)
Num
ber o
f Cre
dit D
owng
rade
s
Average State Income Taxes, 2010, Top 15
Rank StateAverage Tax in
Percent
1 Oregon 8.00
2 North Carolina 6.88
3 Rhode Island 6.85
4 Minnesota 6.60
5 New York 6.49
6 Vermont 6.25
7 Hawaii 6.20
8 Wisconsin 6.18
9 New Jersey 6.08
10 California 5.40
11 Massachusetts 5.30
12 Maine 5.25
13 Illinois 5.0014 Kansas 4.98
15 Connecticut 4.75
Bottom 15Rank State Average Tax in Percent
36 Indiana 3.40
37 North Dakota 3.35
38 New Mexico 3.30
39 Pennsylvania 3.07
40 Current Illinois 3.0041 Oklahoma 3.00
42 New Hampshire 0.00
43 Tennessee 0.00
44 Alaska 0.00
45 Florida 0.00
46 Nevada 0.00
47 South Dakota 0.00
48 Texas 0.00
49 Washington 0.00
50 Wyoming 0.00
Taxes and your Bottom LineTaxes and your Bottom Line
Source: Illinois Policy Institute
Effective Corporate TaxesEffective Corporate Taxes
Pre-Lame Duck: 7.3%Post-Lame Duck: 9.5%
We are now FOURTH highest in the nation.Worldwide, our corporate taxes are higher than Japan.
FY 2011 FY 2012 FY 2013 FY 2014 FY 2015$30,000
$31,000
$32,000
$33,000
$34,000
$35,000
$36,000
$37,000
$38,000
$39,000
$40,000
$33,500
$36,818
$37,554
$38,305
$39,072
Axis Title
16.63% increase over four years
Increases in the State Spending CapIncreases in the State Spending Cap
Solutions!Solutions!
• No new spending until the state can pay its bills within 30 days
• Cut overall spending by 10%
• Further Medicaid reforms
• Pension concessions with guaranteed funding
• Forensic Audit
• Zero Based Budgeting
• Sell state fleet of cars and airplanes
• Eliminate Lieutenant Governor office
• Combine comptroller and treasurer
• More on JimWatsonIllinois.com