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STATE FISCAL CRISES:
FROM CONNECTICUT TO CALIFORNIA
By DAWN CLARK NETSCH, Comptroller, State of Illinois
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At least 30 states are in fiscal crisis, Illinois among
them. The crises in these states are no doubt exacerbated by the decline in federal aid to cities and states
under the Reagan Administration and the rising costs of
Medicaid and Public Aid programs.
But many states, Illinois included, are also facing
shortfalls because of budgetary practices. For years
debts have piled up and obligations have been deferred. Expenditures have been allowed to outpace
revenues. Not surprisingly, the accumulation of all
these factors has taken its toll on Illinois' finances.
Until recently, we have heard little about Illinois'
fiscal crisis. We have heard a great deal more about
baseball and the turmoil of the families Kennedy and
Reagan.
But some alarming numbers have surfaced in Illinois. In my first four months as the state's chief fiscal
officer, I have been forced to assume the role of a
traveling grinch as I speak across the state, warning that
the state is nearly $1 billion in debt.
It is clear spending must be harnessed so we can
begin to pay the millions we owe to medical and social
service providers for essential services already delivered to our people.
Our budget and debt problems have been largely
overlooked, perhaps because people have read that
California is in hock more than $12 billion, or that
Connecticut owes $2.5 billion on a base of $7.5 billion.
In comparison, Illinois' $1 billion debt on a nearly $26
billion budget doesn't appear to be as urgent.
But it is. The fact we can still see a way out of the
fiscal hole we're in doesn't mean we should delay climbing toward the bottom line of fiscal stability.
Big debts give state government a bad reputation
among businesses. It can hurt our bond rating. It hurts
people who don't get paid in a timely manner. Health
professionals who care for our poor and elderly. Impoverished people who struggle each day to survive.
Small businesses that depend on timely payment so
they can meet their payrolls.
Though I strongly disagree with Gov. Jim Edgar
over the way his proposed 1992 budget strips funding
from vital social services, I commend him for making
the payment of old bills a priority in his budget. Proposing cuts of $468 million and earmarking $627 million to
pay old bills, these are major first steps toward righting
our state's finances, after 14 years of smoke-and-mirror
budgets under the previous administration.
Illinois has been spared the despair of many recession-battered states, in large part because tax revenues
had generally kept pace with projected increases. In
March, however, income and sales tax revenues slowed
dramatically, and state unemployment jumped nearly a
full point to 6.8 percent.
These figures show that Illinois may not be immune
to recessionary pressures. Because such pressures can
compound states' fiscal imbalances, we need to keep a
close watch on the extent of fiscal disarray in our struggling sister states. We need to observe and to assess how
neighboring states are coping with their financial challenges.
When we look out at some other states we see:
• Rhode Island shutting down state government
for 10 days.
• Connecticut considering the creation of a 6 percent personal income tax.
• Massachusetts moving to fire 6,200 state
workers.
June 1991 / Illinois Municipal Review / Page 23
• Michigan looking at a 9 percent across-the-board cut in programs.
• Virginia reducing agency spending from 12 to 20
percent and postponing 100 capital projects.
• New York laying off more than 10,000 state
workers.
The grim reports of these state fiscal crises have led
pundits to describe these times for governors as an era
of "The New Pragmatism" where they will be forced to
"innovate with less." But there should be no limit to
efforts to find creative, workable solutions to fiscal
crises.
So what can be done? We certainly can't solve the
budget imbalance solely on the backs of the state's
nearly 129,000 employees (42,000 of them university
employees). Almost two-thirds of state workers earn
less than $30,000 a year. What's more, Illinois ranks 42nd
among states in its number of state employees per 1,000
population.
The experience of other states has shown that massive layoffs provide only short-term economic answers
and often lead to unacceptable cuts in state services. We
can't close down our prisons, nor disconnect the child
abuse hotline. We don't want to cut back our state
college system, which is so vital to our economic well-being.
The long-term fiscal woes that accompany a recession of any depth require a long-term plan of fiscal
restraint and responsibility, one that enables the work
of government — vital services — to continue.
What is required is a new approach to spending, a
new attitude about making budgets. We should phase
down the practice of lapse spending, paying last year's
bills with this year's revenues. We need to curtail our
bond programs and learn to pay as we go for certain
programs.
On the revenue side, the state should push for the
collection of millions of dollars in accounts receivable,
money owed to the state's General Funds. Most importantly, let's make the 1990s the decade of honest
budgets. We cannot rightly hide our problems any
longer, and we should not pass the bill on to future
generations. •
Page 24 / Illinois Municipal Review / June 1991