In September, The Institute will issue a new, major publication which examines the transparency of Illinois' annual budgeting process. Following up on the Institute's earlier 'The Truth about Balanced Budgets: A Fifty State Study', this new work concentrates on the budget process and its shortcomings here in our home state.
The need for this study became evident when the earlier report found that 49 of the 50 states have some form of constitutional or statutory 'balanced budget requirement' yet many we accumulating debt. Illinois has the requirement and every year, our legislators and governor tell Illinoisans that they given us another balanced budget. Despite the requirement and their assurances that they have spent no more than funds available, Illinois' financial position becomes worse every year. We wondered how a budget could be balanced yet create more debt.
Initial research showed the culprits to be an elastic definition of 'funds available' and the use of cash basis method used to calculate the budget. It appears that the governor and the legislature have very different ideas of what 'funds available' means than do most state residents. To determine what revenue and expenses should be included in the balanced budget calculation, the Institute convened a distinguished panel of civic groups, think tanks, academics and other organizations to create a consensus definition of a balanced budget. The two major finding of the panel were that borrowed money should not be considered 'available' and that the full current costs of pensions should be recognized in the year they are earned.
Guided by the findings of the consensus panel, a recalculation of the FY2011 state budget projects a staggering $13 billion shortfall in the state's checkbook.
The Institute is organizing sessions with interested Illinois legislators to educate them about the way to calculate the budget, so the true revenue and expenses are considered and the long term financial consequences of the financial decisions are understood.