Report: Illinois could be $8.3 billion in red

Illinois remains in deep budget trouble and could be $8.3 billion in the red by next June, according to a report released Monday by a Chicago watchdog group.

The budget problems persist despite a significant boost in the state's income tax rates for individuals and businesses passed by the Democrat-controlled legislature and signed earlier this year by Gov. Pat Quinn.

“We're continuing to lose ground. It's a wake-up call and a reminder that we still have a big issue facing the state of Illinois,” said Laurence Msall, president of the Chicago-based Civic Federation, which issued the report.

The $8.3 billion shortfall predicted by the time the fiscal year ends in June includes $5.5 billion in unpaid bills and another $2.8 billion from a payment backlog for Medicaid, employee health insurance bills and business tax refunds, the report said.

While the income tax increase brought in more money and the state has made cuts, Msall said that was all but wiped out by growing pension and debt repayment costs. The state, he said, must continue its pension reforms and that means looking at current employee benefits.

That's a battle Quinn and some others seem reluctant to take on because they fear it could violate the state constitution and would likely result in a costly legal battle. The top Democrat and top Republican in the Illinois House have proposed making such changes.

The state has already made some pension reforms, including raising the retirement age for new employees and capping the amount of money on which their pensions can be based. Msall also said it was good news the state was able to make its pension contribution this year without having to borrow the money to do it.

Kelly Kraft, assistant director of Quinn's budget office, said about $3 billion was generated by the income tax increase in the last fiscal year.

“That has helped the state begin to address the decades of fiscal mismanagement that have taken place, but due to large underfunding of the pension and group insurance systems, more reforms are needed to return our state to sound financial footing,” she said.

Republicans, who are in the minority in the legislature, also said more needs to be done.

“The taxpayers of Illinois were sold a tax increase as a way to solve the state's financial problems. What we've tried to make clear is that it does not solve the problem unless there are major changes in the state's spending habits and service delivery and this administration and the Democrat-majority have been unwilling to address those,” said Patty Schuh, a spokeswoman for Senate Republican leader Christine Radogno of Lemont.