FY16 Budget News Update

Moody’s warns of consequences if budget stalemate not resolved.  The global bond rating service, which has imposed several cuts on the debt status of Illinois, warned the State of potential further downgrades in a report published on Monday, August 31.  The report called attention to the current budget impasse of the State of Illinois, which is attempting to operate without a legally enacted spending plan for fiscal year 2016.  FY16 began on July 1, 2015.

Changes in the debt rating of Illinois as a whole, and of subsidiaries (such as the University of Illinois) affect interest rates that must be paid by Illinois taxpayers. Rating agencies such as Moody’s, Standard & Poor’s, and Fitch Ratings have given Illinois the lowest debt rating of any U.S. state.

Commission on Government Forecasting and Accountability (CGFA) issues monthly budget report.  The CGFA report, issued by the General Assembly’s nonpartisan budget office, covers revenue and spending trends in August 2015.  CGFA tracks changes in State revenues, particularly income and sales tax payments, and projects them out for the remainder of FY16.

Changes in State revenues currently reflect two major factors: (a) the drop in State personal and corporate income tax rates that took effect on January 1, 2015; and (b) continued slow growth in the overall U.S. economy.  CGFA has tracked changes in United States gross domestic product in the first half of calendar 2015, and continues to see overall growth rates trending in the band of 2.0% - 2.5%.

New tax revenue is not growing as fast as the cost of expenses mandated upon the public sector of the State, and is not growing fast enough to replace the revenues lost through the January 2015 income tax rate rollback.  CGFA spreadsheets detail the current fiscal situation.  In August 2015, for example, total State general funds revenues fell $194 million short of previous-year revenues.  In August 2014, the State took in $2.38 billion in overall general funds revenues; during the same 31-day period one year later, $2.19 billion came in.        

Disability service providers said to have been paid through August; some providers say money not yet received.  In compliance with a court order issued by federal judge Sharon Coleman, the State indicated it has paid $120 million to disability service providers.  The payment was reported on Friday, August 28.  The creditors, licensed networks of services (particularly residential services) to persons with developmental disabilities, sought up-to-date payments under the “Ligas” consent decree.  Some creditors reported this week that they have not yet received these reported payments.  

Comptroller Leslie Munger has the duty of balancing money coming in with payments going out.  The July-August payments to disability service providers followed a warning in the previous week that because of the State’s current budget impasse, the required funds would not be immediately available.