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March 4, 2013

Closer Look: Many challenges as Quinn inks budget

 

CHICAGO (AP) — As Gov. Pat Quinn prepares to deliver his latest budget proposal, there's no overstating how ugly Illinois' financial condition is.

Outside analysts in recent months have used phrases like "a deep hole," a "downspin" and "not fiscally sustainable" to describe it. The New York bond houses have given Illinois the worst credit rating of any state in the nation.

The grim outlook persists despite recent efforts to improve it, from a 67 percent state income tax hike passed in the waning hours of the legislative session two years ago to last year's $1.6 billion in Medicaid cuts.

When Quinn presents his latest plan on Wednesday, he'll have few good options. His office already has projected a cut of about $400 million to education and cuts to public safety and economic development.

"We expect the governor is going to have a very difficult time," said Laurence Msall, president of the Civic Federation, a Chicago-based watchdog group that analyzes and makes recommendations on fiscal issues.

It begs the question: How did the state get here? And why is it so bad?

Here's a look at some of the factors contributing to the budget mess, and some of the key issues lawmakers will have to sort out in coming months:

Pension crisis

No single factor will constrain Quinn more than the state's pension crisis. Lawmakers have been going around and around on the worst-in-the-nation problem for years without a solution, and nothing has done more damage to the state's finances.

Because lawmakers skipped or shorted payments to public-employee retirement funds for decades, the accounts are now about $97 billion short of what's needed to fully meet the state's liabilities. Illinois is now playing catch-up on the payments, but each year the cost continues to grow. In 2008 the payment took up 6 percent of the state's general funds budget. In the fiscal year that starts July 1, it will be close to $7 billion — more than 16 percent of the general funds budget.

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