Consequences of Inaction
February 15, 2016
Consequences of Inaction
The Effects of the Budget Stalemate on Revenue and Spending at the Midpoint of Fiscal Year 2016
New analysis by the Fiscal Futures Project finds that Illinois’ budget impasse has put spending on autopilot while revenue is down significantly. This perfect storm of decreased revenue and uncoordinated spending is causing uneven allocations and exacerbating an already massive budget deficit.
The policy brief uses data from the Illinois Office of the Comptroller on spending and revenue as of December 31, 2015 to provide a detailed accounting of the budget picture at the mid-point of FY16. The data show that as of mid-FY16, Illinois had revenue of only about $30 billion, or 46 percent of FY15 revenue. Based on this data and other analyses, the researchers project final revenue for FY16 of about $63.7 billion, a decline of $1.9 billion from FY15.
“The scheduled phase-out of the temporary income tax rate increase has left the state with significantly less money this fiscal year. That’s a problem in itself,” said David Merriman, co-director of the Fiscal Futures Project. “But the autopilot spending caused by the budget stalemate means that the state is allocating expenditures for some categories at rates similar to FY15, while others are receiving almost nothing.”
The report provides a data table that details allocations to various departments and agencies. It compares the amount allocated by mid-FY16 to total spending in each category in FY15, to provide a ratio expressed as a percentage of FY15 spending. For example, spending for K-12 education, funded by an appropriations bill, is consistent with last year at $3.99 billion, or 45 percent of FY15 spending.
The ratios range from a low of less than 1 percent (state employee health care) to a high of 55 percent (Environmental Protection Agency). Other areas with particularly low mid-FY16 rates of expenditures include university education (1 percent), the Illinois Community College Board (1 percent), and the Capital Development Board (3 percent).
Overall, the state’s lack of a budget will only add to the imbalance between revenue and spending, resulting in a bad deficit made worse. The state had a structural deficit of $4.2 billion at the end of FY15. The researchers project that the state will accumulate an additional deficit of $6.6 billion by the end of FY16.
“Understanding how much is being spent where, and how it compares to last year, gives us an idea of what to expect by the end of FY16,” said Merriman. “Our analysis provides a resource to help policymakers and the public more thoroughly understand the long-term consequences of inaction on the budget.”
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Research Area: Fiscal and Economic Policy
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