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Weekly UpdatesA recent report by the Civic Committee of the Commercial Club of Chicago warns of financial crisis in the State of Illinois if the state does not take corrective action. The report calls on state leaders to cut costs and/or increase revenues to meet the growing problem of debt and unfunded obligations, which currently stand at about $106 million. The report says if changes are not initiated, the state may face service cutbacks and problems with refinancing its debt.
The report says the state's liabilities and unfunded commitment exceed its assets by more than $100 billion and says the state does not allocate the true costs of pensions, health care for employees and retirees, and Medicaid, and has failed to meet its financial commitments for K-12 education.
The Civic Committee identified areas where cost savings are possible. The report indicates that retirement and health care benefits for state employees tend to be more comprehensive and more expensive than their counterparts in the private sector and could be brought into line with private and public benchmarks to reduce state costs by approximately $1 billion per year.
The report also targets widespread outsourcing and restructuring of state services as a source of cost savings. It says the cost of many programs could be reduced through tightening the rules governing hiring and contracting.
This report indicates that tax increases may be inevitable, even with cost savings, to meet the state's annual obligations. However, the report included several caveats about tax increases: 1) it cautions against increased taxes without costs reduction; 2) it specifies that any increased revenues from raising taxes should to used to meet the state's commitments, not to launch new programs; and 3) it warns against using increased taxes as a property-tax "swap," because the property taxes provide a more stable source of funds to support schools than statewide income or sales taxes.
The Commercial Club of Chicago is comprised of business and civic leaders in the greater Chicago area. Its mission is to address social and economic issues of importance to the Chicago region. Its Civic Committee conducts projects and initiatives aimed at improving Chicago and surrounding region.
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