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Illinois and Iowa – the Mutt and Jeff of ‘balanced budgets’

September 28, 2021

Forty-nine of the 50 states have “balanced budget” requirements, either as a matter of their state constitution or state laws. Yet some states, like Illinois, have run up massive debts anyway.

At Truth in Accounting, we recently updated our Data-Z website to include the latest available audited annual financial report information for the 50 states, as part of our annual Financial State of the States project (and publication). 

One element in the “State Financial Data” section is “Net Revenue (Change in Net Position).” This amount measures the difference between revenue and expense. Budget accounting can be pretty flimsy stuff, but “Net Revenue (Change in Net Position),” which comes from accrual-accounting-based government wide financial statements, is a relatively reliable indicator. When it is positive (above zero), a state government has effectively walked the talk on balancing the budget.

Here’s a look at a chart comparing Illinois to next-door-neighbor Iowa on “Net Revenue.” 

Iowa (the blue line) maintained positive net revenue in 15 of the 16 years. Illinois, on the other hand, did so in only three of those 16 years.

The frequency of truly-balanced-budgets, as indicated by “Net Revenue,” provides significant explanatory power (in econometrics-speak) for two important measures of state government performance – Truth in Accounting’s “Taxpayer Burden” measure of overall financial condition and rankings of the states on the latest Gallup results for a survey of trust in state government. 

In our latest (2021) Financial State of the States report on state government finances, Iowa ranked 9th, while Illinois ranked 48th. And in the latest Gallup poll on trust in state government, Iowa ranked 8th, while Illinois ranked 50th (dead last).

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