New Illinois Governor J.B. Pritzker proposed his first budget to the Illinois General Assembly yesterday.
When considering the implications of budgets and budget speeches, it makes sense to step back and reflect on some of the risks of applying cosmetics in the world of public finance.
In recent decades, Illinois and Chicago politicians have regularly claimed to “balance the budget,” citing legal requirements. For the state of Illinois, the requirement is often said to be rooted in the state constitution. For the city of Chicago, the requirement cited is a state law.
Trouble is, Illinois and Chicago regularly spend a lot more money than they take in, borrowing to make up the difference, and all the while claiming to balance the budget.
Today, in his budget messaging, it was more of the same from Pritzker. Turning over a new leaf we are not.
In the opening sentences of the “Reader’s Guide” to the Governor’s proposed operating budget, we are told the following:
“The Illinois Constitution requires the Governor to submit a balanced budget and imposes the duty to pass a balanced budget on the General Assembly.”
And in his prepared remarks (which included the word “honest” six times), the new Governor assured us:
“To that end, the budget I present to you today is an honest proposal – the costs are not hidden, the revenues I propose are not out of reach, the hole we need to fill is not ignored. … I want to be clear about this … this Fiscal Year 2020 budget is balanced, but that’s not enough. This is only Year One of a multi-year endeavor …”
Trouble is, the language of the relevant provisions in the Illinois Constitution don’t use the word “balanced.” Here’s the relevant sentence, through which you can drive several trucks loaded with debt bombs:
“Proposed expenditures shall not exceed funds estimated to be available for the fiscal year as shown in the budget.”
“Proposed expenditures” are not actual expenses. And “funds estimated to be available” are not revenue. Expenditures are a cash-accounting artifact that may not include expenses accrued by distributing unfunded promises to pay money in the future. And “funds estimated to be available” can include money anticipated from asset sales, as well as borrowing proceeds.
Since 2005, Illinois has been among the worst states in the nation in walking the talk on its “balanced budgets,” keeping accrued expenses below revenue in only three of those thirteen years.
It’s hard to be optimistic that Illinois will improve on that record in the years ahead.
Budgets can serve as vehicles for planning, control and accountability. But at the end of the day, budgets are basically forward-looking rhetorical devices. Budgets are not results. Every year, we get a chance to ask, and answer, the question – did they really walk the talk?
There are words, and there are deeds. Budgets are words. Audited financial statements help us understand the deeds.
So, what do we know now, about the real results so far? Illinois’ governor proposed a budget for fiscal 2020, but the latest year for which we have audited financial statements is fiscal year 2017 – a year that ended more than 600 days ago!