Late last week, the State of Illinois finally released its Comprehensive Annual Financial Report (CAFR) for Fiscal 2018. Here are some highlights (and lowlights) from the report.
- The report was released August 29, 2019 – 425 days after the end of the June 30, 2018 fiscal year. In other words, we just learned about a year that ended more than a year ago.
- The letter of transmittal – addressed to the “Citizens of the State of Illinois,” “Honorable J.B. Pritzker, Governor” and “Honorable Members of the General Assembly” -- was dated August 22, 2019, even though the Citizens of the State of Illinois didn’t have a chance to see the report until August 29.
- The report was released August 29 – right before the three-day Labor Day weekend. For anyone concerned that government agencies tend to release bad news right before long weekends, to minimize the news impact, the Illinois CAFR release appears to be in that ballpark.
- Truth in Accounting’s “Taxpayer Burden” bottom-line measure of Illinois’ fiscal condition continued to deteriorate, based on the audited results in the report, falling from a negative $50,800 per taxpayer to $52,600 per taxpayer.
- Illinois’ “net revenue” (revenue less expenses, on an accrual basis) “improved” from 2017, but only in the sense that things were getting worse at a slower pace. Illinois’ expenses exceeded revenue by nearly $5 billion in 2018. This measure has been negative in 11 of the last 15 years, despite the “balanced budget” provision in Illinois’ state constitution.
- The continuing net revenue shortfall and deterioration in net position in 2018 arrived despite a nearly 20 percent increase in general tax revenue (sales taxes, income taxes, and other taxes). Since 2005, Illinois general tax revenue has risen much faster than personal income in the state.
- Illinois reported interest expense hit $2 billion (rounded) in 2018 for the first time. Illinois’ reported interest expense has nearly doubled since 2005, despite falling market interest rates. In 2018, Illinois’ reported interest expense amounted to more than $450 per taxpayer -- for interest expense, the cost of borrowing, alone -- before a dime was spent on government services. In Indiana, by way of contrast, the same reported interest expense was less than $20 per taxpayer in 2018.
- Since 2005, the number of times the words “debt” “borrow,” and “tax” appeared in the Illinois CAFR rose two times, three times, and three times, respectively, faster than the number of pages.
- The Illinois CAFR included the acronym “OPEB” 21 times in 2017, and 143 times in 2018, as Illinois and other state and local governments were finally required to recognize related retiree health care and other retirement benefit obligations as a liability on the balance sheet. (OPEB stands for “other post-employment benefits.”) Another $55 billion in previously unreported liability arrived on Illinois’ balance sheet last year. Our calculation of the state’s OPEB liability, based on the state’s own assumptions, has risen 50 percent since 2009.
- The word “million” appeared 239 times in 2018, in line with the 240 times it was there in 2017. The instances of the word “billion” rose from 119 in 2017 to 128 in 2018. Since 2005, the number of “millions” fell 25 percent, while the number of “billions” rose 60 percent. The word “trillion” has yet to appear in Illinois’ annual report.
- The words “prompt,” “penalty,” and “late payment” haven't appeared in Illinois’ annual report in the last five years, either. This raises questions about the quality of accounting and disclosure of the costs of late payment penalties under Illinois’ “Prompt Payment Act.”