(The Center Square) – A new report is advising Illinois and other states to use long-term budget assessments and budget stress tests to prepare for future budget shocks.
Pew Charitable Trusts said state leaders must be able to assess whether their budgetary decisions will be affordable over the long term.
The report suggests that Illinois should conduct a budget stress test to offer warnings when a state’s budget is on an unsustainable trajectory, allowing lawmakers to adjust before problems become severe.
Josh Goodman, senior officer of State Fiscal Health, said once a state goes down that road and creates a budget hole, it is difficult to climb out.
“Over time, they can force lawmakers to take ever more drastic steps to balance their budget, creating a vicious cycle in which structural deficits lead to short-term fixes that exacerbate the deficit,” said Goodman.
Illinois is highlighted in the report for spending more than it collected in revenue every year from fiscal 2006 through fiscal 2020 and then balanced the annual budget in part by delaying payment to hundreds of vendors, including small businesses and nonprofit organizations. The authors said this just made the problem bigger because Illinois paid up to 12% annual interest on unpaid bills. The report notes that Illinois has taken steps to get the problems under control.
In Illinois, the Commission on Government Forecasting and Accountability (COGFA) included four spending growth scenarios in its March 2022 three-year forecast: flat spending, growth equal to the average increase over the prior five years, growth equal to the 20-year average, and a scenario tied to limiting the state’s backlog of unpaid bills. COGFA found that all the scenarios except flat spending would result in deficits by fiscal 2024.
The authors said although states can prevent these challenges from causing structural deficits by diligently balancing revenue and spending, leaders’ immediate imperatives often get in the way. During robust financial times, lawmakers often face pressure to aggressively increase spending. At more than $50 billion in spending, Illinois’ budget that began July 1 is the largest in state history.
The report said Illinois and 14 other states project revenue and spending at least three years into the future but do not use those projections to assess sustainability, a necessary component of a long-term budget assessment.
