Budget In Plain English: Mr. And Mrs. Illinois On Their “Fiscal House”

Illinois Gov. Pat Quinn introduces his new budget Wednesday.  There’s no question Illinois’ current fiscal state is dismal – and complicated.

Illinois Public Radio reporters Alex Keefe and Niala Boodhoo went on a quest to translate state finances into plain English:

[.mp3 – 8:30]

AL: So if today’s budget address is like previous budget addresses, Governor Pat Quinn will try to explain to us Illinoisans how profoundly screwed up our state finances are.
NIALA: We’re talking numbers so big they seem ludicrous – hundreds of millions of dollars in bills, tens of billions of dollars in pension debt. So in past speeches, he’s tried to illustrate this with a familiar metaphor.  AL: Ahh, the fiscal house
NIALA: Yes, the fiscal house.
AL: But maybe the fiscal house can illustrate an important point.
NIALA: That the governor needs new speechwriters?
AL: No – really. What if Illinois were a fiscal household – like a family with a budget. What kind of a family would we be?
NIALA: Uh Okay….(skeptical)
AL: I think this can work. But first, we’re gonna need to get married.

(LOVE AND MARRIAGE MUSIC)

NIALA: Wait, what?!?
AL: Yeah, so I am Mister Illinois, and you can be the lovely Missus Illinois.
NIALA: All right, all right, husband –so how much money do you make? What’s our income?
AL: Well, with tax revenue and fees and such, we’re set to make about 34 billion dollars this year.
NIALA: Oh, that’s so not a public radio salary. Great! But what about our expenses?
AL: Well we’ve gotta pay for schools and roads and state workers and stuff, so that all money’s pretty much accounted for.
NIALA: Oh. I guess I’m taking charge of our finances, right. Ok, so you need to tell me about what’s in our savings, and our bills.
AL: Yeah. About that. I think we should go talk to the person in charge of our bank account.
NIALA: Oh let me grab my calculator. Where are we going?
AL: Judy Baar Topinka. She’s writes the checks.

TOPINKA: They always ask, if I control the airplanes? I’m not the air traffic controller.

NIALA: No, She’s the COMPTROLLER for the state of Illinois. So she pays the bills. Which we were about to find out – are way overdue.

AL (TAPE): What kind of bills are we as the state of Illinois facing?
TOPINKA: Well, I think everybody understands their electric bill.
Al: How much is that?
Topinka: That’s uh $20,778,226.11.
Our water bill! (fade under)

(adding machine)
Al: Throw in overdue medical bills, and money we owe to schools – and the total… (SOUND OF ADDING MACHINE)  it’s about $9 billion dollars. And those are just the bills that are overdue.

Niala:There’s no savings? Like we don’t have a savings account somewhere, like a rainy day fund?
Topinka: Oh that was emptied years ago. Legislature wanted money, they went to the rainy day fund, they got rid of it.

AL: Topinka says, as Mister and Missus Illinois, we’ve also been pretty terrible about saving for retirement. We have at least about a-hundred billion dollars in unfunded pension obligations. That’s the amount we should have been saving for state workers – but instead, we spent it.

Niala: So how would you describe our current fiscal state?
Topinka: Dire, dire. You’re a risk. You’re like dealing with Greece, they can’t get their act together, you can’t get your act together.

Niala: (sigh audibly). This is really bad. I think we need to see a counselor.
Al: What, like a marriage counselor?
Niala: NO, for our finances. A financial planner.

Lawrence: Hello Mr and Mrs. Illinois!

Al: We paid a visit to Laurence Msall. He’s in charge of the Civic Federation. It’s a nonpartisan budget watchdog group here in Chicago.
Niala: We were hoping this would be more pleasant visit than the comptroller’s office. We were wrong.

Lawrence: We are the Beverly Hillbillies of financial management.

Al: What he’s trying to say is that we, as Mister and Missus Illinois, have been living beyond our means. And we’ve been borrowing way too much money.

Lawrence: It looks like you use your credit card to pay your groceries, and then you don’t pay your grocery bill at the end of the month, you pay the bare minimum.

Niala: This is the worst type of borrowing. What he means is that we’re taking out loans to cover day-to-day expenses.
Al: And that’s our fundamental problem. It’s called a structural deficit. What it basically means is, for years, even before the recession, there was more money going out the door than money coming in.
Niala: Have you looked outside at the rest of our neighbors? I was looking up information and in 2010 Indiana’s debt to income ratio is 6.9 percent.
Al: Oh, I’m sure ours is better than that.
Niala: Our pension and other debt is at 25 percent of our income – more than three times the national median.

Lawrence: You’re so close to collapsing that you need to have a scared straight reality. Throw away the credit cards, stop borrowing, start reducing your spending.

AL: So Msall talks about trimming pension benefits, cutting services – but I dunno, this all seems really tough.
Niala: No, I think he’s right. I think we have to start cutting.
Al: I think we have to talk to somebody else.

Martire: I’m Ralph Martire, I’m executive director of the bipartisan Center for Tax and Budget Accountability.

Al: And actually, Martire (mar-TEER-ee) says we, as Mister and Missus Illinois, aren’t exactly living in the lap of luxury.

Martire: You are at best lower middle income class, probably a cut below that if you what you’re able to put on the table in the way of services.

Al: He says if we look at how much we spend on core expenses – stuff like public safety, education, social services – we rank in the bottom ten out of the 50 states.
Niala: Yeah, and I guess cutting those services isn’t as easy as giving up our date night at Gibson’s. Like Martire says, it’s not like you can just cancel third grade for the entire state.
Al: So his solution isn’t to spend less – it’s to make more.
Niala: Martire says the problem is Illinois doesn’t bring in nearly enough tax revenue. And it hasn’t. For decades.

Martire: And I do mean decades, at least four or five possibly six decades. Our tax system which isn’t designed to work in a modern economy, hasn’t.

Al: All right, Illinois has a pretty complicated household budget to balance – I mean cutting services would hurt people, and raising taxes doesn’t seem popular. Are you sure we can’t just borrow a teensy little bit more money?
Niala: Uh, have you looked at our credit report lately? Our score is in the toilet.
Al: I’m sure if we just talk to them maybe we can work something out.

(phone ringing, Fitch Ratings, this is Karen.
Al: Karen! This is Mr. and Mrs. Illinois.
Karen: Good morning!
Al: We need your help.)

Niala: Karen Krop is senior director, public finance for Fitch – one of the three agencies that rates Illinois’s credit. What they say about Illinois is the equivalent of a credit score.
Al: And it’s not good. Illinois has received [13 downgrades over the last decade.]  That makes it even more expensive for us to borrow money – so expensive, the state actually canceled a bond offering recently.
Niala: And the people who are saddling us with these downgrades are people like Karen.

Al: Do you not like us, like as a family?
KROP: (laughs) It’s nothing personal. Illinois’ behavior, management behavior, over the last couple of years, has led us to lower the rating, because the problems haven’t been solved in a comprehensive long term way.

Niala: At this point, we were both tired of being Mr. and Mrs. Illinois.

Al: So, we can’t like, escape to Tijuana.
Karen: No, the state of Illinois in real life cannot run away. So the state of Illinois will have to step up and find a solution.

Al: If we were a normal family, I’m pretty sure would be heading toward bankruptcy court right now.
Niala: Uh, and divorce court.
Al: But states can’t do that. Illinois is legally bound to pay its debts.
Niala: Everyone we talked to agreed on this: we do have to do something. Right now, Karen and Fitch have – us – the entire state – on a negative watch. That means actually she is watching – waiting – for the state do something. And if we do nothing?
Al: Illinois will almost certainly get downgraded again. Making our fiscal house even more of a tinderbox.

I’m Mrs. Illinois – Niala Boodhoo. And I’m Mr. Illinois – Alex Keefe.

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