GO TO 2040 establishes coordinated strategies that help the region’s communities address transportation, housing, economic development, open space, the environment, and other quality-of-life issues.  The metropolitan Chicago region’s ability to implement GO TO 2040 is significantly shaped by decisions made at the state level.  While the Illinois budget's largest spending areas are health and human services and education, the State also plays a significant role in maintaining the transportation system, promoting economic development, and preserving natural resources.  All of these programs are jeopardized if the State does not address its unsustainable Medicaid program and exponentially growing pension liabilities, which are usurping its overall budget.

A recent Illinois State Comptroller’s Quarterly newsletter stated that Illinois is “essentially treading water” with regard to the mismatch between the State’s revenues, expenditures, and future obligations.  The statutorily-required contribution to the State’s retirement systems for FY 2013 is nearly $1 billion more than the required FY 2012 contribution.  To make up for years of underfunding, Illinois statute requires a contribution schedule that will result in the State’s retirement systems being 90 percent funded by 2045.  Meanwhile, a recent Civic Federation budget analysis indicates that the Illinois Medicaid program is underfunded in the current fiscal year by an estimated $1.5 billion. 

At the end of the past several fiscal years, the State has had a significant backlog of unpaid bills for which payments were delayed because of shortfalls in State revenue relative to appropriations.  According to the Comptroller’s Quarterly newsletter, Illinois currently holds approximately $9 billion in total accounts payable, including payments to universities, to Medicaid providers, and for employee health insurance. 

These spending pressures crowd out other spending priorities, such as badly needed investments in transportation infrastructure.  One of GO TO 2040’s major recommendations is that our system must be modernized so the region can compete economically with other U.S. and global economic centers.  Unfortunately, the State’s recently announced multi-modal transportation program, Transforming Transportation for Tomorrow, is significantly impaired by growing pension contributions.  Illinois Department of Transportation (IDOT) Secretary Ann Schneider recently announced this statewide $9.6 billion multi-year transportation improvement program, which is funded at a level 16 percent lower than the previous six-year program.  The program is an estimated $800 million less than it would have been had pension contributions remained at 2003 levels.  IDOT anticipates that its annual pension contributions for the department's employees will reach $400 million by 2019, which is untenable considering that IDOT's total expenditures for FY 2011 were $2.1 billion.

Credit rating downgrades due to fiscal programs have impeded the State’s ability to cheaply issue bonds.  Moody’s has downgraded the State’s bond rating four times in the last three years, including in January 2012.  Fitch Ratings issued downgrades in 2008, 2009, and 2010.  Standard and Poor’s issued two downgrades in 2009.  According to a 2010 report by the Civic Federation, bonds issued between September 16, 2009 and July 14, 2010 cost Illinois $551.3 million, or 20.9 percent, more than it would have if the State had maintained its 2008 credit rating.  A recent position paper by the Illinois State Treasurer reported that the State’s downgrades have also increased the cost of borrowing for counties and municipalities within Illinois.  Rating agencies have stated that future downgrades may occur if efforts are not made to improve the State’s fiscal condition.  Ongoing spending pressures may affect the State’s liquidity, and therefore its ability to repay bondholders. 

The General Assembly is currently deliberating on proposals that would improve the State’s budgetary outlook, including reforms for the State’s retirement systems and changes to the Medicaid program.  CMAP encourages the Governor and the General Assembly to find long-term solutions for improving the State’s fiscal condition, which must be stable in order for our region to maintain public services and move forward with infrastructure investments.