Monday, April 11, 2011

Comptroller's Report: Revenues Are Up, but Illinois' Financial Challenge Remains as Challenging as Ever

Controller Judy Baar Topinka notes in her April edition of the Comptroller's quarterly, that actions taken in the first three quarters of fiscal year 2011 have allowed the state of Illinois to gain revenue and avoid financial catastrophe in the short term. But a massive bill backlog and substantial long-term challenges remain.

She notes, at the end of March, the office of the Comptroller had $4.515 billion in unpaid bills with some vouchers dating back to October 2010. The Comptroller's office is at two prioritize critical payments such as debt service and other funding vital to the operation of state programs such as general state aid to school districts.

The report goes on to note that further adding to the backlog is the ongoing need to prioritize Medicaid disbursements in order to receive increased federal stimulus match funding. The federal share of Medicaid payments dropped from 59% to 57% in April. And it will fall to 50% after June 30. Therefore the state is expediting payments on medical bills in order to gain as much of the federal match as possible while time allows. This means others who have been waiting to have their bills paid continue to wait.

The backlog in bills would be even more substantial if not for the $3.7 billion in pension funding bonds issued in March, which was used to pay the majority of the states obligations to the retirement system in fiscal year 2011.

As the report notes, the combination of tobacco bond proceeds, the tax amnesty program and the increase in tax rates led to general funds revenue increase of $1.536 billion, a 7.3% increase. Individual income tax receipts grew by $1.057 billion, through nine months. Corporate income tax revenue increase by $240 million, a 27.6% increase. And the states tax amnesty program contributed $36 million in individual income tax receipts and $215 million in corporate income tax revenue.

SALES TAX: as the report notes, an improving economy increased sales tax revenues by $414 million although $164 million of that was due to the tax amnesty.

GENERAL FUNDS SPENDING: Gen. fund spending increased by $2.45 billion, or 11.3% in the first three quarters of fiscal year 2011. Through nine months of fiscal year 2011 base expenditures have increased by $2.45 billion.

Of this amount, healthcare and family services had the largest increase in vouchers presented for payment among the major agencies, with $537 million. Vouchers presented by the state Board of Education were down $250 million to the first three quarters of the fiscal year. The teachers retirement system of higher education are down $660 million, and $67 million respectively year to date as a larger share of this year's pension payments were funded directly by bond proceeds.

UPCOMING CHALLENGES: the state still has to pay back $1.3 billion from the July 2010 short-term borrowing over the next three months. While that amount is lower than what was outstanding at this time last year, the state shifted over $2 billion in Medicaid spending to other state funds in the fourth quarter of fiscal year 2010 which cannot be repeated this time around.

So while the states tax revenues have grown, the state's bill backlog is not likely to decrease significantly from the current levels, or the levels seen at the end of fiscal year 2010 if the current trends continue.

Thus while the state is collecting some additional dollars, the fiscal challenge of operating the state remains as daunting as ever.

No comments: