Illinois’ worst-in-the-nation pension systems alone owe at least $130 billion, but now comes a new warning about the high cost of simply managing that debt.
In her latest fiscal report, Illinois Comptroller Judy Baar Topinka warns that Illinois will see billion dollar payments in interest on the state’s exploding debt.
“(Last year) Illinois spent $1.45 billion on its general obligation bonds’ interest alone,” Topinka wrote in the December Fiscal Focus report. “Every dollar spent on interest is a dollar not spent on some other pressing need.”
The state rushed to borrow to pay for roads, bridges and schools, but that at least left the state with something to show for its spending, she writes. Borrowing for pensions has left little more than debt.
“Spending priorities really suffer,” said Cory Eucalitto, author of State Budget Solutions’ fourth annual report on state debt. “That’s bad for taxpayers who expect a quality education for their children and all of the other state services.”
Eucalitto’s newly released report details sky-rocketing debt in all 50 states.
The 50 states combined owe $5.1 trillion in debt, mainly for public pensions.
Illinois is among the worst offenders. The Land of Lincoln is in the top five when it comes to debt per capita ($25,959), debt in relation to state spending (727 percent) and unfunded pension liability ($254 billion).
State Budget Solutions uses a far less optimistic formula to calculate pension funding and total debt than does Illinois and most other states.
Topinka uses numbers that are substantially lower than the figures from State Budget Solutions. The comptroller lists Illinois’ debt total at $127 billion and puts the state’s unfunded pension liability at $97 billion.
Illinois, Topinka notes, has been on a borrowing spree. The state has borrowed $16 billion in the past four years, including two pension bond sales in 2010 and 2011.
With increased debt comes increased payments.
Illinois will pay $1.6 billion in interest on pension debt in the coming year, on top of a $6 billion pension payment.
“In the last 10 years, the state of Illinois has issued $17 billion in (pension debt) that will not be completely paid off until 2033,” Topinka writes in her report. “For the majority of those years, taxpayers will pay $1 billion in debt service.”
Eucalitto said taxpayers may notice the $1 billion interest payments, but he thinks the $17 billion in debt will be forgotten.
“The regular budget process focuses on balancing an annual budget, no matter, in a lot of cases, what the cost is,” Eucalitto said.
Until taxpayers demand a new budgeting process, and new spending priorities, debt at the state level will continue to grow at an alarming pace, he said.
Photo credit: Daniel Schwen (CC-By-SA 3.0)