The following are some of the highlights of an article by by Richard Mattoon, senior economist and economic advisor of the Federal Reserve Bank of Chicago. The complete work is four pages and can be seen at: http://www.chicagofed.org/digital_assets/publications/chicago_fed_letter/2010/cflaugust2010_277c.pdf
The state of Illinois has been facing a precarious fiscal situation for the past several years. According to the Civic Committee of the Commercial Club, Illinois has accumulated over $120 billion in total indebtedness. This works out to nearly $25,000 per household. Even in the short run, Illinois faces a budget deficit in excess of $11 billion in the next budget year.
reflect the state’s ability to pay off the debt. Under this measure, Illinois had a state and local debt level of over 210% of total taxable resources in 2007, which compares to a level for all U.S. states of roughly 180% during the same year
Illinois’s total liability is nearly 35% of gross state product (GSP), compared with 20% in Indiana, 19% in Wisconsin, and 13% in Iowa.
New York City’s fiscal crisis in the mid-1970s, Proctor explained, the city was essentially placed into receivership. In response, the city had to begin producing four-year rolling budgets that would be monitored and revised on a quarterly basis. This longer horizon introduced more disciplined planning into the budgeting process. Moreover, the city was required to balance its budget on a GAAP ….two-tiered oversight system was created. In the first tier, a control board was established to run city finances; and in the second, an ongoing monitor was set up to ensure that fiscal discipline continue
Richard Dye (IGPA) presented joint work with Nancy Hudspeth and David Merriman on a fiscal model designed to allow multiyear budgeting for Illinois….According to the model, total expenditures are projected to grow at 4.6% per year, while total receipts will grow at 3.5% per year. Without policy changes, this 1% growth gap will lead to significantly larger deficits in the future,
Other Researchers-----
Pensions: bring the system back into line, costs must be reduced by reducing basic or ancillary plan benefits for current and/or new employees, increasing investment returns, or reducing administrative costs. It might also be possible to identify new funding sources to reduce the size of the gap.
More taxes: most reasonable options would be to raise the personal income tax rate (given that the 3% flat tax rate in Illinois is lower than in neighboring states) and to consider extending the sales tax to a larger group of personal services.
No comments:
Post a Comment