March 22, 2018 / 6:54 PM / in 9 months

Illinois budget deficit soars to $14.6 billion in FY 2017

CHICAGO (Reuters) - Illinois’ general fund budget deficit grew by 52 percent in fiscal 2017 to a record $14.6 billion as political feuding pushed the state deeper into the red, according to an annual financial report released on Thursday by the Illinois Auditor General.

The ballooning deficit, as measured on a generally accepted accounting principles (GAAP) basis, underscored the cost of an impasse between Illinois’ Republican governor and Democrats who control the legislature. That tussle left the state without complete budgets for an unprecedented two straight fiscal years.

For an interactive graphic of the deficit's growth, click: (tmsnrt.rs/2HW3mhM)

“(The audit report) shows the current political logjam is leading us to a bad place,” said David Merriman, director of the Fiscal Futures Project at the University of Illinois’ Institute of Government & Public Affairs.

The stalemate, which also pushed Illinois’ unpaid bill backlog to a record $16.67 billion, ended last July when the legislature enacted a fiscal 2018 spending plan and $5 billion income-tax hike over the vetoes of Governor Bruce Rauner.

The comprehensive annual financial report for the fiscal year that ended June 30 showed the deficit more than doubling on a budgetary basis, to nearly $8 billion from $3.54 billion in fiscal 2016. Fiscal 2017 also marked the 16th straight year of deficits for the nation’s sixth-largest state.

“This report makes clear that Illinoisans continue to pay the price for the state’s disastrous budget impasse, in the form of late payment interest penalties and a state government that is weakened at almost every level by the inability to pay its bills on time,” said Jamey Dunn, spokeswoman for Democratic Illinois Comptroller Susana Mendoza.

Illinois’ deep financial woes have left it with the lowest credit ratings among U.S. states.

It is also paying more to sell debt than any other state. The so-called credit spread over Thomson Reuters’ Municipal Market Data benchmark triple-A yield scale was 208 basis points for Illinois’ 10-year bonds on Wednesday. That is well above the 75 basis-point spread for New Jersey, another fiscally challenged state.

On a total assets versus total liabilities basis, Illinois also fared the worst among the 43 states that had released their fiscal 2017 annual audits by mid-March. The Illinois auditor’s report showed the state at -$141.7 billion. Texas fared the best at a positive of nearly $102 billion.

Laurence Msall, president of the Civic Federation, a Chicago-based government finance watchdog, called the audit “another smack in the head” for the state.

“I hope reports such as this are a frank reminder of the need to have a budget,” he said in an interview.

Rauner, who won a close race in Tuesday’s Republican primary election for governor, proposed a $37.6 billion fiscal 2019 budget in February that included measures likely to hit a road block in the legislature.

Reporting by Karen Pierog; Editing by Daniel Bases and Matthew Lewis

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