Analysis of the Fiscal Year 2008 Illinois General Fund Budget Proposal


May 1, 2007

This Report contains CTBA's analysis of the proposed FY2008 General Fund budget, which was introduced by Governor Rod Blagojevich in March of 2007. The General Fund budget proposed for FY2008 demonstrates the continuation of two significant flaws in the state’s overall fiscal system. First, revenue growth will again fail to keep pace with the economy, falling short of inflation. This pattern of revenue underperformance is long standing,¹ and has contributed substantially to Illinois’ structural deficit. A “structural deficit” is the term used to describe an ongoing shortfall between the revenues that a tax system generates and the inflationary cost of continuing the same level of public services frommone year to the next, without expanding or adding programs. The state’s historic revenue underperformance also has contributed to the second significant flaw demonstrated in the FY 2008 General Fund budget proposal – an over reliance on debt to fund current services. If the FY2008 budget passes as proposed, almost 7% of spending on current public services will be paid for with debt rather than recurring revenue. Generally speaking, current public services should be paid for with recurring revenue. Debt should be reserved for covering capital projects that have long-term useful lives, much like a family incurring a mortgage to finance the purchase of a home.

Topics:Tax and Budget, Illinois Budget, Revenue Policy, Education, Healthcare, Pensions

Tags:FY2008, State Budget, Gross Receipts Tax, General Fund, Deficit, Debt, State Pensions