NEWS

Report: Illinois headed for 'economic disaster'

State Capitol Bureau

A new report released today identifies Illinois and eight other states as facing many of the same financial problems that have been plaguing California and pushing it toward "economic disaster."

The budget troubles of those 10 state governments ripple through the rest of the country, too, according to the report, "Beyond California: States in Fiscal Peril."

That's because the 10 states cited in the report – California, Illinois, Arizona, Florida, Michigan, Nevada, New Jersey, Oregon, Rhode Island and Wisconsin – account for more than one-third of the population and economic output in the United States.

In addition, the nation's economic recovery can be slowed by state governments' budget-balancing strategies, such as increasing taxes and making deep spending cuts, according to the report.

Authors of the report cited Illinois for "its lack of fiscal discipline to balance its state budget." They noted that Illinois' $13.2 billion budget gap for fiscal year 2010 was among the top three in the country.

"Officials have used all sorts of short-term approaches to address the budget gaps, but two of the most significant and consequential are to put off paying bills and skimp on the state's annual pension payments."

Pew Center on the States, a division of the Pew Charitable Trusts, researched and issued the report.

Pew researchers identified six factors that significantly contributed to California's financial woes and examined how other states have been dealing with the same challenges. The six factors are loss of state revenues, relative size of budget gaps, increasing joblessness, high foreclosure rates, legal obstacles to balanced budgets (namely, a supermajority requirement to pass tax increases or budget bills) and poor money-management practices.

The full report is available online at www.pewcenteronthestates.org/beyondcalifornia.

GateHouse News Service State Capitol Bureau