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05/27/2010

Deficit Defined

   I can't do this enough.  After all, we're the ones who keep using the word in virtually every report from Springfield this week.

    A "Deficit" in the Illinois budget occurs when the Springfield government does not collect enough money in taxes, fees, etc. to match the amount of spending by the state during the same period.

   The $13 billion figure that we use so often in our stories is actually an amount accumulated over several years.  It is the difference between actual revenues and expenditures that some experts say can be traced back to the late 1990's, believe it or not.

   During the current "Great Recession", Illinois and most of the other 50 states have experienced record shortfalls in revenue collections in sales, income and property taxes.  The deficits here and elsewhere have skyrocketed. 

  Without the political will to raise taxes, as recommended by Governor Pat Quinn or to drastically cut spending as demanded by republicans, the majority democrats in the House and Senate want to borrow money ($4 billion) to shore up the revenue shortfalls for at least one year.  The borrowing would specificially address one of the state's "structural debts" i.e. the pensions of its retirees.   Wall Street brokers can sell bonds for that purpose because they know the state is legally obligated to guarantee the bonds. 

  But the interest expense of the bond issue is a yet another, unfunded expense for the state government.  So conceivably, borrowing could increase the deficit.

  That's your annual, slightly updated, albeit oversimplified look at the Illinois budget crisis.

   Why do I think I'll be writing the same post this time next year?

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