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Kai Ryssdal: We told you earlier about the federal deficit. But proportionally, the balance sheet for a lot of states around the country looks even worse. Legislators in Illinois face a particular challenge. They’re scrambling to plug a $13 billion gap, a hole that’s half the size of the state’s entire budget.
Marketplace’s Jeff Tyler has the details.
Jeff Tyler: State lawmakers are rushing to fix a budget problem that they couldn’t fix last year. Laurence Msall is president of the Civic Federation, which researches Illinois’ state and local government budgets.
Laurence Msall: The general assembly adjourned last year without funding the pension contribution for the year, which is about $4 billion. And so that’s putting enormous pressure on our pension funds, as well as on the state operating budget.
If the state doesn’t fund its pension obligations, those funds are expected to start running out of money in the next five to 10 years. And it can’t all be blamed on the recession.
David Merriman: We’ve just been underfunding the pensions in order to pay our operating expenses.
That’s David Merriman, associate director of the Institute of Government and Public Affairs at the University of Illinois.
Merriman: We should understand that this is a political, rather than an economic problem. This has been a long-term refusal of the politicians to look the fiscal facts in the face.
Credit rating agencies have already given Illinois bonds junk status. That makes it more expensive for the state to borrow. But Merriman says a political solution looks unlikely.
Merriman: With the large pension obligations and other obligations, it’s going to be difficult to get revenue to support basic services like K-12 education, roads, police.
It might be politically unpopular now, but when the newly elected officials are sworn in next week, observers say a compromise is even less likely.
I’m Jeff Tyler for Marketplace.
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