CHICAGO (Reuters) - Illinois' budget deficit will top $3 billion and its pile of overdue bills will hit a new record high by fiscal 2025 if the state's "unsustainable" tax structure remains in place, according to a five-year forecast released on Wednesday by the governor's budget office.
The economic and fiscal policy report said the state's general fund deficit is projected to steadily grow over five years to $3.2 billion with the unpaid bill backlog ballooning to $19.2 billion. It also showed annual pension contributions climbing to $9.65 billion in fiscal 2025 from $8.1 billion in the current fiscal year.
Illinois has the lowest credit ratings among states due to its $133.5 billion unfunded pension liability and chronic structural budget deficit. Its bill backlog reached a record-high $16.67 billion in 2017 due to a budget impasse.
The report pointed to the need for more money, preferably from Governor J.B. Pritzker's "fair tax" plan, to avoid draconian budget cuts.
The Democratic governor's plan would replace Illinois' flat income tax rate with graduated rates that tax higher earners more to generate $3.6 billion in additional annual revenue.
“Without structural changes like the fair tax, Illinois will continue to struggle to make ends meet, pay our bills on time and deliver vital services, like public education and public safety,” Pritzker said in a statement.
State lawmakers earlier this year took action to place a constitutional amendment for graduated tax rates on the November 2020 ballot. If voters reject the move, Illinois would have to cut spending on many essential services by about 15% or increase the flat income tax rate, according to the report.
For fiscal 2021, which begins July 1, state agencies were asked for options to reduce spending by 6.5%, along with ideas to improve efficiency and consolidate programs, the report said.