Beware of Comptroller Mendoza’s 'phony budget' numbers, fiscal watchdog Mark Glennon says
Recent fiscal news from the Illinois’ Comptroller Susana Mendoza, the overseer of the state’s finances, seemed to give Illinoisans a glimmer of hope that the state was finally emerging from its fiscal abyss. A positive-sounding statement from Mendoza’s office surrounding the Comprehensive Annual Financial Report (CAFR) for the fiscal year that ended June 2018 showed that the state’s general funds budget was still running a deficit, but it was a deficit reduced by half over the previous year.
The problem, says Wirepoints founder Mark Glennon, is that year-to-year general funds spending is just one part of the state’s financial load. A bigger part, larger in fact than the state’s entire budget this fiscal year, is a $47 billion loss – reported this year for the first time. The largest part of that, $42 billion of it, covers the future health care costs of state retirees.
“Mendoza has converted the Comptroller’s office into a propaganda operation, and the press lets her get away with it,” Glennon told Prairie State Wire in an email. “The latest is her spin on the state’s new financial statements, which much of the press repeated almost verbatim. Instead of addressing the truly stupefying loss the state actually incurred – $47 billion – she cherry-picked one element from the financials to claim the state cut its deficit in half, which became a headline. To make that claim you need to count borrowed money as income and cherry-pick from the financial statements, which is horribly dishonest.”
Glennon adds that the health care coverage for retirees is protected, just as public pensions are, by the state Constitution. But unlike pensions, the state has set nothing aside to cover those costs.
The health care obligation has been piling up for years, but past CAFRs ignored it until the Governmental Accounting Standards Board, which sets accounting principles for state and local governments, insisted the losses be included in the annual financial reports.
“The [accounting] change finally exposed a monstrous growing liability that has been mostly hidden,” Glennon said. “Instead of ignoring it as just a bookkeeping quirk, Illinoisans should be educated about it. That’s the state’s liability for future health care costs for state retirees. The state now says that’s a whopping $55 billion [includes all health care coverage costs] and growing by billions every year."
Glennon said that additional 2018 fiscal year losses, totaling $5 billion, are the result of the state spending more than it brings in.
“The phony budget numbers cover that up, but these audited financial statements get at the truth that politicians try to hide,” he said. “That $5 billion of routine losses would have been closer to $10 billion, which is the recent average for the state, except that FY 2018 was a particularly great year for stocks, which propped up the pensions by about $4 billion.”