State of Illinois Budget State of Illinois Budget

An Uphill Battle

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011$19.00

$21.00

$23.00

$25.00

$27.00

$29.00

$19.90

$21.30

$22.70$23.40

$22.30

$23.50

$23.80

$24.50

$26.00

$27.50

$29.60

$26.00

$26.61

State Spending

In Billions

Give Illinois a nickel, it’ll spend a dime…

Uncontrolled SpendingUncontrolled Spending

FY2003 spending has increased $4.3 billion or 19%!

Borrowing to SpendBorrowing to Spend

Thompson, $300

Edgar $3,672

Ryan $1,000

Blagojevich $8,815

Quinn $3,350

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

In m

illi

on

s

Short-Term Cash BorrowingThompson to Quinn

1983-2002 Since 2003

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011$0.00

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00

$5.27 $5.46

$5.89

$6.60

$7.63

$18.81$19.56 $19.89 $20.25 $19.93 $19.41

$18.40

$24.50

$26.70

General Obligation Bond Debt: Mortgaging the Fu-ture

In Billions

Worst Funded Pension System in the Nation

Worst Funded Pension System in the Nation

UNFUNDED PENSION LIABILITIES

($90)

($80)

($70)

($60)

($50)

($40)

($30)

($20)

($10)

$0

FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 Est.

Billio

ns

$10 B Pension Bonds

Unpaid BillsUnpaid Bills

-$7,000

-$6,000

-$5,000

-$4,000

-$3,000

-$2,000

-$1,000

$0

$1,000

FY2000 FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011

$777

$300

-$1,220-$1,094

-$410 -$474-$291

-$135

-$834

-$3,674

-$6,475 -$6,475

Mil

lio

ns

Governors Discretionary13%

Public Safety5%

Government Services5%

Economic Development & Infrastructure

0.5%

Environmental & Business Regulation

0.2%

Education35%

Human Services41%

Fiscal Year 2011 Appropriations by Major Purpose GRFGRF Total: $26.014 Billion

Sales Tax 23%

Corporate Income Tax6%

Individual Income Tax31%

Public Utility Tax4%

Federal Aid23%

Other Sources7%

Lottery/Riverboat4%

Other Transfers2%

Fiscal Year 2011 Revenue by SourcesPercentage of Total

General Funds: $27.655 Billion

Illinois Citizens Enrolled in Medicaid

1.0

1.5

2.0

2.5

3.0

FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11

Mill

ion

s

There are 2.8 million Illinoisans on Medicaid - that's 1 of every 5 people.

1.2 million people have been added to the program since Democrats took

control, an increase of 75%

Exploding Medicaid GrowthExploding Medicaid Growth

Covers 2.8 million Illinoisans

Covers 1 of every 5 Illinoisans

Covers 1 of every 2 births in Illinois

Covers 2 of every 3 nursing home residents

in Illinois

Covers 1 of every 3 children in Illinois

Medicaid is the Largest Insurer in the State

Medicaid is the Largest Insurer in the State

Medicaid Costs

$6.0

$7.0

$8.0

$9.0

$10.0

$11.0

FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11

Bil

lio

ns

Medicaid costs have escalatedat an average rate of 8%.

At this rate, the program willdouble every 9 years .

More People and Higher CostsMore People and Higher Costs

Borrowed for Pensions$3.5 B

Federal Stimulus $1.5 B

Fund Sweeps, $360 MBond Refinancing, $500 M

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

In M

illi

on

s

Total = $5.8 Billion

FY10 One Time Revenues

Replacement of One-time Revenues, $5.8 B

Pensions, $1.5 B

Medicaid Increase, $500 M

Unpaid Bills, $6 B

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

In M

illi

on

s

Total = $13.8 Billion

FY11 Starting Shortfall

Job Growth in Neighboring States since 2003

-3.1%

2.2%

-0.7% -1.0%-1.6%

-4.2%-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

Illinois Indiana Iowa Kentucky Missouri Wisconsin

Lagging BehindLagging Behind

Lagging BehindLagging Behind

Job Growth in Peer States since 2003

-3.9%

0.3%1.1%

10.7%

-4.2%-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

Illinois California New York Florida Texas

Texas added 1 million jobs

If Illinois had simply grown at the national average over this time period, we’d have 350,000 more jobs today.

If Illinois had grown jobs at the rate of Texas, we’d have over 850,000 more jobs today and over $3 billion in associated state revenue annually.

Business ClimateBusiness Climate• Chief Executive Magazine ranks Illinois 46th in the nation

of best states in which to do business. The ranking is done by surveying 600 major company CEOs.

• In this year’s ranking Chief Executive Magazine ranked Illinois as the biggest loser over the last 5 years, as we dropped from ranking 17th to 46th in the last five years.

• Citizens of Chicago pay the highest sales tax (9.75%) of any city in the nation.

• Forbes Magazine ranked Illinois #50 (worst in the nation) for debt burden. According to Forbes, we have the worst debt problem of any state in the country.

Average Worker’s Compensation Costs (per $100 of payroll)

Average Worker’s Compensation Costs (per $100 of payroll)

State Cost Rank

Indiana $1.23 2nd

Iowa $1.86 11th

Wisconsin $2.12 18th

Missouri $2.20 23rd

Illinois $2.79 40th

*Source: 2009 ALEC-Laffer State Economic Competitiveness Index

Overall Economic Performance*Overall Economic Performance*

Source: 2009 ALEC-Laffer State Economic Competitiveness Index

State Economic Performance

Economic Outlook

Kentucky 31st 36thWisconsin 41st 27thMissouri 44th 23rd

Iowa 45th 35th

Indiana 47th 17thIllinois 48th 44th

*Historical measure based on a state’s performance in three important performance variables: Personal Income Per Capita Cumulative Growth, Absolute Domestic Migration and Non-Farm

Payroll Employment Cumulative Growth -- all highly influenced by state policy.

Losing JobsLosing Jobs

• Illinois ranks 47th in the nation in job growth.

– Only three states in the nation have performed more poorly than Illinois over that time period. (Michigan, Ohio & Rhode Island).

• Illinois has LOST almost 250,000 jobs.

– During that same time period, 30 other states added jobs.

• Illinois LOST over 4% of its jobs while the average state INCREASED jobs by 1.7%.

– If Illinois had simply grown at the national average, we’d have 350,000 more jobs today.

– If Illinois had grown jobs at the rate of Texas, which grew jobs at over 10%, we’d have over 850,000 more jobs today and almost $3 Billion in associated state revenue annually.

Credit RatingCredit Rating

• Illinois has the lowest credit rating of any state in the nation.

– Every other state in the nation is operating in the same national economy, yet we are rated worst. We’re not just like every other state. We’re worse than every other state.

• Almost half of all the credit downgrades in the history of Illinois have occurred on Pat Quinn’s watch.

– We’ve been downgraded 8 times in less than two years (of 17 total in history).

• Lower credit ratings mean higher interest payments for Illinois taxpayers.

– These downgrades will cost taxpayers hundreds of Millions of dollars.

• Illinois has one of the highest risks of default of any sovereign government in the world.

– Lately, Illinois regularly ranks in the top 10 highest default risks with countries like Iraq, Greece, Pakistan and Iceland.

History of Illinois Credit Downgrades

6

3

8

0123456789

Before Blagojevich(Prior to 2003

covering 24 years)

Under Blagojevich(2003 to 2009

covering 6 years)

Under Quinn (2009 to Present

covering 18 months)

Num

ber o

f Cre

dit D

owng

rade

s

Average State Income Taxes, 2010, Top 15

Rank StateAverage Tax in

Percent

1 Oregon 8.00

2 North Carolina 6.88

3 Rhode Island 6.85

4 Minnesota 6.60

5 New York 6.49

6 Vermont 6.25

7 Hawaii 6.20

8 Wisconsin 6.18

9 New Jersey 6.08

10 California 5.40

11 Massachusetts 5.30

12 Maine 5.25

13 Illinois 5.0014 Kansas 4.98

15 Connecticut 4.75

Bottom 15Rank State Average Tax in Percent

36 Indiana 3.40

37 North Dakota 3.35

38 New Mexico 3.30

39 Pennsylvania 3.07

40 Current Illinois 3.0041 Oklahoma 3.00

42 New Hampshire 0.00

43 Tennessee 0.00

44 Alaska 0.00

45 Florida 0.00

46 Nevada 0.00

47 South Dakota 0.00

48 Texas 0.00

49 Washington 0.00

50 Wyoming 0.00

Taxes and your Bottom LineTaxes and your Bottom Line

Source: Illinois Policy Institute

Effective Corporate TaxesEffective Corporate Taxes

Pre-Lame Duck: 7.3%Post-Lame Duck: 9.5%

We are now FOURTH highest in the nation.Worldwide, our corporate taxes are higher than Japan.

FY 2011 FY 2012 FY 2013 FY 2014 FY 2015$30,000

$31,000

$32,000

$33,000

$34,000

$35,000

$36,000

$37,000

$38,000

$39,000

$40,000

$33,500

$36,818

$37,554

$38,305

$39,072

Axis Title

16.63% increase over four years

Increases in the State Spending CapIncreases in the State Spending Cap

Solutions!Solutions!

• No new spending until the state can pay its bills within 30 days

• Cut overall spending by 10%

• Further Medicaid reforms

• Pension concessions with guaranteed funding

• Forensic Audit

• Zero Based Budgeting

• Sell state fleet of cars and airplanes

• Eliminate Lieutenant Governor office

• Combine comptroller and treasurer

• More on JimWatsonIllinois.com