Budget Deficits in the States: Illinois

During FY 2009 and FY 2010, the State of Illinois was faced with significant fiscal challenges. The national recession was adversely impacting the state's economy, while the state had been struggling since the last recession with operating budget deficits and large unfunded pension liabilities. In the spring of 2009, the Governor's Office of Budget and Management estimated that in the absence of any intervention, there would be a $4.3 billion budget deficit in FY 2009 and a $7.3 billion budget shortfall in FY 2010. This paper discusses the magnitude and nature of Illinois' fiscal problems and the factors that have contributed to this situation. It also discusses Governor Quinn's proposed budget for FY 2010, as well as the legislative response. Although the state passed a capital budget and an operating budget, the outlook for the future remains uncertain. The operating budget significantly relies on one-time revenue and funding sources (including $3.4 billion in debt) and the state has approximately $100 billion in unfunded accrued liabilities for pensions and other postemployment benefits.