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DEFICIT THIS!

10 MAJOR OCCULTED
EXPENSES

Where they are hiding
from reality:

ILLINOIS

The poster child!

Sheila Weinberg’s
absolute truth:

"One of your Chicago
friends..."

Resources &
definitions:

Getting a grip on CAFR

Slide 9

Pensions/OPEB

Medicaid deficit

Insurance

Indebtedness

Operating balance

Rainy Day Fund?

Public works/capital
projects

Federal “Recovery Act”
funds

Shifting expenses

Sales of state assets

It
is our duty to tell citizens – and many of the clueless

politicians
we elect – what the true deficit is for their

state.
It is going to be difficult, because we go where

no
journalist (or anyone else) has gone before. You

will
have to find your own way, but here are some

signs to
guide you along the trail.

End of slide show, click to exit.

DEFICIT THIS!

It is our duty to tell citizens
– and many of the clueless politicians we elect – what the true deficit is
for their state. It is going to be difficult, because we go where no
journalist (or anyone else) has gone before. You will have to find your own
way, but here are some signs to guide you along the trail.

10 MAJOR OCCULTED
EXPENSES

These are areas of hidden state
expenses adding up to trillions of dollars that taxpayers will have to pay

Where they are hiding
from reality:

Pensions/OPEB

Medicaid

Insurance

Indebtedness

Operating balance

“Rainy Day Fund”

Public works/capital projects

Federal “Recovery” funds

Shifting expenses into the next
fiscal year

Sale & leaseback of state
facilities

ILLINOIS

The poster child!

We’re using Illinois as an
example because, well … it’s Illinois!

Official Deficit: $24.4 billion

CAFR page 2 (24)

Sheila Weinberg’s
absolute truth:

Question 1

•       Revenues = expenses?

•
Deficit should be zero

•       Despite the fact that Illinois’
Constitution requires a balanced budget, the state’s debt now totals more
than $82 billion

•
Every child, woman and man’s share of state debt is more than $6,000

•       So how are we $82 Billion in
debt?

•       It all depends on how you count – or
don’t count

•       A very ‘sophisticated’ accounting
system calculates the budget

•      It
is political arithmetic, ask the politicians to explain it

Question 2 - The state is
issuing $3.4 billion in “pension” notes to balance budget

Question 3 - More than $2
billion of this year’s bills will not be paid until next year.

–      Should the State’s vendors be financing the
State’s operations, interest free?

Question 4 – The state takes
out a loan to pay contribution to pension plans?!

(Refer to Truth in Accounting’s
50-State Study)

"One of your Chicago
friends..."

One of your Chicago friends
calls to ask you, “What direction must I drive to get to Los Angeles?”  What would you tell her?

_________________________________________________

In 1984 you had debt of
$50,000.  Since that time you have
balanced your budget.  How much debt do
you have now?

_________________________________________________

If you take out a loan to pay
your current bills, would you consider your budget balanced?

_________________________________________________

Your goal each year is to
balance your budget by not spending more money than you make.  But each year your credit card balances
continually increase.  Are you reaching
your balanced budget goal?

_________________________________________________

A few years ago you sat down
with a financial advisor to set up a plan to fund your children’s college
educations.  Under this plan you are
suppose to put $4,000 into the college fund this year, so your kids can go to
college when they graduate from high school.
During these tough economic times your hours at work have been
dramatically cut, so your pay has also been significantly reduced.  You do not have a raining day savings
account and are having trouble making ends meet.  Should you still put money into the college
fund?

State Questions

The State of Illinois had $5
billion of debt in 1984.  Since that
time, the state’s budget has been balanced.
Based upon these facts and what you have heard, how much debt does the
State have now?

___________________________________________________________

If the State has to take out loans to pay
its current bills, would you consider its budget balanced?

___________________________________________________________

The State’s fiscal year ended
June 30, 2009.  On June 1, 2009
Children’s Memorial Hospital submitted a bill for Medicaid services provided
during the month of May 2009.  The State
is more than 100 days late in paying its bills, so this bill was not paid
until September 15.  Should this bill
be included as an expenditure in last year’s balanced budget calculation?

___________________________________________________________

In 1995 the Governor Illinois
General Assembly with the assistance of actuaries set up a plan to fund the
pension plans for State employees and teachers.  By law the State is suppose to put $4
billion into the pension plans this year.
During these tough economic times state revenues have dramatically
dropped.  The State has no rainy day
fund and is having serious trouble making ends meet.  Should the State still put money into the
pension system?

Resources &
definitions:

These are things you must know:

CAFR: Comprehensive Annual Financial Report

RSI: Required Supplemental Information

ARC: Actuarially Required Contribution

AAL & UAAL (Sheila will
explain)

OPEB: Other Post Employment Benefits

GASB: Government Accounting Standards Board

FMAP: Federal Medical Assistance Percentage

By state

ARRA: American Recovery and Reinvestment Act
of 2009

Census Bureau: Federal State
& Local Governments

NASBO: National Association of State Budget
Officers

NASACT: National Association of State
Auditors, Comptrollers & Treasurers

NGA: National Governors Association

NCSL: National Conference of State
Legislatures

Getting a grip on CAFR

Slide 9

Pensions/OPEB

Page X(16) CAFR

UAAL of the 5 state pension
plans:

$54.4 billion

UAAL of OPEB: $23.9 billion

2004 bond issue: $10.0
billion

2010 mandated ARC? $  3.0
billion

Total at least $91.3 billion

Medicaid deficit

Page IX (15) CAFR

Sect. 25 Finance Act 2008
-$2.4 billion

Page 6 (28)

Decrease in accrued
liability    $1.0 billion

Page 153 (175)

MPAP deficit 6/30/08 $0.1
billion

Page 154-5 (176-7) 318 (296)

MPAP combine/other $0.026
billion

Page 322/300

Special Education $0.001
billion

Total -$1.3 billion

1-time Federal Relief $1.3
billion

Insurance

Accrued self-insurance due

See Note 19 Page 128 (150)

Page 90 (112)

State Toll Highway
Auth. $0.001 billion

Page 91 (113)

Southern Il.
University $0.008 billion

Page 91 (113)

U of I $0.049 billion

Page 377 (399)

Change in net $????
billion

Indebtedness

Page X(16)

Debt service on all outstanding
general obligation bonds cannot exceed 7% of prior year’s General and Road
Funds appropriations. Currently 2% of total budget, Page 9 (31)

Page 6 (28) and 14 (36)

Bonds payable
liabilities $23.5 billion

Total liabilities $56.6
billion

Total state assets $36.7
billion

Page 15 (37) Bond ratings

Page 88 (110)

Changes in long-term
obligations

Operating balance

Page VII (13)

General Fund balance 06/30/08

GAAP: -$3.9 billion

Budgetary: -$835 million

Page IX (15)

Bills due immediately exceed
available cash. Budget Stabilization Fund “significantly less”

Rainy Day Fund?

$276 million gone Day 1

$3.3 billion in bills past due

Public works/capital
projects

Page 13 (35)

Road fund: Are projects being
deferred? Fund balance $255 million

State Construction Account:
Expenditures less than resources. Fund balance $440 million.

American Society of Civil
Engineers estimates immediate need at $27+ billion

Federal “Recovery Act”
funds

$3.4 billion in projects; $474
million in funds awarded; $22 million in funds received

Official Federal site

http://www.recovery.gov/Pages/home.aspx

Tracking recovery

http://www.recovery.org/

Shifting expenses

$2.4 billion carried over into
FY 2009

Page IX (15)

What is it for FY 2010?

Sales of state assets

Page VIII (14)

Student Assistance Commission
sold loan portfolios to retire debt, re-fund the program and leave how much
left over?

Page 28 (50)

What happens to cash receipts
from loan portfolios?

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