State News Roundup

August 9, 2012

In Illinois, the state will spend more on its pension system than on education by 2016, according to a study released by Governor Pat Quinn’s office. The state faces $83 billion in unfunded liabilities from its five pension systems. Illinois’s budget deficit and unfunded pension liabilities have led to a credit downgrade and a 67% tax increase. Meanwhile, the state is struggling with a crippling budget deficit as a result of the same pension liabilities, but is unable to raise funds even with the fourth highest combined local and national corporate tax rates in the industrialized world. A lack of reform or decrease in government spending could lead Illinois down France’s path to a 75% tax that raises little revenue and drives citizens to relocate.

In Montana, the state legislature isn’t in any hurry to face the $3 billion shortfall in the state’s pension system over the next thirty years. The state’s legislature has failed to act on Governor Bob Schweitzer’s plan to have employees and state and local employers pay more into the system. Governor Schweitzer said of legislators, “Inaction means they are acting like Congress and they are taking a pension system that could easily be made whole with current revenue…If you kick it down the road, it increases the liability and increases the instability and makes the problem worse.”

In Alaska, Governor Sean Parnell made reducing government spending a priority. Facing economic uncertainties and decreased revenue from oil production, the state must focus on reducing spending to keep a balanced budget. Governor Parnell said, “When oil prices go down, our spending is going to go down, too.” The biggest areas of spending are on Medicaid and education. Parnell thinks accountability and increasing efficiency is the way to improve education as opposed to cutting funding, which leaves Medicaid on the table. Parnell is wary of expanding Medicaid under the new health care law without understanding the full costs and benefits. Parnell expressed concern over Medicaid expansion saying, “Our history with the federal government right now is they cut what they promise to fund.”

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