March 30, 2018

Simonds lecture looks at causes and consequences of Illinois’ fiscal woes

by Pete Rosenbery

Eileen NorcrossCARBONDALE, Ill. — Eileen Norcross, one of the nation’s top experts on public finance, will focus on how Illinois got into its fiscal mess and review proposed solutions next week at Southern Illinois University Carbondale. 

Norcross will present the SIU School of Law 2018 Gene and Katy Simonds Lectureship in Democracy on Thursday, April 5. Norcross’ lecture, “Illinois Fiscal Breaking Points: Causes and Consequences of a State in Distress,” begins at 5 p.m. in the Hiram H. Lesar Law Building Auditorium. 

The lecture is free and the public is invited. A Q-and-A and reception will follow.

Media Advisory

Reporters, photographers and camera crews are welcome to attend the Simonds Lectureship in Democracy with Eileen Norcross at 5 p.m., April 5, in the SIU School of Law Auditorium. For more information or to arrange interviews contact Diane Regan, the law school’s interim director of communication and alumni outreach, at 618/453-8768.

Norcross is director for the State and Local Policy Project and Senior Research Fellow at the Mercatus Center at George Mason University. George Mocsary, assistant professor in the School of Law, said Norcross’ lecture is “an opportunity to engage the topic in depth from an intellectual standpoint, free of the shallow sound bites that permeate modern discourse.” 

“The lecture will trace the causes of Illinois’ fiscal distress to its major fiscal institutions – the rules of the game – which are created, shaped and at times evaded by policymakers,” Norcross said. “These rules have put Illinois on a difficult-to-correct path that point to the need for structural solutions.” 

Several factors for Illinois’ deficit 

Norcross said the factors behind the state’s massive deficit include:

  • Illinois’ Balanced Budget Requirement,
  • The 1970 state constitution pension clause,
  • The use of “fiscal evasion” or accounting, budgeting and debt measures to alleviate short-term pressure while shifting burdens into the future. 

Norcross will also review the state’s finances, the state’s major fiscal institutions and their design and weaknesses, and a number of structural solutions that are proposed, including those that look to the federal government for intervention. 

State’s $8 billion bill backlog is traced to a few factors 

Norcross said a few factors have contributed to the state’s $8 billion bill backlog, including Illinois’ balanced budget requirement that allows the state to “report ‘technical’ but not actual budgetary balance.” 

“By permitting the state to carry-forward deficits, and include debt and fund sweeps as revenue, the state has run a structural deficit for close to two decades,” she said. “The state’s recourse to debt to cover what should typically be financed with tax revenues is another source of ongoing fiscal weakness in which proposed spending fails to match up with traditional revenue sources.” 

Insufficient pension funding is another problem 

“The decades-long lack of a sound funding policy — insufficient contributions and bonding for contributions — for the state’s pension system has led to a gaping hole that cannot be met without significant reform,” Norcross said. “At the root of these problems is an accounting that fails to accurately measure fiscal risks for long-term obligations.” 

Norcross said the biggest problem facing the state is its unfunded pension liabilities “which are slated to demand more of the general fund for years to come.” 

“That is the driver of many other fiscal/budget/revenue pressures both the state and the local governments are currently facing,” she said. 

No easy path to financial sustainability 

Because the state’s problems “are structural rather than cyclical, Illinois does not have an easy path to financial sustainability,” Norcross said. 

  • Demands of funding employee obligations resulted in tax increases and in some areas, a reduction in services – paying more taxes and getting less in services makes Illinois less competitive
  • A sustained population loss in the state would further weaken the tax base. 

Illinois is at a “consequential moment” 

Norcross said Illinois’ economy remains strong and diversified. She said it is also good the state’s fiscal problems are well documented and discussed. The multiple bond downgrades have also resulted in a discussion on the “risks of continuing on this path,” Norcross said. 

A “positive consequence” is Illinois has an opportunity to “undertake meaningful structural solutions and re-design fiscal rules so that they constrain lawmakers to general principles of fiscal discipline but not bind them in perpetuity to what should be under the purview of the legislature,” she said. 

“It is a chance to end years of evasive budgeting and accounting tactics and signal that the state is ready put itself on solid fiscal foundations,” Norcross said. 

Norcross’ work is widely cited 

In addition to Norcross being widely cited in various media outlets, her opinion pieces have appeared in the Wall Street Journal, the New York Post, Christian Science Monitor, US News & World Report and Forbes. 

She has also testified before Congress on issues that include the Community Development Block Grant program, state and local pension underfunding, municipal bankruptcy, and the use of technology to monitor stimulus funding. Norcross has also testified on fiscal and budgetary policies in Pennsylvania, Florida, California, New Hampshire and Montana. 

Norcross received both her master’s and bachelor degrees in economics and American history from Rutgers University.