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Watchdog group: State deficit to grow to $5 billion

Updated: December 1, 2011 5:27AM

SPRINGFIELD — Despite an infusion of new tax dollars and budget cuts, state government’s deficit will grow to $5 billion by next July because of added pension and debt costs, a government watchdog group warned in a report being released Monday.

The Civic Federation said the jump in this year’s net operating deficit from $4.6 billion last year demonstrates why Illinois lawmakers need to wring pension concessions from existing state workers, an untried, constitutionally questionable proposition that could be on the General Assembly’s fall agenda.

“In spite of a tax increase, we’re actually losing ground under this budget,” said Laurence Msall, president of the non-partisan budgetary think tank.

The actual operating gap between revenues and expenditures dropped this year to $454 million from $3.9 billion last year because of the January increase in the state income tax, the group found.

But that improved financial position does not tell the whole story because the budget that Democratic lawmakers crafted and Gov. Pat Quinn enacted underfunds the state’s Medicaid health-care program for the poor by $1.7 billion, pushing those costs into next year, and did not include enough to pay off tax refunds owed to businesses, the group contended.

And even though the state has cut spending by $298 million over 2008 levels, those reductions will be more than offset by the need to spend $1.98 billion more in pension contributions and $1.14 billion more in increased borrowing costs.

“This doesn’t surprise us a lot in what we found. We warned against this. But when you see it put together and do the projections, these are staggering financial challenges the state faces,” Msall said. “It’s an incredible indictment to the state’s fiscal instability.”

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