Taxpayers United of America’s Executive Director, Jared Labell, was interviewed by Illinois News Network about the dire financial state of Illinois’ rainy day fund.
States rely on “rainy day” funds to get by during an economic downturn to avoid raising taxes.
The stopgap budget may have come to the temporary rescue of many state-run operations, but the intermediate spending plan is emptying Illinois’ rainy day fund.
Ideally, the rainy day fund should hold between $1.5 billion to $3 billion, financial experts say. The State Journal-Register reported, however, that as of Aug.12 the fund had dwindled to approximately $180 million. The balance is anticipated to reach zero in a few weeks.
“(The money) is mostly going back into the government, while we see the private sector continuing to squeak by,” Jared Labell, executive director for Taxpayers United of America (TUA), said. “This is very dangerous.”
A study released by the Mercatus Center at George Mason University earlier this year, revealed that most states aren’t financially equipped to deal with the typical drop in revenue that comes with a recession.
Illinois ranked among the least prepared states because its account has been used to help cover the state’s day-to-day expenses when the amount in the general operating fund isn’t enough to cover the state’s bills.
Illinois’ rainy day fund has had a maximum balance that ranged from $226 million to $275 million in the past; however, the daily balance is often zero, or close, the State Journal-Register noted.
Labell said Illinois is in this financial predicament largely because of politicians.
“Politicians care about the next election cycle,” he said. “If that means they will take money from one fund and sweep it into another, they’ll do that if it means short-term political gain.”
Putting Illinois back on a path to financial success will be difficult “because the political process itself is so bad.”
But there is hope, he added, because taxpayers are more aware than ever because of the disastrous situation Illinois is in.