According to a report by the University of Illinois Institute for Government and Public Affairs, Illinois today faces an infrastructure funding deficit of as much as $31 billion. Add on infrastructure funding deficits facing autonomous agencies including the Illinois Tollway, RTA, and CTA, and Illinois’ infrastructure funding deficit is billions more. And the entire state general revenue budget last year was around $33 billion.
Time to waste $570 million on a “signature project” flyover to shave 20-30 seconds off the very best CTA commute time in Chicago?
Martin J. Luby, the report’s author, advises:
“Given the scarcity of funding for infrastructure, the state must identify and fund projects that will have the greatest benefit to the state as a whole. This means rejecting projects whose benefits are small and primarily localized even if supported by a strong political constituency. “
Read Luby’s opinion piece in Crain’s:
Don’t look now, but Illinois has another deficit
By Martin J. Luby, Crain’s Chicago Business, 9/8/2015
We all have read a lot in the past few years about Illinois’ two major financial deficits. There is a large mismatch between sustainable operating revenues and costs for existing programs—this is our structural deficit, which is on the order of $6 billion per year. And Illinois has an immense pension deficit, estimated to be greater than $100 billion.
But there is a third fiscal deficit facing Illinois that largely has been ignored: the lack of funding for the state’s physical infrastructure. In a report by the University of Illinois Institute for Government and Public Affairs, I estimate that this infrastructure funding deficit may be as large as $31 billion. That is, to maintain our state’s roads, bridges, water and wastewater systems, school buildings and so forth, Illinois would have to devote $31 billion more to the effort than they previously have been doing.
To put that figure in perspective, the entire state general revenue budget last year was around $33 billion.
This estimate only includes infrastructure managed by the state itself, not its autonomous agencies such as the Illinois Tollway, the Regional Transportation Authority, the Chicago Transit Authority or any Illinois local governments. Including these entities increases the infrastructure funding deficit by billions.
Why is this deficit important? Economists agree on the importance of a vital and well-maintained infrastructure to overall economic health. Illinois’ excellent and long-standing system of highways, railroads and airports have helped drive the state’s economic success for over 150 years and given it an advantage over other states.
By failing to maintain, replace and improve its infrastructure, Illinois limits the productivity and income-earning ability of its businesses and workers. This ultimately will lead to a lower standard of living for future generations.
WHAT CAN BE DONE?
First, the state must come to grips with the size and scope of this problem. Our report is a step in this direction.
Second, elected officials must improve the state’s capital budgeting process to help address the infrastructure funding deficit. They must identify long-term, sustainable streams of revenue and reform the capital budgeting process to be less episodic and, thus, less at the mercy of changing political winds.
Third, given the scarcity of funding for infrastructure, the state must identify and fund projects that will have the greatest benefit to the state as a whole. This means rejecting projects whose benefits are small and primarily localized even if supported by a strong political constituency.
Fourth, the state must address its other two deficits. Since infrastructure funding is often financed with long-term debt, the state’s poor financial reputation in the bond market makes borrowing for infrastructure much more expensive than it should be.
Ultimately, all Illinois stakeholders must incorporate the state’s infrastructure funding deficit into their assessment of the fiscal condition of the state. Given the fiscal and budgetary urgency of dealing with the state’s overwhelming obligations, it may seem convenient to overlook the state’s infrastructure funding deficit. But this is extremely perilous for the state’s long-term economic health.
Illinois Gov. Bruce Rauner has placed Illinois’ economic turnaround at the top of his agenda. Fixing our infrastructure funding deficit must be integral to that effort.
Martin J. Luby is a visiting scholar at the University of Illinois Institute of Government and Public Affairs and an associate professor in the School of Public Service at DePaul University.