Illinois Has At Least $17.47 Billion In Surpluses of the Taxpayers Money it is not using.

  FY 2003 Report Home Page Flags courtesy of Robesus Inc.



The State of Illinois at the State-level has approximately $17.47 billion of the taxpayer's money it is not using, i. e. surpluses equal to $1,386 for every man, woman and child in Illinois or $5,544 for a family of 4. This does not include all the additional surpluses that exist in the school districts, cities, or counties in Illinois.

The Exhibit A below shows the results of the FY 2003 review.

What are these surpluses we refer to?

Government surpluses, as used in this report, are funds that are not required or needed for the operation of all government operations, funds, accounts, agencies, etc., directly or indirectly, for the year(s) covered by the budget which is usually one year. Theoretically, at the end of every fiscal year, governments should have little or no cash/investments on hand. But what we have found is that most governments have huge amounts of cash and investments on hand at the end of the fiscal year. And somehow these cash and investments are not being recycled back through the budget process the next year, but are being held year-after-year.

A Government Can Have a Budget Deficits/Shortfalls and Financial Surpluses At The Same Time.

This is the most deceiving topic that governments, politicians, and the news media have conveyed to the public about governmental financial matters. In realty, a government can simultaneously have a budget shortfall and a financial surplus of the taxpayers' money.

The problems are focused in four areas:

1. The budget only covers a small portion of the State's financial condition. There are a group of funds not part of the budget process. The complete list of funds and budgetary requirements are found in the Comprehensive Annual Financial Report (CAFR). This report depicts the complete financial status of the State. The budget only covers a portion of the financial resources of the government.

A Little Background:

The CAFR usually has four categories.

Categories Amount of Surplus(In thousands) Per Capita Surplus Family of Four
Governmental Funds 5,754,140   457   1,827
Proprietary Funds 1,914,757 152 608
Fiduciary Funds 5,638,853 447 1,790
Component Units 4,158,314 330 1,320
Total...  17,466,064 1,386  5,544

Governmental Funds involve activities of the government including most basic services such as environmental resources, general government, transportation, education, health and human services, and protection of persons and property. Most of the cost of these activities are financed by taxes, fees , and federal grants.

Proprietary Funds are used when a government charges customers for the services it provides, whether to outside customers or to other agencies with the state. For example, Enterprise Funds, a component of proprietary funds, are for activities that provide goods and services to outside (non-government) customers, which includes the general public. Fees, charges for services or goods, assessments, fines, licenses, etc. are the major revenue sources.

Fiduciary Funds are activities in which the state acts as a trustee or fiduciary to hold resources for the benefit of others. These funds are pension trust funds, investment trusts, and agency funds (which are for assets held for distribution by the government as an agent for other governmental units, other organizations, or individuals).

Component Units reportedly are legally separated organizations for which the government is financially accountable. Usually fees, charges for services or goods, assessments, fines, penalties, licenses, etc. are the major revenue source.

The budget, as commonly known to the public, only involves the Governmental Funds and may not even include all of the governmental-type funds. The remainder of the Funds shown above are not part of the budget and are commonly called "off-budget" items.

2. Next year's budget consists only of next year's estimated revenues and next year's estimated expenditures. Previous years' revenues not used (spent) are normally not considered in the next year's budget, but should be. In other words, the previous years' revenues (as shown in the CAFR) are not recycled back to the budget process.

Historically, a budget consists of three parts: 1) Funds brought forward (funds not previously spent); 2) Next year's estimated revenues; and 3) Next year's estimated expenditures.

But somewhere along the way the funds brought forward category was lost. In accounting, the previous years' revenues are no longer called revenue but have been converted to Cash and Investments. Since they no longer called Revenues governments have forgotten about them to the public. They are there but not considered in the budget process, but should be.

3. The budgeted items and non-budgeted items (off budget) should be budgeted to zero (usually referred to as zero-based budgeting). In addition, the government should be on a pay-as-you-go basis, no reserves for future years. What this means is that you budget to have a zero fund balance. If you plan to spend $100 you budget for $100 with no excess or reserve allowed.

For example, the State of Illinois Special Revenue Funds (Governmental Funds), considered part of the budget, have fund balances of $1,407 million that probably will not be considered in the next year's budget. The total cash and investments, funds that were not used during the current year, was $2,077 million (surplus) and should be part of the next year's budget. So if next year there is a "budget deficit" ask about these funds not being considered or used.

4. Budgeted expenditures should be last year's expenditures (as shown in the CAFR) with an adjustment for increase in requirements (costed out) or reductions in requirements. In most cases the CAFR expenditures are not considered in the next year's budget because the CAFR in many cases is published after next year's budget is considered and sometimes approved.

Running Surpluses is Stealing

Although taxation is legitimate, running a government surplus isn't. It represents a taking by the state, because it exceeds the government's contract with the community. It is no different than if a federal agency were to take a person's land or possessions without just compensation (an activity barred by the Fifth Amendment). Excess taxation isn't what the people bargained for.

In presuming entitlement or authority not ceded by the community, the state abrogates its moral pact with those it governs. Its power is no longer derived from the people, whose rights to liberty and property it boldly denies.

"Collecting more taxes than is absolutely necessary is legalized robbery" - Calvin Coolidge

The Governor and the Legislators

The Governor and the legislators should include in the next year's budget the previous years revenues not spent as indicated by the CAFR. These were once a revenue and should still be considered revenue for budgetary purposes.

Also, they should consider a zero-balance budget concept for all budget and non-budgetary items in the CAFR including the College and Universities and the Component Units.

Budgeted expenditures (for the budget) should be last year's expenditures (from the CAFR) adjusted for demonstrated requirement changes in project, program or services. An increase in requirements should include the costs of these additional requirements. Conversely, a decrease in requirements should result in a decrease in costs associated with the decreased requirements.

The Governor and legislators should take into consideration the entire financial condition/status of the State in the budgetary process by including all of the funds in the CAFR as being a part of the budget.

This system is covered in the CAFR Budget System. This system needs to be implemented in all governments.

If the State holds the excesses/surplus, it will earn 4% to 5% on that money. If the State returns the money to the people it will receive 20% in revenue because of the increased economic activity. This is elementary economics.

Laws need to be changed.

Every thing done by governments is by law. There are laws that state this or that regarding the use of some of the funds. Man made the laws, man can change the laws. How much effort would it be to include at the end of every law "...or if considered excess or not needed for the current operation that the funds will be refunded to the taxpayers?" See how easy it is.

At one time every law had its place, but things change. The laws need to be reviewed for change to meet the current needs of the government and the people to release these funds for use/refunded.

If this were accomplished, the State would have a huge surplus to refund (rebate or tax reductions) to the taxpayers. Such a refund would create considerable wealth and jobs, increase wages, increase State and local government revenues, dramatically increase the economy, and create the greatest economic expansion in the history of the State. Everyone wins.

If you want to know the financial condition of your government(s), do not look at the budget. Get the CAFR.

The Synergistic Magic of Economics.

What happens when the government holds the $17.47 billion.

  (In Thousands) Investment Income   Per   Capita Family of 4    
  The government holds and investments the surpluses at 4.5%. 785,973 62 249  

Here is what happens when the $17.47 billion is returned to the taxpayers (the private economy).

  (In Thousands) Surplus
Per   Capita Family of 4    
  The surplus is returned to the taxpayers. 17,466,064 1,386 5,544  
  Wages are increased. 8,733,032 693 2,772  
  State government revenues increase. 4,573,640 363 1,452  
Local government revenues increase. 3,658,912 290 1,161  
  Federal government revenues increase. 9,147,281 726 2,904  
  Total Benefits...   3,458 13,833  

In FY 2003 unemployment was 415,719. If the $17.47 billion is returned to the people, 457,364 jobs will be created. There would be a labor shortage in Illinois. This is why it is disastrous for governments to hold excesses/reserves of the taxpayers money.

Note: The economic impact analysis is further explained at Economic Impact Analysis.

The business community suffers the most.

Before the 9-11 tragedy, President Bush and Congress provided tax rebates which averaged $427 for every American. This was to create an additional $60 billion in consumer (economic) spending, turn the economy around and create jobs for the unemployed. However, 9-11 change that.

As the above economic impact chart shows, if the State returned the $17.47 billion in surpluses to the people the State economy would grow by $3,630 per capita. That is 9 times the amount the Federal government used to stimulate the U.S.A.. economy. Businesses net incomes could double or triple. This is elementary economics.

What to do?

Unless the budget flaws are corrected and the entire State finances are used in the budget process, the problems that created the surpluses will continue to exist. The budget deficits reported by the Governor and legislatures will be used year after year for the excuses for tax increases and/or to reduce needed services.

Just stopping a tax increase or a reduction in services will not solve the problems. The problems will come back the next year.

I have provided the details of the surpluses and explained the ways the surpluses are accumulated. The data is accurate because it comes directly from the government's own financial statement, the CAFR. You must provide the where-with-all to convince the Governor and legislatures that the surpluses exist and what should be done about it. I live in Arizona. It is not my money that is at stake.

Exhibit A

The 2003 CAFR is located at:

Items not Included

The following items are not included in the amount of surplus shown:

-Buildings, roads, bridges, land (not for sale), and equipment.

-Deferred compensation plans for employees. These are plans in which the employee contributes to his/her retirement over and above the normal employee retirement contribution.

-Any fund that is 100% supported by donations, bequests, gifts, endowments, etc. These are not taxpayers money.

-For Colleges and Universities. All endowment and similar-type funds should not be included as surpluses. Sometimes these funds are combined with other college/university funds. We are interested in surpluses, so in these cases the total amount should not be included.

-Funds in which the revenues/contributions are 100% held for other individuals, organizations or another government.

-Funds that are required by law in which a bank, financial institution, insurance companies, etc. are required to deposit with the government a certain amount for insurance against the entity going bankrupt. These are not taxpayers' money.

-Retirement/Pension Funds - only included are 1/2 of the actuarially determined excesses, the taxpayers portion. The other 1/2 is the government employees portion.

  Review of The State of Illinois CAFR- FY 2003

CAFR Page List of Investments By Fund (In thousands) Surpluses Notes
No Governmental Funds:    
CAFR    General:    
Pages       General Revenue Account 629,127  
        Education Assistance Account 211,646  
        Common School Account 133,808  
     Medicaid Provider Assessment Program:    
        University of Illinois Hospital Service Account 16,715  
        County Hospital Service Account 5,690  
        Long-Term Care Provider Account 56,654  
        Other Medicaid Provider Assessment Accounts 8,515  
     Road Fund 464,539  
     Motor Fuel Tax Fund 114,647  
     State Construction Account 245,172  
     Special Revenue Funds:    
           Tobacco Settlement Recovery Fund 42,246  
        Children and Family Services:    
           DCFS Training Fund 6,451  
           DCFS Childrens' Services Fund 39,170  
           DCFS Federal Projects Fund 3,171  
        Commerce and Community Affairs:    
           Supplemental Low Income Energy Assistance Fund 22,557  
           Fund for Illinois' Future 71,234  
           Tourism Promotion Fund 19,131  
           Low Income Home Energy Assistance Block Grant 14  
           Community Development /Small Cities Block Grant 25  
           Build Illinois Capital Revolving Loan Fund 33,549  
        Human Services:    
           Prevention and Treatment of Alcoholism and Substance          Abuse Block Grant Fund 121  
           Vocational Rehabilitation Fund 4,804  
           DHS Special Purposes Trust Fund 45,831  
           Old Age Survivors Insurance Fund 57  
           Early Intervention Services Revolving Fund 30,720  
           USDA Women, Infants and Children Fund 7,593  
           Community Mental Health Medicaid Fund 1,329  
           Local Initiative Fund 8,028  
           Maternal and Child Health Services Block Grant Fund 9  
           Food Stamp and Commodity Fund    
        Public Aid:    
           Special Education Medicaid Matching Fund    
           Trauma Center Fund 8,023  
           Child Support Enforcement Trust Fund-Administrative 40,388  
           Public Assistance Recoveries Trust Fund 1,111  
           State Gaming Fund 29,919  
           State and Local Sales Tax Reform Fund 27,906  
           County and Mass Transit District Fund 43,321  
           Local Government Tax Fund 223,658  
           Illinois Sports Facilities Fund 3,500  
           Illinois Tax Increment Fund 5,296  
           Local Government Distribution Fund 45  
           Municipal Telecommunications Fund 50,783  
           Personal Property Tax Replacement Fund 162,430  
           Build Illinois Fund 13,168  
           Federal/Local Airport Fund 2,558  
           State Rail Freight Loan Repayment Fund 13,535  
           Public Transportation Fund    
           Downstate Public Transportation Fund 12,755  
        Natural Resources:    
           Open Space Lands Acquisition and Development Fund 27,022  
           Parks and Conservation Fund 9,860  
        Other Department Funds:    
           Services for Older Americans Fund 127  
           Wireless Service Emergency Fund 6,131  
           Department of Corrections Reimbursement Fund 321,263  
           Title II Social Security and Employment Service Fund 35,207  
           State Pension Fund 33,226  
           Public Health Services Fund 6,454  
        Environmental Protection Agency:    
           Brownfields Redevelopment Fund 9,574  
           Hazardous Waste Fund 31,190  
           Vehicle Inspection Fund 6,335  
        State of Board of Education:    
           Drivers Education Fund 3,506  
           SBE Federal Department of Agriculture Fund 506  
           SBE Federal Department of Education Fund 1,440  
           School Technology Revolving Loan Program Fund 44,714  
        Other Agencies, Boards and Authorities:    
           School Infrastructure Fund 3,844  
           Juvenile Accountability Incentive Block Grant Fund 11,811  
           Rate Adjustment Fund 3  
           McCormick Place Expansion Project Fund    
           Help Illinois Vote Fund 44,935  
           Underground Storage Tank Fund 35,546  
        Student Assistance Commission:    
           Federal Student Loan Fund 47,004  
        Other 710,832  
     Debt Service Funds:    
        General Obligation Bond Retirement and Interest Fund 1,037,538  
        ESCO Debt Service Fund 4,422  
        Illinois Civic Center Bond Retirement and Interest Fund 21,462  
        Build Illinois Bond Retirement and Interest Fund 137,919  
        Other 5,957  
     Capital Projects Funds:    
        Build Illinois Bond Fund 125  
        Conservation 2000 Projects Fund 11,691  
        Transportation 110,608  
        Capital Development Board 148,263  
        Anti-Pollution Fund 17,840  
        Other 6,836  
     Permanent Funds:    
     Other Funds    
  Proprietary Funds:    
        Unemployment Compensation Trust Fund 105,674  
        Water Revolving Fund 309,147  
        Designated Account Purchase Program Fund 774,965  
        Nonmajor Enterprise Funds:    
           Central Management Services 52,230  
           State Lottery Fund 29,454  
           Prepaid Tuition Fund 343,567  
           Other 80,966  
     Internal Service Funds:    
        Central Management Services 205,820  
        Working Capital Revolving Fund 1,735  
        Other 11,199  
  Fiduciary Funds    
        Pension Trust Funds    
        Investment Trust Funds 5,402,138 1
        Private Purpose Trust Fund    
        Agency Funds:    
           Department of Insurance    
           Department of Public Aid    
           Department of Revenue 109,404  
           Other 127,311  
  Component Units:    
     Illinois Housing Development Authority 969,113  
     Toll Highway Authority 552,477  
     Other Authorities 200,783  
     Illinois State University 114,114  
     Northern Illinois University 89,448  
     Southern Illinois University 260,626  
     University of Illinois 1,795,939  
     Other Universities 175,814  
  Related Organizations: Financial Data Not Provided    
     Central Midwest Interstate Low-Level Radioactive Waste    Commission    
     Havana Regional Port District    
     Kaskaskia Regional Port District    
     Mt. Carmel Regional Port District    
     Shawneetown Regional Port District    
     Southwest Regional Port District    
     Tri-City Regional Port District    
     Waukegan Port District    
     White County Regional Port District    
     Illinois Community College System Foundation    
  Total Surpluses… 17,466,064  
  Per Capita… 1,386  
  Family of 4… 5,544  

This is a broad based investment pool and the explanation of the money in this fund are not sufficient to make a determination of exactly how much would be potential surpluses.


Note: For those familiar with governmental accounting, for surpluses we basically used GFOA Balance Sheet Account Classification Codes 101, 102, 103, 151, 153, and 170.

USAF Image

This report was prepared by:
Gerald R. Klatt
Lieutenant Colonel, USAF, Retired



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