SPRINGFIELD, Ill. – While most other states enjoyed a little extra cash, Illinois suffered a $3 billion deficit in fiscal 2005, the largest shortfall in the nation.

Illinois also brought up the rear in another category. Its total debt – such as pension obligations and unpaid medical bills – outweighed total assets by a staggering $17.5 billion, the Rockford Register Star reported Monday.

But Gov. Rod Blagojevich’s budget director said the state’s financial condition isn’t as bad as those numbers suggest.

John Filan said Illinois is taking in more than enough money each year to pay its annual expenses. If you look at cash coming in the door versus cash going out, the state budget is balanced, he said.

“In terms of day-to-day running the joint, so to speak, we’ve taken in more money than we’ve spent in terms of expenditures,” Filan said.

The deficit comes up when looking at obligations that have built up over years or, in the case of pensions, decades.

The state is running far behind in paying the hospitals, nursing homes and pharmacies that care for the poor. It had a Medicaid backlog of $1.4 billion when the budget year ended June 30.

Decades of shorting government pension systems has left the state promising more to retirees than is available. Its five pension systems had a $38.6 billion gap between assets and future obligations as of late last year.

Comptroller Dan Hynes calls Medicaid and pensions “two major obstacles to getting entirely on sound fiscal footing.”

Running a deficit causes a variety of problems.

Medical providers wait months to be paid for their services, hurting their bottom line and in some cases forcing them to turn away Medicaid patients.

Meanwhile, the state lacks money to spend on other important services. The deficit can also hurt the state’s credit rating, which means Illinois must pay more to borrow money.

The Register Star’s analysis is based on annual reports each state must file. The reports for fiscal 2005 are the newest available. Two states hadn’t filed their 2005 reports yet, so the newspaper looked at their previous report.

Illinois had a deficit of just more than $3 billion. Wisconsin and North Carolina were the only other states in the red, with deficits of $2.2 billion and $78.9 million, respectively.

Florida showed the healthiest balance sheet, with a $6.9 billion surplus.

Filan said Illinois’ deficit was artificially high in fiscal 2005 because of technical reporting requirements and because the state did not take out a short-term loan that year to increase cash flow. Even so, the deficit was $1.1 billion less than in fiscal 2003, when Blagojevich replaced Gov. George Ryan.

The financial reports also looked at states’ net assets – essentially, the government’s value after comparing debt with cash on hand, property and other assets.

Illinois was $17.5 billion in the red, while New Jersey had a negative worth of $7.8 billion. Texas was in the best shape by that measure, with a positive balance of $81.7 billion.

Analysts with credit-rating agencies were pragmatic about the Illinois figures, saying they tend to focus on a state’s cash balance and whether it can pay its bills. Still, they said Illinois’ annual report does suggest long-term challenges.

“You can’t explain all of it away,” said John Kenward, an analyst with Standard & Poor’s. “It’s still not an ideal situation. It does signal things to look out for.”