I approach finances fairly simply. Raised in a conservative household, I began working for spending money at the age of 12. I was taught that success meant living within one’s means and “working hard for the money.”

As the owner of a small business, I budget conservatively. But as an early mentor once told me, all businesses struggle with financing and growth…it’s just that some of them have more zeros in the revenue and expense columns.

While we’ve ridden out the worst of the Great Recession, businesses and individuals alike remain cautious as high levels of uncertainty have become the norm. Unsure whether to borrow money or expand operations, we watch and wait while legislators in Washington and Springfield reinvent the rules—often without considering the unintended consequences.

At the state and federal levels, while the conversation has finally shifted toward confronting massive budget deficits, lawmakers are still shying away from the toughest decisions. After all, every line item has a constituency.

“We have cut everything there is to cut,” a local banking executive recently told me. “Now, the government is going to cap our fees…we must look for new products and services to remain profitable.” Having made just about every conceivable cost-cutting measure over the last three years, I suspect that most private-sector employers can relate.

And with 45 states and the District of Columbia facing a collective annual deficit of about $125 billion—and no federal stimulus money to fill the gaps—that trend has finally reached the public sector. The State of Illinois alone accounts for $15 billion of that figure.

“It’s time for a reality check,” says Illinois Chamber President and CEO Doug Whitley in this issue. “The solutions Governor Quinn offers in his 2012 fiscal year budget don’t come close to confronting Illinois’ dire economic circumstances.”

It’s hard to know where to begin, but a recent report from the Illinois Auditor General lifts the curtain on one giant mess in Springfield:

This chaotic patchwork of systems has severe consequences. It impacts the State’s bond rating and jeopardizes federal funding. (In 2009, Illinois spent $23.7 billion in federal dollars.) It is riddled with inaccuracies, and the lack of timely reporting ensures that important decisions are made based on outdated information.

“What private company with revenues of $33 billion wouldn’t have a unified accounting system?” asks one state legislator. For many years, the public sector has been shielded from the tough issues that private employers have faced for decades. But the bills are coming due…and it’s not a pretty sight. iBi