Illinois - The Worst is Still Ahead

January 27, 2011
The Worst is Yet to Come in Illinois
By Dennis Byrne

Illinois, the worst is yet to come.

All you state retirees: Do you really believe that your pension was in any way secured by those blow-off-the-roof income tax increases? All you hospitals and social services that are owed billions: Think that check will arrive soon?

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Dennis Byrne RealClearPolitics
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Should we think that tax increases will halt the torrent of state borrowing that put us so deep in debt in the first place? Will it drag the state's credit rating from off the floor?

Truth is, you've been chumped. None of that is happening.

Let's do the simple math: The new revenues will produce $6.5 billion. That amount has to cover a $15 billion budget deficit. Failing a miracle of loaves and fishes, it won't work.

Billions in delinquent bills will remain unpaid. New borrowing of $8.75 billion was supposed to take care of that, but even Democrats didn't have the stomach to swallow that one. Gov. Pat Quinn's office said that the new taxes would "address" the backlog, which is bureaucrat-speak for "we don't have a clue." State Comptroller Judy Baar Topinka warns unpaid bills could double soon, even with the increases.

Pensions? The state passed a provision for some $4 billion just to pay this year's obligations to the drowning pension funds. There's nothing to whittle down the $80 billion (or whatever) that the state already owes the pension funds, and nothing to ensure future payments into the system.

None of this bothered New York Times editorial writers who, from afar, lauded the tax increase in a Jan. 17 editorial, headlined "Illinois wakes up." Reflecting the cant of Illinois social liberals who don't see the train wreck coming, the Times suggested that other states follow Illinois' example as "a first step toward getting (their financial) house in order."

Gratefully, virtually none are.

Even California Gov. Jerry Brown, once dubbed Gov. Moonbeam by the late Mike Royko, has stepped into the realistic light of day, proposing $12.5 billion in spending cuts from an $84.6 billion general fund budget. Even he isn't proposing new taxes, calling only for voter approval of a five-year extension of taxes and fees set to expire this month.

Actually, Illinois can learn something from other places that eschew big income tax increases. In New York City, for example, Mayor Michael Bloomberg is calling pension reform a major state priority and says he will refuse to sign any union contract with salary increases without accompanying major pension reforms.

Compare that with Illinois, where state and local officers have stood weasel tall in controlling labor costs - handing out job guarantees (Gov. Quinn) and signing 10-year contracts (Mayor Richard M. Daley).

Nationally, public pensions are facing a collective deficit of more than $3 trillion. States, not just Illinois, are in such distress that talk has begun of bankruptcy as a way out. When I raised the possibility a few weeks ago, it was generally considered to be an absurdity, but Thursday it was memorialized by Times reporter Mary Williams Walsh. Bankruptcy proponents, she wrote, "... say some states are so burdened that the only feasible way out may be bankruptcy, giving Illinois, for example, the opportunity to do what General Motors did with the federal government's aid."

If only Illinois' problems were as manageable as GM's. "Policymakers" are working "behind the scenes," Walsh wrote, to find ways to surmount the serious constitutional and political obstacles to turning a "sovereign" state over to a federal bankruptcy court or to a financial oversight agency, such as the Municipal Assistance Corporation that rescued New York City in the mid-1970s.

If that happens, who knows what will happen to Illinois' constitutional obligations to protect state retirees' pay and benefits?

The very thought already has big labor girding for battle.

The Illinois Policy Institute, a Chicago-based free-market think tank, already is calling for repealing the increases, citing its own studies that show how damaging they will be to the Illinois economy. Meanwhile, those more friendly to tax increases as part of a "comprehensive" solution must be wondering whether Democrats, now that they've got what they wanted, will be motivated to come up with the second part of the equation - rationalization of the entire Illinois budget.

Yes, the worst is yet to come.

Dennis Byrne is a Chicago-area writer. He blogs at chicagonow.com.


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