Four Ways Illinois Failed to Confront Reality in 2016 – WP Guest
Political dysfunction in Illinois runs deep. Chicago is the epicenter of the state’s political dysfunction and from Chicago emanates a broken politics that has polluted the state. Yet it’s not just a Chicago problem. Few if any political actors are rising to the occasion to present an honest assessment of the state’s crippled fiscal, political and economic reality, along with a message about an alternative vision for the future.
Even with divided government, Illinois’ head-in-the-sand approach to impending catastrophe and pay-to-play approach to economic policy have continued to grind on. Here are four ways that political leaders and commentators in Illinois are simply not recognizing Illinois’ dire condition, nor fundamentally changing the culture which has put Illinois into crisis.
- Illinois’ out of control pension debt spiked by $20 billion in one year and no one blinked.
Illinois’ pension debt was a crippling $110 billion in FY 2015. A COGFA special report increased that by 18% for FY 2016, going from $110 billion to $130 billion, based on changed assumptions and missed investment returns.
Where was the legislative reaction to this crippling financial news? Or a push from the executive branch to address the pension problem which will otherwise sink the state? How about an editorial board outcry to change the constitution so that the state’s core document stops being a financial suicide pact? The reaction to the spiking pension debt was largely a ho-hum “Meh, this is Illinois, pensions are bad.”
Democrats have walked back Sen. Cullerton’s milquetoast “consideration” reform because they don’t want to annoy unions. Republicans have offered nothing new other than to ask for Cullerton’s bill in exchange for which the governor would sign off on a $200mil bailout for the morally and financially bankrupt Chicago Public Schools.
If Springfield’s bailing out Chicago, who’s going to bail out Springfield?
Illinois’ pensions are a train wreck in motion that is going to get worse. The only question is when. One run-of-the-mill recession might blow them apart. A little outrage is in order all over Illinois.
- After 18 months without a budget, no one has yet proposed a balanced budget
Both the legislative and executive branches are involved in making sure that a balanced budget is enacted and executed. Yet for more than a decade, Illinois has not had a balanced budget.
Governor Rauner has appropriately stressed the importance of lower taxes, smaller increases in spending and more economic growth. However, he has not yet put forward a plan for Illinois to run a budget at the current 3.75 percent income tax rate.
The legislative Democrats have been predictably worse. The only full budget they attempted to pass was $7 billion out of whack and clearly unconstitutional. The Democrats’ offer is a tax hike to finance record spending or nothing at all.
The reality that has been laid out on Wirepoints is that the true budget deficit is something like double what is being admitted. There is no plan to close the real budget deficit nor is there a plan to ensure the financial viability of the state. At the end of 2016, Illinois remains the State of Denial.
- Illinois’ temporary budget solutions locked in record spending levels, a huge deficit and increased education spending
When Illinois was stuck in a financial hole, state leaders opted to keep digging. At the end of June the governor and legislative leaders agreed to a stop-gap spending plan that locked in record spending rates of nearly $40 billion per year along with a massive operating deficit.
The state also continued to increase education spending even though there’s not enough money to cover current expenses. Furthermore, education retirement spending continues to grow in the form of funding for the TRS pension plan, so education spending is increasing on two fronts.
In summary: record overall spending, increased education spending, increased pension spending, but no long-term cuts to address the structural deficit and no reform to how money is spent on education. The stop-gap plan was more bi-partisan largesse that the state cannot pay for.
- The story of people leaving Illinois is being misrepresented in media coverage and ignored by Democratic leadership
The story of outmigration from Illinois is a pretty simple one. Politicians screwed up the state so badly that residents and businesses are getting out at record rates. Illinois saw 114,000 more people leave than enter year over year, the worst on record. An analysis from Real Clear Politics shows that Illinois could lose two congressional seats in the next census and lose its spot as the 5th largest state to Pennsylvania.
Yet you wouldn’t know the dire state of the state from how the story was covered in the media, and how it was completely ignored by Illinois Democrats. The first crack at interpretation came from Crains’ Greg Hinz who noted Illinois’ cold weather as a contributing factor and quoted a union group that blamed Rauner. Chicago Tonight aired a conversation with two “experts” who could not pin down the obvious fact that the politicians have ruined the state. Various other outlets opined, many attributing Illinois’ losses to a housing recovery, a general flow from the Midwest and cold weather.
What was missing from almost all commentary was the fact that Illinois’ out-migration is very different from all surrounding states. Illinois’ losses are magnitudes worse than other states and Illinois is by far the most dysfunctional state in the Midwest.
Set aside all the other political dysfunction and consider just the state pension debts. Illinois’ official pension debt is $130 billion and other retirement benefits add another $50 billion, putting Illinois in hock for more than $180 billion in debt for state government retirement plans. An average family of three moving out of Illinois is relieved of a $42,000 liability in the form of government retiree debt covered by the state. A business’ burden is undoubtedly larger than average. That’s on top of the already high tax burden in Illinois, and doesn’t even include local pension problems.
There are plenty of other problems, too, including terrible job creation, crushing property taxes, a legislature that is openly hostile to business and general despair at the fact that legislative leaders see no need to take any action to fix the problems. Greg Baise, the CEO of the Illinois Manufacturers Association, put it succinctly when he said “Government is closing Illinois one day at a time.”
Illinoisans are voting with their feet and Illinois is shrinking as a result. It’s a simple story that the Illinois media can’t help but get wrong. And it’s so damning that Illinois Democrats have to ignore it.
Illinois failed to face up to its massive challenges in 2016, and neither political leaders nor the established media have accurately painted the picture of the dire future facing the state. Here’s hoping for a lot more courage in 2017 so that Illinois can finally emerge from its state of denial.
*”Dalton” is a pseudonym for an individual known to us here at Wirepoints.