Posted December 11, 2015 2:01 am by Comments (12)

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By: Mark Glennon*

 

It comes down to a single question in Illinois. Everybody with an opinion about the financial mess should be forced to try to answer: What conceivable combination of tax increases and spending cuts would solve Illinois’ state and local fiscal crises without drastic reforms including cuts in pension benefits and an agenda that grows the tax base?

 

There is none. For three years we’ve linked here to every significant article, report and analysis we can find, from all sides. None has come remotely close to suggesting an answer. We’ve defied critics in the comments on this site to put up an answer. They can’t. There is no answer.

 

It doesn’t matter what’s fair. It doesn’t matter who gets hurt or what promises get broken. It doesn’t matter what party you’re in or what obligations you think government should have. Those things matter when it comes to designing solutions, but they don’t bear on the question, which is just math.

 

And it is just the math. Restore the temporary tax increase as Speaker Madigan suggested on Wednesday. Impose the “millionaires tax.” Expand the sales tax. Make the income tax progressive. Raise property taxes. Let municipalities nickel and dime whatever they can. Throw in whatever else you want to try to answer the question. Then give some realistic estimate of new revenue all that would yield. It still wouldn’t be enough. Give some unrealistically high answer and it will be clear to all that Illinois would be taxed into a ghost state if it was tried.

 

Put the question to any politician. I have, with many, including much of the General Assembly leadership. They have no answer. It’s exactly why Speaker Madigan was so evasive Wednesday about what tax increases would be needed beyond restoration of the temporary increase that expired this year. That increase is just “a place to begin,” and that’s all he’d say. If all officeholders could be forced to answer the question we’d at least have enough common ground to hope for a negotiated settlement.

 

It’s because local governments are mostly in worse shape than the state that the question can’t be answered. For many of them, the train wreck has already occurred — ever higher property taxes imposed on declining market values have sparked a death spiral that already has doomed many communities, including most of Chicago’s south suburbs, as we wrote recently. Dozens of Illinois towns and cities should be in a bankruptcy proceeding now. Most importantly, it’s more clear each day that bankruptcy may be unavoidable for Chicago. The question demands a comprehensive answer that covers both state and local problems.

 

And pensions are central to why the question cannot be answered. Whether through bankruptcy, constitutional amendment or simply by default, unfunded pension liabilities cannot be paid in full — earned benefits must be cut. The math won’t work otherwise.

 

The plain reality is that our model of government is broken. We simply aren’t generating the jobs, growth and revenue needed to meet the promises made. Deal with it.

 

Enough of the piecemeal solutions endlessly offered. Whether it’s Cook County’s sales tax increase, Chicago’s property tax increase or Illinois’ income tax increase, sponsors of those things will never attempt a comprehensive answer to that single, overriding question. Just patch it over a bit for their unit of government. That’s good enough for them.

 

Reform opponents, save the lectures about the moral superiority of your viewpoint for the form that comprehensive reform should take. Include tax increases if you want (that’s inevitable). But say nothing until you stipulate that no conceivable combination of tax increases can solve Illinois’ state and local fiscal crises without drastic reforms including cuts in pension benefits and a pro-growth agenda.

 

Or put up your numbers showing otherwise. It’s just the math. If you can’t, go away.

 

*Mark Glennon is founder of WirePoints. Opinions expressed are his own.

 

 

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Caliban
There is so much misinformation regarding Illinois pension mess, it’s hard to know where to start. Most importantly, perhaps, is the Ill Supreme Court found Lisa Madigan’s argument that the State needed to use its police powers to reduce pension benefits, lacking. That essentially closes the door on reducing the pension costs. The money will have to be found. What I find most disappointing is that had the State paid what they owed, when they owed it, the TRS system would be funded in the low 70% range, at a minimum. Not sure where the other systems would be. I… Read more »
Rex the Wonder Dog!

unfunded pension liabilities cannot be paid in full — earned benefits must be cut.

The term “earned benefits” is not entirely correct, or accurate, as a large portion of government pensions have been jacked, retroactively, during the last 15 + years.

Anonymous

Mark – great article. Bankruptcy is not available to states and will never be. The people of Illinois are not going to amend their constitution. Default will happen. Repeat, DEFAULT WILL HAPPEN. After the default, federal courts will be able to take over and make the changes needed. Nothing will happen until then, so relax.

Rex the Wonder Dog!

Bankruptcy is not available to states and will never be.
The states are sovereign. They are 100% immune from lawsuit in both state and federal courts, from both state residents and residents of other states- under the 11th Amendment.

All a state has to do is say “we’re NOT paying”, or “we repudiate these debts”. Game over. Debt erased. States will never have to file BK, ever, they are immune from being forced to pay up, no one can force a state to make good.

Jim Palermo

Rex, a state that repudiates its debts had better not plan on borrowing in the public markets any time soon.

Sean
Yes. To the public sector workers, I would also say: ENOUGH of your platitudes already! 1. A promise is a promise (grow up. promises made under the conditions in which you acquired them should be illegal anyway). 2. We faithfully paid in our fair share, now it’s time for your end of the deal to be kept. (BULL. You did NOT pay in anywhere near your “fair share.” On the other hand, we, the taxpayers, have been paying in way, way more than our fair share. Leave us alone!). 3. If only these crooked politicians had funded our pension funds,… Read more »
greg
Sean – I’d like to encourage you to learn more about the history of the pension debacle and the programs in place. http://www.SURS.com would be a good place to start (it’s the state university retirement system). I am familiar with it. Employees pay in 8% of their salary and are not entitled to social security. Their money (and state match – at least in theory…similar to SS match in private sector) is invested professionally, and nets solid returns (recent data showed 13.2% annually for the past 5 years and 7.8% for past 10…which includes the recession). Please use Excel and… Read more »
Theodore Konshak

For the real story Mark, google my name ‘Theodore Konshak and scribd’

Tough Love
Quoting …”It comes down to a single question in Illinois. Everybody with an opinion about the financial mess should be forced to try to answer: What conceivable combination of tax increases would solve Illinois’ state and local fiscal crises without drastic reforms including cuts in pension benefits and an agenda that grows the tax base?” As you said …. NONE. The magnitude to of tax increases necessary to do so would be so great that the remaining productive/tax-paying residents & business would pack up and leave …. accelerating Illinois’ spiral into the toilet. It’s WAY past time for the Public… Read more »
Bob Oriole Park

You’re right about the piecemeal approach and the need for a comprehensive solution. As we’ve seen recently, our officials are only concerned with their little fiefdom. Toni made that clear when she raised the county income tax to preempt Rahm doing so. She doesn’t care about the city, the state, or Elgin, Springfield or Peoria. And they don’t care about Cook County, S***cago, the state or each other. We need an overarching solution since the entire state is affected all all levels of government. They’re trying to fix a problem that requires a full body cast with child size bandages.

Anonymous

They will go away– after they get their pensions, retire, and move to Florida or their summer homes in Grand Beach. Then they can get their checks and leave the clean up to someone else.

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