By: Mark Glennon*
The debate consuming Springfield has now drifted into something hopelessly misdirected. With no real reforms even under consideration, history will treat the “budget debate” over the last couple weeks as a footnote.
Illinois has a financial crisis, not a budget crisis. That’s how former Illinois State Rep. Ron Sandack perfectly summarized it last week. The difference is everything.
Our crisis didn’t begin two years ago when the last budget expired. It began in 2001, which is when the last of the revenue gush from the roaring late nineties economy dried up. We haven’t had a balanced budget since then. I first wrote that Illinois was broke in 2002. Others saw it, too, but were ignored or didn’t speak up.
Yes, failure to enact a budget will cause massive, immediate harm. But that failure in fact would only speed up and concentrate what became inevitable in 2001 without drastic reform. Reform never came so it was just a matter of time.
The budget the General Assembly now appears ready to pass is just plain silly. It does nothing to address the $15 billion unpaid bill backlog. It doesn’t deal with the recent court order to pay Medicaid bills. It doesn’t fund the new school aid formula passed by the General Assembly. It doesn’t eliminate most of the spending cuts social service organizations have endured. Most importantly, even ignoring those things and more, it pretends to close a deficit that’s in fact two or three times larger than the obviously phony numbers used by Illinois to measure deficits.
What the budget would mean is a tax increase of about $5 billion dollars per year, roughly the same as was raised during the earlier temporary income tax increase. The tax increase is in separate legislation House Speaker Michael Madigan now says will be put to a vote today, Sunday.
If the budget and tax increase pass, expect the euphoria to last no more than a few weeks, maybe less. Illinoisans then will see that nothing has changed except the tax deduction from their paychecks.
They’ll see that nothing was really done about pensions. The pension reform bill now floating is a gimmick that will let unfunded liabilities continue to soar. They’ll see that worker’s comp costs weren’t reduced enough to keep employers here. They’ll see no term limits, which an overwhelming majority want, but that topic apparently has been dropped from the debate. They’ll see nothing on dozens of other reform items floated in recent years. Most importantly, they’ll see that the property tax freeze being discussed, even if it passes, is full of holes.
In short, they’ll see only a few bits of window dressing on a tax increase. The exodus of people and employers will accelerate and the tax base will shrink more rapidly. The credit downgrade everybody now fears from the budget impasse will just come a little later.
If, on the other hand, the budget and tax increase don’t pass, or if Governor Rauner vetoes them, well, let’s put it this way. “Just blow it up” has always been an option — a bad option but one with an important advantage. The deny-delay-extend-pretend crowd would be shut up once and for all.
What Illinois needs is a genuinely believable, comprehensive, five-year recovery plan. To be believable, that plan should include pretty much every reform mentioned in recent years. More importantly, it would have to include debt reduction, including unfunded pension liabilities, and there’s only one way legally to do that — bankruptcy. The United States Congress has to authorize bankruptcy for states.
To those who think otherwise I repeat my standard challenge. Show me the alternative. Show me a rough outline of a financial plan that truly puts Illinois on a path to financial stability without the debt reduction only bankruptcy offers. There is none.
*Mark Glennon is founder of Wirepoints. Opinions expressed are his own.