Tuesday, March 2, 2010

Illinois’ Unnecessary Budget Crisis & Irresponsible Solutions

Illinois is said by all to have one of the most serious budget crises of all the states, with a balance sheet deficit between $11.5 and $13 billion relative to an annual budget (read spending plan) of about $28 million (WSJ; WSJ; Dennis Byrne; Dennis Byrne). The politicians’ technique is simple. First, recklessly spend borrowed money you’re not sure you can ever pay back on Democrat special interest groups (i.e., unionized government and education employees, with their way-beyond-private-sector salaries and pension plans, and the poor on Medicaid). Then, when revenue and budget trickery fail, declare a crisis. Then, while making superficial and largely symbolic spending cuts that don’t touch the major spending categories linked to those interest groups, declare any cuts to those special groups “off limits” and enact symbolic spending cuts to highly visible functions like state park hours. Then, in ponderous tones echoed by the liberal media, declare that a tax hike is the only answer to fix the Illinois budget.

We’ve seen this kabuki theater routine when the state income tax was first passed and then when the rate was raised from 2.5% to 3%. Each time politicians assured Illinois taxpayers that the extra revenue would fix things for good. Of course, all that extra tax revenue did was reset the cycle – spend, spend, borrow, and tax; repeat cycle in perpetuity.

Here are just a few astounding facts about Illinois’ finances I’ve gathered from my clippings:

* From 1998 through 2008, despite revenue that has gone up by many billions, spending has skyrocketed: per capita state expenditures after inflation have climbed almost 47% while the state population has grown only 4%.
* Medicaid is almost 30% of the current spending plan. Note, however, that since 2000 the state's Medicaid rolls have gone up 59% while the state’s population has grown only about 4% (link).
* Illinois has the most underfunded public pension plan of all the states, with a deficit that some say is now approaching $50 billion. Note, however: According to a recent Cato Institute report, state and local employees in the U.S. earn $1.45 for every dollar private workers earn; state workers get $2.18 in health benefits for every one dollar private-sector counterparts receive; public-sector workers receive $6.95 in defined-benefit pension benefits for ever dollar given to private-sector workers. And, to add insult to injury, “some states allow workers to retire early, begin to collect a pension, and then go back to work for the state at their old job, earning a salary as well as a pension” (link). This is now unaffordable and unconscionable.

Of course, it is widely reported that Illinois already has a requirement to balance its budget each year. But each year the politicians dissemble and through budget trickery of dubious ethicality spend way more than available revenues in violation of the law but yet are never held accountable. This must change. Carefully thought-out proposals have been advanced (Illinois Policy Institute; Illinois Policy Institute; Chicago Tribune) without the tax increases touted by Democrats.

From my view, there should be no increases in taxes or other fees, which would just reset the pernicious cycle perpetrated for a generation by Democrats aided and abetted by some Republicans. There should be serious cuts in the spending plan to reverse a decade of unwarranted and irresponsible increases, with no area of spending off-limits. Illinois spendaholic politicians have ruined this state’s finances to buy crass political power through what amounts to bribery of segments of the electorate, and giving them more taxes to misspend won’t do the state's productive taxpayers any good.

John M Greco

Related Post:

Illinois' New Governor Proposes a 50% Tax Hike To Close Budget Gap Caused By Years of Reckless Overspending