Illinois Wakes Up?? – Part 2

Well, Illinois continues to be at the forefront of the news, albeit the part of the news that you want to avoid. Budget deficit. Crushing debt. Crumbling pension system. Bankruptcy?? The Land of Lincoln, home of the Daleys, the City of Big Shoulders and Caterpillar? Say it ain’t so!

Sadly, it is so.

Two recent articles highlight Illinois’s ongoing issues, as related to my original post:

The deficits will continue, despite the ongoing embarrassment. Granted, the current governor in Illinois is hobbled by years of mismanagement not of his making, but Mr. Quinn will need to continue to look for a long-term solution to our issues. Of course, making that “temporary” tax increase will be the first step. 🙂 It is somewhat relaxing to see that Illinois has had some of the lowest income taxes across the country (see graphic below), so it is about time we caught up?

With a more frightening prospect, we now hear about a movement by which states might be able to claim bankruptcy. Huh? Just so that a state can avoid pension obligations? This would be bringing the worst of corporate culture to an institution (state government) that has long prided itself on being different from a corporation. Any person in the state that is tied to a public pension should begin to worry. Those pensions, while maybe overly generous, have always been a source of stability for state workers. Keep in mind that state pensioners (like teachers) were never obligated to contribute to Social Security precisely because the pension was their retirement nest-egg. If the pension must be adjusted, it should be for state employees entering the system today, not 20 years ago.

[following was posted on Jan 18]

According to a recent editorial in the New York Times, the State of Illinois has “awoken” to its fiscal mess. How so? By raising state income taxes by 66%, and passing a significant increase in the corporate tax. According to the editorial,  Illinois has finally come up with a plan to help reduce its deficits and to close the budget gap. The deficit has been projected to be about $15 billion in the next fiscal year, but the “temporary” tax increase will reduce that deficit by only about $7 billion. Across the nation, Illinois is held up as a major financial basket-case, so something needed to be done. Yes, something needed to be done. Of course, how are we going to close the budget gap even further? More taxes?

Citizens – both private and corporate – are outraged for sure, but the  investors who track the fiscal stability of states see this move as very positive, and trumpet it as a signal of the creditworthiness of Illinois. Wow, how different can be the perspectives of those paying the taxes and those making money by lending even more money to the State?

Of course, nobody believes that this tax increase will be “temporary.” The last time Illinois raised income taxes, in 1989, the increase was supposedly temporary – until 1993 when all was made permanent. So, let’s call a spade a spade...it will be permanent. Granted, taxes had not been raised since the late 1980s, and our taxes remain below some of the states that have criticized our tax increase (New Jersey and Wisconsin). Nevertheless, such an abrupt and large tax raise gets one pretty excited. After all, the lack of tax increases has been easily rectified by the raising of every fee imaginable (multiple times) in Illinois. So, the State has received its fair share even without the income tax. But, what has the Land of Lincoln done with my taxes and fees?

Now, I am the first to support taxation and reasonable state and federal use of those taxes. In fact, I am likely a more strident proponent of taxation than your average American. Aside from all of the inevitable government waste that worries me about the destination of my taxes, I believe strongly that our governments in the United States need sufficient taxation to support the services that we all require. While some need unemployment support and welfare, I need roads, fire, police, schools and the military.

In an effort to make us feel better, the Democrats in the Illinois legislature passed a restriction that will potentially eliminate the tax increase if the state surpasses its self-imposed spending caps. If the budget rises more than 2% per year over the next few years, the State may rescind the tax increase. Sorry, but how come I do not believe this will happen?

But when are the true budget cuts going to happen, and from where are they coming?  The Democrats in the legislature claim that they will make the budget cuts necessary, but can we really expect Michael Madigan to faithfully make that happen? He has been there for too long, and he has overseen this mess as much as the two disgraced former Governors Ryan and Blagojevich.

This State needs leadership. Quinn is not it, and the Republicans have been unable to field a true leader. What will Illinois do?

Good News for Illinois?

 

 

Well, it depends….

Anytime Illinois House Speaker Michael Madigan has a say in the future of Illinois, we need to worry. After all, he will one day have to answer to the fact that he has led the Illinois House through one of the most tragic periods in state history, and he needs to be held partially responsible for our fiscal mess, political backwardness, and general sad state of affairs. Yes, our previous two governors – one Republican in jail and one Democrat the laughing-stock of the nation and on the verge of going to jail – have much blame on their hands. But it has been Madigan who has been the constant through this period.

Illinois needs a reset button. But until then, politics as usual. In that context, despite the wave of Republican victories across the nation and in Illinois, the Illinois Democrats still have some good news. They still run things in Springfield. Part of that power will bring the ability to redraw the congressional districts around the state, presumably to favor as much as possible the Democratic base.

Good news for Democrats; good news for Illinois if Madigan and Quinn do the right thing. Do what is right for Illinois – yes, redraw the boundaries, but start to figure out how to get the entire state out of the ditch.