Illinois’s legislators are struggling with the challenge of Illinois’s underfunded public pension system, showing few signs of any results:
On Saturday, Democratic Gov. Pat Quinn and the four legislative leaders met for two hours in Chicago to discuss an outline of pension reform proposals but came to no agreement. That makes it questionable whether senators will return before the clock runs out Wednesday.
Democratic House Speaker Michael Madigan of Chicago called the meeting “productive” and said work would continue to try to meet the Wednesday deadline, but acknowledged serious differences remain. Asked why he thought progress was made, Madigan joked, “Well, we weren’t throwing punches at each other.”
Several major hurdles remain in trying to quickly put together a comprehensive pension overhaul before a new General Assembly is inaugurated — not the least of which is how a Democratic-led state government would alter benefits for members of unions that traditionally are powerful Democratic allies.
Illinois is in serious need of a mulligan. The problems with Illinois’s public employee pension funds are not that Illinois’s taxpayers didn’t pay the taxes they were supposed to or that Illinois’s public employees failed to make the contributions required of them by law. It is not because the public pension benefits are overly generous. They’re comparable to those in other large states including New York, which doesn’t have the public employee pension crisis that Illinois does. The problem with Illinois’s public employee pension system can be summarized in two words: Rod Blagojevich.
In his first term as governor Blagojevich expanded the state’s Medicaid roster and benefits and increased the state’s spending on education, as well as a number of other, smaller benefit programs. Whatever the merits of doing so, he did so without raising taxes by deferring the state’s contribution to the public employee’s pension plan.
Illinois state expenses are growing rapidly, far faster than its population. Since 2000 Illinois’s population has increased about 5%. Over the same period its Medicaid roster and spending have roughly doubled. The spending for pensions is skyrocketing—from $19 billion in 2002 to $30 billion this year.
There’s no obvious way for the state to increase its revenues. Despite a 66% increase in the state personal income tax rate in 2011, the state only realized a roughly 10% increase in revenues from personal income taxes. That does not suggest that further increases in the personal income tax rate will result in the revenue that the state needs to pay its bills. Sales taxes are already high here—Chicago’s sales tax is the highest of any major city in the nation (a federal sales tax would probably bankrupt Illinois but that’s a subject for another post).
I honestly don’t see any way for Illinois to dig its way out of the hole dug for it over the last decade other than to reverse the decisions that have been made over that decade. That means reducing compensation for state employees, reducing its Medicaid benefits, and shrinking its Medicaid roster.
At this point the only Illinois population that’s not being asked to sacrifice in the name of righting Illinois’s fiscal ship is the population most responsible for Illinois’s fiscal problems: state legislators. Here’s my modest proposal. Until Illinois budgetary problems are corrected the salary of Illinois legislators should be reduced to $1 per year and budgets for offices and staffs should be eliminated.
I wish that the people of Illinois would show more interest in pragmatic, workable government when they go to the polls. So far that has not been the case. Voters are much kinder to politicians who lie to them. The incentives have got to change.