This morning George Will takes note of the state of Illinois’s impending fiscal shipwreck. Like most commentators he’s better at describing the problem than he is at proposing a solution:
Illinois was more heavily taxed than the five contiguous states (Indiana, Kentucky, Missouri, Iowa, Wisconsin) even before January 2011, when Quinn got a lame-duck legislature (its successor has fewer Democrats) to raise corporate taxes 30 percent (from 7.3 percent to 9.5 percent), giving Illinois one of the highest state corporate taxes and the fourth-highest combination of national and local corporate taxation in the industrialized world. Since 2009, Quinn has spent more than $500 million in corporate welfare to bribe companies not to flee the tax environment he has created.
Quinn raised personal income taxes 67 percent (from 3 percent to 5 percent), adding about $1,040 to the tax burden of a family of four earning $60,000. Illinois’ unemployment rate increased faster than any other state’s in 2011. Its pension system is the nation’s most underfunded, and the state has floated bond issues to finance pension contributions — borrowing money that someday must be repaid, to replace what should have been pension money that it spent on immediate gratifications.
Illnois’s Gov. Pat Quinn’s proposal last week to raise the retirement age for public employees to 67 over time and require them to contribute more to their own pensions has gotten some attention. A flurry of concern has been generated by his proposal that districts take responsibility for a greater proportion of their retiring teachers’ pensions. IMO that’s reasonable. Under the status quo school districts negotiate the employment contracts and pay salaries while the state shoulders much of the burden for paying pensions. That incentivizes districts to boost pensions as much as they’re allowed as a means of increasing total teacher compensation without being required to pay for it themselves, an obviously perverse situation.
The proposal is a mite belated, however. That’s what should have been done before impeached Gov. Rod Blagojevich, now serving time in the federal pen, failed to ante up the state’s required pension contributions, expanded state services, and shouldered the state with billions in additional debt.
One aspect of Gov. Quinn’s proposal hasn’t received as much attention as it deserved: his proposal that retired state employees pay premiums for their own healthcare, something retired teachers already do. A great deal of Illinois’s fiscal problems are the result of increasing healthcare costs, which the federal government abetted or even caused and has demurred from dealing with, electing instead to extend coverage. Expanding services instead of dealing with the fiscal problems already at hand sounds oddly familiar.
No one here will be surprised Gov Quinn is no favorite of mine. As someone who is in business, and runs in business circles, I know exactly how frustrated IL businesses are, and how they are fleeing, especially to Indiana, where the attitude is not to slaughter, er, fleece the golden goose. Those of you who don’t believe the tax and regulatory environment affects business location, expansion and hiring decisions just need to spend some time here.
That said, I agree with Dave’s point that Quinn has made a proper move here in proposing to raise the public employees retirement age. A cynic- that would be me – would observe that the state is so in the bag for the Democrats, and that alternative goodies will be made available, that Quinn has taken no material political risk. that said, his proposal stands on its merits, and is a good one.
Separately, I’m no fan of Rahm Emanuel either. But until this past weeks classic Chicago shenanigans (and Dave, you know what I’m referring to) he has also been saying and doing some good things.
Perhaps the specter of financial calamity is taking hold. Perhaps it’s show. But it’s a start. Such a long road to go…………
Well, my question is whether Quinn’s plan is an effort to renege on pension obligations by passing the buck to a large collection of entities without the power to guarantee they can raise the revenue to meet constitutional obligations or is it to intentionally bankrupt enough school districts to secure passage of the radical school district centralization plan Quinn floated unsuccessfully last year.
It is interesting to me that in these budget wranglings, very little is ever said about Illinois $31 billion capital outlay budget, only our operating budget of $33 billion. Some of the former spending is normal and vital, some of it is patronage in concrete and steel contracts and all of it gets very little public scrutiny compared to the operating budget.