10 Reasons For Illinois' Budget Mess

Jul 30, 2015
Originally published on August 3, 2015 1:38 am

You may be asking: How did Illinois get to this point?

The State of Illinois can’t pay its bills — literally. Without a budget for the new fiscal year, the state’s bank account is frozen (with some exceptions). Those receiving various social services from the state — generally the poor or otherwise challenged — have already been hit hard. Soon, state workers will miss paychecks. And we all will feel the pain as services that we count on start disappearing.

Chris Mooney, Director of the Institute of Government and Public Affairs at the University of Illinois, breaks it down.

With apologies to David Letterman, here are “The Top 10 Reasons Why the State of Illinois Is in its Current Financial Stalemate.”

#10. Failure to adjust significantly after 2008

Almost every state was in deep deficit after the 2008 market crash and recession. Most states undertook tough tax increases and budget cuts that put them on an even keel with the recovery. The Illinois budget was cut and the income tax was raised, but only temporarily. When that 2011 increase disappeared last January, the budget picture turned bleak again.

#9. A tax system out of sync with the modern economy

Our sales tax rate is high, and its base is narrow. Our flat income tax doesn’t yield the increased revenue that progressive systems do with greater productivity. We rely very heavily on property taxes to fund our schools. Our motor fuel taxes are set at a fixed number of cents per gallon that not only don’t rise with inflation, but generate less revenue with today’s better-mileage vehicles.

#8. Pension payments are easy to put off

Policymakers (and the voters who elect them) prefer current spending to saving for the future. This has led to a staggering $100+ billion difference between what we owe our current and former public employees for their retirement and what the state has put away for it.

#7. Strict pension language in the state Constitution

Public pensions are “an enforceable contractual relationship, the benefits of which shall not be diminished or impaired.” In May, the state Supreme Court strongly affirmed this constitutional restriction when it overturned the 2013 pension reform, essentially telling the state to “pay up.”

#6. Tough non-budgetary demands

Gov. Bruce Rauner has tied a variety of reform proposals to budget negotiations. Fair enough — he’s a governor with strong policy views. But these controversial proposals make budget compromise more difficult. Some of these items — like term limits and redistricting reform — are tantamount to asking the Democratic power structure to cut off its own head. Not an easy ask.

#5. Gubernatorial “union bashing”

Rauner toured the state preaching the right-to-work gospel last winter and spring. This is an existential issue for unions, and they and their Democratic allies have been energized in opposition, further poisoning the budget negotiations waters. Ironically, few believe that right-to-work is likely to become law in Illinois.

#4. National ambitions?

Some observers have jumped to the conclusion that Rauner has his sights set on the White House. As a GOP governor of a largely Democrat state who is “taking on the unions,” the scenario is not implausible. But having a governor with national ambitions is a mixed blessing, at best. Ask your friends in Wisconsin, New Jersey, and Louisiana.

#3. A “doubly new” governor

Any newly elected governor is going to be tested by the General Assembly. But as a rookie to government and an unknown quantity to his negotiating partners, Rauner truly is a wild card. Legislative leaders don’t know his motivations, his modus operandi or his bottom lines, making negotiation difficult.

#2. Challenging the “alpha dog”

House Speaker Mike Madigan has held his position for decades and is used to winning. He has power, and he is darned good at his job. But today, he faces a new governor with uncertain incentives, strategies and goals and who has essentially unlimited resources — and who is also used to winning. This is a recipe for an all-out brawl.

#1. Years of poor financial management

Even aside from the pension problem, in recent years policymakers have carried over deficits, delayed payments, used one-time money, and resorted to other budgetary tricks to get from one fiscal year to the next. Simply put, this comes from a short-sighted focus on the next election. The result has been a huge structural deficit that no longer can be ignored. Fixing this requires service cuts and tax hikes, neither of which anyone likes — least of all legislators who have to explain them to voters.

Illinois’ policymakers face a very difficult problem under very difficult circumstances. But solve it they must and they will. The only questions are when they will do so and how the resulting pain will be distributed.

Christopher Z. Mooney is director of the Institute of Government and Public Affairs at the University of Illinois

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