What could be worse in Illinois right now? It’s November and ‘Da Bears’ are barely above .500, while the hated Packers are undefeated and the Lions (the Lions?!) are positioning themselves for a playoff run.
Here’s what could be worse. Illinois’ state budget, filled with gimmicks, constructed for years on promises for which there were no revenues, and sustained by borrowing of the type that would make even a loan shark blush, is in serious meltdown mode. Less than a year after the state raised taxes by some $7 billion in the face of a fiscal crisis, legislators in Springfield, whose government qualifies as the fiscal bad-boy of states, have done little to address Illinois’ long-term spending and borrowing problems.
Even while the state’s vendors wait up to a year for money they are owed, Gov. Pat Quinn is making sure that favored insiders get paid. The Securities and Exchange Commission is investigating whether Illinois exaggerated in bond offerings the savings it claims it will get from last year’s largely cosmetic pension reforms, which did little to fix the worst state pension problem in the country. And now the governor is actually proposing the state borrow even more, up to $5 billion, to clear up some of those back bills, which prompted an editorial from the Chicago Tribune under the simple headline: “No. More. Borrowing.”
Illinois is like the Bears after Walter Payton, the Bulls after Michael Jordan. Except that it’s been even longer since the state could claim it had a championship season. As Josh Barro showed in a City Journal article earlier this year, the state has long tried to deliver services without having the revenues to pay for them. It essentially wanted to be a low-tax (or at least a moderate-tax) state with high services and rich employee pensions. One result has been that the state hasn’t really balanced its budget for a long time. Instead, even during the national good times earlier this decade, Illinois used borrowing and gimmicks to create the appearance of fiscal propriety, though few people were fooled. As Indiana’s Gov. Mitch Daniels likes to say whenever he talks about his own state, it’s easy to look good when you have Illinois for a neighbor.
But late last year it seemed as if Illinois had finally reached the limit of its shenanigans. Investors balked at buying the state’s bonds except at a significant premium over what other states had to pay investors. CMA Datavision actually listed Illinois debt as one of the 10 biggest risks among governments in the world, along with places like Greece and Iraq. With borrowing problematic, state legislators panicked and enacted steep increases in personal income and business taxes in January, which have come to be known as the Quinncome taxes. The Chicago Tribune estimated that the tax increases take an extra week’s worth of earnings away from workers in the state and gives them to government. There, the money seems to be disappearing into that great celestial body known as the black hole of Springfield.