Perhaps Illinois never really needed a budget. The state is still operating, after all, as Friday completes the second year in a row without one. Prospects for fiscal 2018 are so politically volatile that things may change before you reach the next paragraph.
While we wait, let’s look at some of the issues involved.
The better your credit score, the easier it is to borrow money and the lower the interest rate. This is true whether you are running a home, business or state. Lenders, wary of being paid back late — or not at all — always want more reward from more risk.
Exasperated financial rating agencies, like Moody’s, recently dropped Illinois’ score, again, and are poised to make it the first state with a “junk” classification if the budget dithering continues. It would sort of be like running the sixth most populous state on a payday loan.
Delayed payments to suppliers of goods and services are the life jacket keeping Illinois state government afloat, but higher interest will weigh down the buoyancy.
The tax problem comes in two parts:
• Illinois doesn’t have enough revenue to cover spending.
• It also doesn’t have enough to cover what it already spent.
Hard as it is to cut spending going forward, it is nearly impossible to un-spend money. The state did try unsuccessfully a while back to take back some retirement benefits from people (like my educator-wife) who worked for less upfront pay in exchange for guaranteed pensions.
No politician wants to take responsibility for the inevitable income tax increase. In 2011, lawmakers imposed a temporary tax hike on personal earnings, to 5 percent from 3 percent, but let it drop to 3.75 percent in 2015 despite continuing desperate straits.
Some legislators who voted for overspending are gone, some are not. Some may not have realized the consequences in the moment. State Rep. Michael Madigan, D-Chicago, who has been speaker of the House all but two of the past 34 years, has been the one leadership constant through the disaster, yet shows no apparent reduction in power.
He often is regarded as more powerful than the six governors during his tenure. But even with two successive Democrats as governor, Rod Blagojevich and Pat Quinn, and the majorities their party held in both legislative chambers, the state’s fundamental problems went unfixed.
Moody’s says the unfunded state public pensions are now behind by $251 billion, and current unpaid bills are almost $15 billion more, and counting.
Illinois has about 12.8 million people. So every resident’s share of the debt is about $78.13 per $1 billion. That works out to $19,609 each for pensions, and $1,171 more for the late bills. Taking a cue from state officials, I think I’ll just say, “The check’s in the mail.”
Weighted distribution of state school aid is controversial. Every district gets a basic amount per student, with needier districts getting more. Defining that need is complicated and now subject to reconsideration.
With state finances in disarray, school districts also are late in getting that aid, and may not know in advance how much is coming. Despite a provision in the Illinois Constitution implying that public education is primarily a state responsibility, in reality schools are financed largely by payers of locally assessed property taxes.
Gov. Bruce Rauner has joined those proposing a freeze on property tax revenue to schools and other local governments as a way to make a state income tax increase more palatable. He said it would lead to more state aid for schools. I’d recommend that the local officials first heed Cuba Gooding Jr. in the movie “Jerry Maguire” when he declared, “Show me the money!”
Another education issue under discussion is a state subsidy for Chicago teachers’ pensions, which are not part of the state-backed Teachers’ Retirement System that covers all the others. The debate is dense because it is intertwined with the aid formula.
Progress seems gridlocked in no small part by the impasse between Republican Rauner’s claim of a pro-business mandate and the Democratic legislative majorities’ claim of a pro-labor mandate. They cannot seem to compromise, no matter what the cost to constituents.
A constitutional convention might bypass clogged state arteries with revised provisions on the likes of school funding, taxation, campaign finance reform and possibly term limits. But the patient surely would die awaiting a procedure that would take years — and historically has not been supported by legislators or a public majority anyway.
Illinois has an automatic public vote every 20 years on whether to hold such a convention. But the next isn’t until 2028. That would be a long time to wait for a rescue. Surely Speaker Madigan and Gov. Whomever will deliver a budget by then.