What do Dennis Rodman, Rod Blagojevich and Jesse Jackson Jr. have in common with Illinois state government?
Despite having large incomes, they’ve each found themselves teetering on the brink of insolvency.
When I was younger, celebrity bankruptcies used to puzzle me. How is it that high-earners such as Wesley Snipes, Willie Nelson or Burt Reynolds can just go flat-out broke?
The answer is simple: they spent too much. And so it is with the state of Illinois.
Illinois’ revenues are at the highest level in the state’s 194-year history and yet state bills are getting paid six months late, Illinois’ pension funds are in crisis and it has the worst credit rating of any state in the union.
And keep in mind, Illinois got to this point despite the fact that our General Assembly passed – and our governor signed – a “temporary” 67 percent income tax increase two-and-a-half years ago.
Every working adult in the state of Illinois is now contributing an extra week’s pay to the state’s coffers since the tax hike passed. That’s no small sacrifice. Illinoisans have cut grocery lists short, canceled vacations, deferred car and appliance purchases and made many other sacrifices.
And yet the state is still broke. In fact, instead of cutting spending, state government is spending more.
In 2008, the last full fiscal year before the recession, Illinois spent $30.4 billion in base general revenue funds and in 2012 it was on track to spend $33.5 billion. Rather than tightening the belt, the state has pulled out the credit card.
The level of state bond debt has increased during the same period from $58.7 billion in 2008 to $71 billion.
And if that’s not bad enough, Illinois’ official unfunded pension liability was $55.4 billion in 2008 – and the Commission for Government Forecasting and Accountability projects that liability will grow to $102.7 billion this year.
No state has ever taxed its way into prosperity.
In the coming months, you are going to hear some nonsense about how Illinois needs to “reform” its revenue system by passing a graduated income tax. It has nothing to do with tax fairness and everything to do with government consuming more money.
Illinois doesn’t have a revenue problem. It has a spending problem.
No matter how much more money you give Illinois state government, it is going to spend more, borrow more and avoid tough decisions such as pension reform.
Now government union bosses and their allies want us to pony up more cash – so they can be guaranteed a more prosperous retirement.
Sadly, politicians make lots of promises.
Few are kept.
For example, when Gov. Pat Quinn was running for office he promised to veto a tax hike as large as the one that ultimately passed. He signed it.
The legislative leaders promised that tax hike would be temporary when they pushed it through. Now they are quiet about its future.
So when I hear government union bosses say they were promised this or that, I have to sigh. Taxpayers were promised things, too.
The answer is to put workers, rather than politicians, in charge of retirement planning.
“A 401(k)-type system is really the way to go,” said state Rep. Joe Sosnowski, R-Rockford. “The private sector has proven that time and time again. I don’t know if politically we can get there right now. But that is the direction we should be heading.”
Illinois also keeps expanding costly programs such as Medicaid at a time when the state is in fiscal crisis. And the state has borrowed to pay for things such as $700,000 doors for the State Capitol.
Spending is public enemy No. 1 in Illinois.
Cronyism in overdrive
One of the most unseemly things government does is flash cash in front of businesses under the guise of “economic development.”
In the quarter century I’ve been a reporter, I’ve seen it time and time again.
A company will make noise, saying that it will move to a neighboring town or state, and suddenly money – our money – is getting flashed in their face.
For example, Archer Daniels Midland is making noise about moving its corporate headquarters out of Decatur to a bigger city. And now the state is looking at offering incentives for them to move these 100 executives to Chicago.
Indiana also wants to lure the Fortune 30 company. And there are probably other states in the mix, too.
ADM is a private business. It can locate its headquarters anywhere it pleases. But why should Illinois taxpayers be on the hook to help pay for the move?
If ADM wants to stay in Illinois it will. If it doesn’t, it won’t. The company’s revenues last year exceeded $80 billion.
So if Gov. Pat Quinn offers tax breaks, it will affect the state’s bottom line more than ADM’s. After all, Illinois had total revenues last year of $68 billion.
Yes, you read that right; Quinn is reportedly considering giving a handout to an organization taking in more money than all of Illinois state government.
The bottom line: ADM is going to move where ADM wants to go – whether the state decides to help or not.
Rather than offering special tax breaks to some companies, Illinoisans would be far better off if lawmakers worked to make Illinois a more attractive location for all businesses – not just the few that politicians choose to help out.
Why ObamaCare means Illinoisans pay more
Not everyone in Illinois is going to take an insurance policy from the new health insurance exchanges under ObamaCare, and yet insurance rates are going up for everyone. Why is that?
ObamaCare requires all insurance companies, regardless of whether they are in the state exchange, to accept everyone onto their plans, regardless of their health status. Plans must also cover everyone by providing a minimum standard of benefits.
These requirements mean more bills for insurance companies. To pay these bills, insurance companies have to spread the costs around to those paying for plans—which means higher premiums.
This is not the same in every state. According to David Hogberg, a senior fellow at the National Center for Policy Research, it depends on what state regulatory frameworks looked like before ObamaCare.
“In some places like New York and New Jersey they had highly regulated markets, so going from what they had in place to the exchanges will make premiums cheaper,” he said. “But in most cases, states are going from a less-regulated environment to the exchanges, which is causing their rates to rise.”
Surprisingly, Illinois actually belonged to the group of states that needed to add regulations to comply with ObamaCare.
“They are creating a set of incentives for the young and healthy to leave the exchanges,” said Hogberg. “Young people will be asked to pay more than they would on the market, which means they will be less likely to get on exchanges.”
Examples are not hard to find. A 27-year-old man in Chicago would pay $125 per month under the cheapest ObamaCare plan. However, similar coverage he could find on the market today costs only $77 per month.
To see how your own insurance will be affected by ObamaCare, consult this chart at http://www.manhattan-institute.org/knowyourrates/ provided by the Manhattan Institute.