Can the governor, like Bush, change his tune?
Report predicts financial disaster, but Blagojevich remains in denial
Now that we finally have President George W. Bush talking about “a new way forward” for the United States in Iraq, it would be good to hear Gov. Rod Blagojevich discuss ways to deal with reality in Illinois. Of course, it took a big loss for the Republicans in the midterm elections to get Bush’s attention. By contrast, Blagojevich won his election handily, so voters sent him no message except “keep up the good work.” When the Baker-Hamilton commission offered Bush a face-saving way to change course in Iraq, Bush at least said that he would consider it. When an independent commission offered Blagojevich a way to begin his second term by facing facts about the state’s financial condition, the governor sent his staff out to quibble about some minor details, then dismissed the overall document as “flawed and inaccurate.” Bush has at least toned down his “victory” rhetoric. Blagojevich remains in full-scale denial, continuing in his campaign mode with promises of new programs, no tax increases, and no major spending cuts.
“Illinois is headed toward financial implosion.” That’s the clear message of a prestigious Chicago business group, the Civic Committee of the Commercial Club, in the report on Illinois finances it released last week. “The state’s liabilities and unfunded commitments exceed its assets by over $100 billion. The state has failed to set aside the amounts necessary to pay employee/retiree pensions and health benefits and to pay amounts currently owed to healthcare providers under Medicaid. The state has also failed to fund K-12 education at the ‘foundation’ level. These liabilities and unfunded commitments are growing rapidly. Yet the state continues to spend or commit to spend billions more than it takes in each year.”
The report is sensible in its approach. It recommends an increase in the income tax, the implementation of a sales tax on some services, and the cutting of some costs, notably retiree benefits. The costs of doing nothing are substantial and growing. The report states: “Commitments to state employees will become a huge burden to future generations or will not be kept at all. Illinois may be forced to implement radical service cutbacks, and its ability to refinance its debt may be adversely affected by deteriorating ratings.”
The Civic Committee report echoes a report released last month by the Center for Tax and Budget Accountability revealing that the state’s unfunded pension liability, already the worst in the nation, has grown by $7 billion in the last two years. “Illinois public pension liabilities are growing out of control,” said the report, “and the state’s failure to pay keeps making them worse. If lawmakers don’t act to meet these obligations now, the cost of catching up later will force cuts to education, health care, and other essential public services.”
The CTBA has long been calling for a “tax swap” that would decrease property taxes in exchange for an increase in the income tax. That is seen as a way to make a tax increase more politically palatable to skittish legislators. Interestingly, in its recent report, the Civic Committee argued that a tax swap would be a waste of time and money. A tax swap would grant property-tax relief everywhere, not just in places where it’s needed most, and local governments would eventually raise taxes back up anyway. Funding schools adequately, through an income-tax increase, would at least relieve pressure for future property-tax increases.
“Tax swap or no tax swap” would make an interesting debate in the Legislature — but the trouble is, so far there is no debate on the state of Illinois finances. The governor continues, dishonestly, to deny that there is a problem, and legislators continue, cowardly, to wait for the governor to take the lead. The Civic Committee says it’s time for businesspeople and citizens groups to get involved rather than waiting for elected “leaders” to lead. That would give them a voice and the ability to insist that taxes should not be the sole solution, that they be accompanied by cost-cutting and other reforms.
I haven’t completely given up on Blagojevich, who has a budget address coming up. If Bush can change his rhetoric on Iraq, the governor can change his tune, too. He could begin by quoting from the Civic Committee report: “Good government in a democracy involves making hard choices. Citizens who live in Illinois and pay taxes here, and the businesses located here, make hard choices. Their government should do no less.”
The entire Civic Committee report is available at www.civiccommittee.org.