The 1.4 percent solution
Back in June of 2015, in “The Razor blade in the apple,” I speculated about the likely effects if passed of Mr. Rauner’s ballyhooed property tax freeze. Among its provisions, the Rauner tax freeze would exempt local governments from the Prevailing Wage Act and allow those governments to limit what is on the table when they sit down to bargain with public employee unions.
It all sounded a bit dodgy to me. Take the Prevailing Wage Act, which sets a locally controlled floor for construction pay on taxpayer-funded projects. I wrote,
As I understand that law, it doesn’t require, say, the city of Springfield to pay Chicago wages, only that local governments in Springfield pay the wage – usually the union-negotiated wage – that prevails in Springfield. I’m not convinced that this is inimical to government efficiency. Construction is only a fraction of the cost of public works, the cost of labor is only a fraction of the total cost of public works construction and the difference between paying top local wages and paying less than top is a fraction of labor costs of public works.
I didn’t really expect anyone to take my word for it, since my conclusions were merely I reasoned from general principles. Happily, Rich Miller has looked at some of the same points, this time reasoning from numbers provided by Rauner’s staff in a blog post that appeared on his Capitol Fax.com site on Jan. 14 and later in his column that appeared in our paper on Jan. 21.
Even if every single local school district throughout Illinois immediately stopped paying prevailing wage rates on construction projects (not gonna happen) and even if eliminating the prevailing wage does indeed save as much as the Anderson study projected (doubtful), school districts could’ve saved a grand total of 0.74 percent of their property tax budgets, which is not much more than a rounding error. Now figure, in reality, savings of at most half that amount and we’re looking at about a third of a percentage point. That’s not even a rounding error.
Miller also examined the likely effects of others of Rauner’s plans to put the state’s finances on a stable basis. Here’s some of what Rich concluded:
Personal income tax savings by ending out-migration of Illinoisans to other states: $140 million
Revenue growth by lowering the Illinois unemployment rate it “average:” $150 Million
Revenue growth if Gross State Product is raised: $220 Million
All this pain inflicted to maybe produce an additional $510 million in revenues -- a 1.4 percent increase over the State of Illinois’ Fiscal Year 2015 budget.
In the end, Miller concluded that the Turnaround Agenda, even if it could be passed, “wouldn’t produce enough revenue to pay the juice on money owed to the state’s vendors.”
These conclusions are based on Rauner’s own numbers, by the way. The centerpiece of his plan to save Illinois is a fraud. Pass it on.