Yes you Can, part 4
Sunday, May 23, 2010
The governor of California — which has the only state government certifiably sicker than Illinois' — has confronted his legislators with a "Sophie's Choice" that the San Jose Mercury News sums up as: "You can save the poor, or the pensions." With that, Arnold Schwarzenegger has put on the defensive legislative leaders who have overpromised taxpayers' dollars to needy citizens and state workers. Looks as if the Terminator has dug in for an epic battle to force overdue spending reforms on his state's broke and broken government.
In Illinois, meanwhile, lawmakers who've spent two weeks on paid holiday (while health providers and other vendors go unpaid) return to Springfield to face their own overcommitments. They have wasted nearly two years without reforming how Illinois does business.
While legislators wait for their leaders to tell them how to vote, they can ponder this: Research from Northwestern University and the University of Chicago projects that Illinois pension plans could run out of money as early as 2018. That's eight years earlier than the projected collapse of California pensions, in 2026.
You might think Illinois' shameful insolvency, its crushing pension obligations and its loss of a half-million taxpayers' jobs would have Gov. Pat Quinn dug in for his own epic battle over spending. Instead, he's still talking tax increases — a strategy certain to keep driving job creation to lower-cost states.
And never mind the global financial crisis that overborrowed governments have wrought: While acknowledging to the Tribune editorial board Thursday that Illinois' debts and unfunded obligations have grown into the range of $130 billion to $175 billion, Quinn's budget director and chief of staff said they want legislators to borrow more: They want four more borrowing streams that total … another $9.3 billion in debts.
One stream would raise some $3.8 billion for the state's payment to its pension funds. Taxpayers wouldn't repay that borrowing until 2019. This is madness — a race to rig the 2011 budget by denying Illinois needs future revenues for pension payments in 2012, 2013, 2014 …
We were pleased to hear the governor's top staffers suggest that Illinois can't erase its $13 billion budget deficit — recklessly accumulated over several years — in one budget. Three months ago, on Feb. 28, we offered an option that's still available: at least $6.4 billion in recurring savings that would in time nix the deficit:
• Roll back spending to 2007 levels to tighten programs and payrolls. Yes, state employees unions oppose this savings of $2.5 billion.
• Drop school funding by $560 million, not the $1.3 billion Quinn threatened with fingers crossed. Let teachers unions oppose this cut of 2.1 percent from the $26.1 billion from all sources — $13,000 per student — that public schools spent last year. (That total excludes, yes, pension costs!)
• Trim current employees' future pension earnings for cost reductions of $2.1 billion a year. Note that Winston & Strawn has joined the list of world-class Chicago law firms (Jenner & Block, Mayer Brown, Sidley Austin and Sonnenschein Nath & Rosenthal) that say the Illinois Constitution permits this. For the fourth time, legislators: Yes, you can. Unions or no.
• Delay your capital spending plan. Quinn's people want to borrow $3.6 billion for this in 2011. No. Use the revenues that would have gone to new bondholders to offset $500 million in state spending. Road builders will beef? Tough. This is a crisis.
• Save $600 million by halving the income tax slice you give local governments. Richard Daley and other mayors will say that would force them to raise taxes? Let's see if their constituents agree.
• Medicaid? In short order you can save billions. If, that is, you for once stare down protectors of the current delivery system.
Legislators, Gov. Quinn, the voters of Illinois have had it with your refusal to discipline yourselves. Stop borrowing. Stop appeasing all the interests so tightly wedded to — with apologies to Rod Blagojevich — business as usual. Start cutting, by multiple billions.
Look at the mess that is California. The mess that is Illinois. Then dig in for an epic battle to force spending reforms on this broke and broken government.