New state economic development chief makes his case

Thursday, April 05, 2012

The new head of Illinois' economic development unit says his job for now is mostly "listening," but he concedes that what business needs most is for the state to cure its own enormous budget woes.

In an interview, David Vaught, who earlier in the week was named director of the Illinois Department of Commerce and Economic Opportunity, said there "is no magic bullet" to turn around an Illinois economy that has lagged the nation in job growth for most of the past three decades.

"The most important thing is learning from business leaders how to help our economy," said Mr. Vaught, who until this week had been Gov. Pat Quinn's budget director. "I want to play that role, of being in the listening role."

Mr. Vaught said part of his job will be to "defend the governor's priorities" in spending on education and infrastructure. Both are "critical" because neither economic nor fiscal woes will heal without a peppier private sector. "We can't solve the state's fiscal problems based on very, very slow growth."

But, noting warnings from bond-rating agencies that Illinois' credit faces a major downgrade unless something changes soon, Mr. Vaught said the state really does need to rein in Medicaid and pension spending this year, and preferably this spring.

Pension trims will be easier, Mr. Vaught said — despite opposition from worker unions. "It's going to be contentious, but I think it will happen. . . .If you have an out-of-control pension system that's growing faster than the state and economy, you have a problem."

Mr. Vaught said he believes changes will be enacted in the Legislature this spring. But other Springfield insiders say action in a post-election veto session is more likely. The changes would apply to current state workers, not just new hires, who had their benefits cut a year ago.

The $2.7 billion that the governor wants to cut out of Medicaid spending this year "may be a little harder" to achieve than pension reform, Mr. Vaught said. "But I'm optimistic."

The former budget director pretty much discounted the possibility of large-scale tax reform, such as widening the sales tax to cover services while reducing the tax rate.

"We have some obsolete tax breaks" that ought to be repealed, he said. "I don't think we're near mega tax reform."

Mr. Vaught, 64, grew up on a family farm downstate before setting up his own law practice. He's still an owner of a Chicago investment firm, Mitchell Vaught & Taylor Inc., that manages $300 million in client funds.

Mr. Vaught denied that his departure as budget chief was contentious.

"Four budgets will wear you down," he said, referring to the four often bitterly contentious state budgets that he drafted. "I proposed (the job switch) to the governor. He liked the idea, and off I went."

Mr. Vaught's appointment requires confirmation by the Illinois Senate. He clearly stepped on some toes as budget director — all budget chiefs do — but I'd be surprised if Mr. Quinn would have made the appointment without doing his political homework.

Former Quinn Chief of Staff Jerry Stermer takes over as acting budget director.