You may have seen the television commercials where a door-to-door interviewer spells out to a horrified woman just how much money Illinois needs. She tells the person that they don’t have the money he is requesting. While that is enough of a problem in and of itself, the bigger horror is that the interviewer is informing the woman’s baby that she is holding in her arms, that is how much the state needs from the baby and now.
Or, perhaps, you have seen the billboards with Abraham Lincoln that read, “Illinois is still broke.” Yes, Illinois is broke and that is AFTER the largest tax increase in the state’s history was passed in the dead of night just hours before a new legislature would be sworn in. A new legislature that wouldn’t have voted for the state’s largest tax increase in history.
We were told that large tax increase, which increased individual state income taxes by a whopping 67 percent, would be “temporary” by Gov. Pat Quinn and his Democratic minions in the legislature. The problem is that the state budget AFTER the $8 billion tax increase is still $8 billion in the hole and that doesn’t even begin to include the estimated $85 billion to $140 billion the state owes on state worker pensions.
Currently, our legislators are in Springfield during what is the called the “veto session.” One item to be taken up, or possibly taken up, is Senate Bill 512, which seeks to stabilize required state contributions at around 25 percent to 30 percent of the Big Three tax revenues (individual income, business income and sales) through 2045 and avoids the crowding out of critical state services over time. According to the folks at www.illinoisisbroke.com, Senate Bill 512 would steadily improve the funding level of the pension plans each year until it reaches 90 percent by 2045. As of 2010, the state’s pension plan is funded at a very dangerous 38 percent – the lowest in the nation.
According to the Illinoisisbroke group, “the pension funds today do not even have sufficient assets to pay for the benefits of current retirees, let alone those for current employees who are contributing to the funds each and every paycheck. If the funds run out of money, it would be a tragedy for everyone in the state.” That means retired state workers, currently employed state workers, individual taxpayers and businesses.
And Illinois businesses are paying attention to the state’s fiscal woes. In October, Abbott Laboratories CEO Miles White gave a very pointed message to the political leaders of the state when he met with them. He told them “We have options.” The option White was referring to was leaving Illinois, like so many businesses already have and many are currently threatening to do. Abbott Labs owns lots of property in Southern Wisconsin, a state that is wooing disgruntled Illinois businesses. Abbott Labs could expand in Southern Wisconsin rather than adding to its Illinois operations in North Chicago.
Illinois leadership did tweak its pension system last year so that new workers would have to retire later than the current 55 years-old or 60 years-old that they can if they have worked the required amount of time, and annual increases will be more limited. While many agree that was a decent first step, most agree that it is nowhere near enough to even begin to solve the pension problem or the state’s other fiscal woes. Of course, the state’s fiscal woes are compounded by an irresponsible governor who wants to tax and spend even more, and then borrow billions upon billions more to close the state’s revenue and spending gap.
That will not work. Illinois has to begin living within its means. The taxpayers of Illinois suffer enough with some of the highest taxes in the nation when one adds up our income tax, property tax, gas tax, sales tax, liquor tax, license plate fees, car sticker fees, and all of the other taxes on utilities, gasoline and all of the various items our leaders can think of to tax us on.
The growing pension problem will soon eat us alive. According to Illinoisisbroke, under current law, the state is expected to make pension contributions each year that grow at about double the rate of expected growth in the Big Three taxes of personal and corporate income taxes and sales taxes. By 2045, if there is no pension reform, pension costs will take up half of the revenues brought into the state by the Big Three taxes. That leaves less money for everything else.
The other problem, and state workers need to realize this, is the pension system will not have the money to fulfill the promises made. The reality is that everyone loses: state workers (current current and future), taxpayers and businesses. And taxpayers and businesses will continue to flee the state, putting even more pressure on an already fragile state budget and pension system; not to mention the effect on local governments that will see declining tax revenues as well.
But it appears the state leaders are going to punt on any pension reform until 2012. Of course, 2012 is an election year so it will get punted again to 2013. By then, Abbott Labs may have left the state as well as other businesses. Hence, more unemployed to add to the state’s already too high 10 percent unemployment rate, which will add even more pressure on the state budget.
Illinois is in deep trouble. The state is broke. You, the taxpayer, will pay and you are only getting deeper into trouble.
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