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Monday, January 15, 2007

No more magic tricks

By Dennis Byrne
Chicago Tribune

Go ahead and just get it over with: Raise our taxes.

Illinois' financial mess is driving the state to ruin unless a tax increase is part of the solution. For heaven's sake, even the state's business titans, who usually blanch at any mention of a tax increase, are almost pleading for one.

That's because they understand, unlike our Gov. Rod Blagojevich, that a state in financial ruin will lose jobs--in both private and public sectors--and businesses; poor people will find it even harder to get health care; the roads will deteriorate faster; and Illinois will complete its fall to below the perpetually bottom-dwelling Mississippi in virtually every quality-of-life measure.

With Illinois in hospice care, Blagojevich can forget about all those "activist government" goodies that he promised in last week's inaugural address. He also can say goodbye to all the things he bragged about achieving in his first term.

No wonder Blagojevich has asked to have a few more weeks before he has to present his budget to the General Assembly next month. By then, the anticipation will be sky-high as to what transparent gauze he'll try to hang over the state's ugly finances.

Just how bad is it? The figures already have been well publicized, from the elite business group the Civic Committee of the Commercial Club of Chicagoto the Chicago-based Center for Tax and Budget Accountability.

Illinois has the largest pension-fund debt in the nation, about $43 billion, give or take a billion, depending on whom you ask. But what's a few billion, more or less, when you're already drowning in $45 billion in debt? Nobody noticing the difference would be just further excuse for Blagojevich to lift another billion or so from the pension fund.

When you add up the pension deficits, unpaid bills, Medicaid costs and other obligations, the Civic Committee figures that the state's total liability is $106 billion. That despite a provision in the Illinois Constitution that says: "Appropriations for a fiscal year shall not exceed funds estimated by the General Assembly to be available during that year." In other words, no deficit spending. Maybe we should impeach the whole lot of them, if it's possible, for violating their constitutional oath of office.

But not before they get into the usual quarrel over whether the problem is caused by insufficient revenue or "wasteful and profligate" spending. Ralph Martire, executive director of the Center for Tax and Budget Accountability, claims that the deficits are not the result of overspending or waste, noting that Illinois is one of the nation's lowest-spending states (42nd). The group blames the shortage of revenue on a variety of causes, such as a complex federal Medicaid reimbursement formula that punishes states with disproportionately high numbers of impoverished people.

But to ignore the spending side is irresponsible. Just to highlight a portion of the Civic Committee's report: The cost of employee and retiree health care has been growing 14 percent a year since 2000. I suppose you could blame the shortfall on revenues, which increased only 4 percent annually when they should have been growing at 14 percent, but that's perverse.

Just look at the cost of the state's profligate spending on insurance for retired state employees: Retirees with 20 years of service don't pay for their health insurance. Many retirees are covered by plans that allow free doctor visits. The state subsidizes 80 percent to 100 percent of health insurance premiums. Employees get to retire at 55. Most of us in private retirement plans would dearly love to have just one of those benefits.

Whether spending or revenue is to blame, the problem now is almost out of hand, and only tax increases (along with spending cuts) will give this state a chance. The politicians and the special interests, such as the teachers lobby, will fight to a standstill over what those steps should be. Progressives will want a "tax swap," in which a state income-tax increase will help equalize school funding while reducing property taxes. Fine. Whatever.

Blagojevich, if he's true to form, will show up with another cockamamie scheme for selling off state assets to fund current bills, a "solution" that will drive the state into bankruptcy even faster.

At this point, the solution is beyond me, but that's why we elect those people to go to Springfield. But one more year of this nonsense, and we all might as well move to Mississippi, where life undoubtedly will be better.

Copyright © 2007, Chicago Tribune

2 comments:

Anonymous said...

Here's what I just sent to the Trib:

I knew something was up this morning.

First there was the weird sky, still dark over the lake while dawn was getting all rosy-fingered out past Skokie and Lincolnwood. Then I let the dog out and had to duck some foul-smelling poop from the migratory Poland Chinas squealing and grunting overhead.

Then I opened the paper and there I sat, agreeing with Dennis Byrne.

Mr. Byrne, this time you've got it right, and I thank you. You and I, along with just about everybody who has looked at the issue, agree that we have one of the country's worst tax systems and that nothing in our state’s governance can be fixed until that is fixed--starting with an overhaul of the income tax.

And yes, we know that for most of us, our state income taxes will have to go up. We may not like it, but we're grownups. Please, Governor Blagojevich and all the rest of you, treat us as such, and while you’re at it act like grownups yourselves. Own up to the problem and start working on it.

Rich Stewart
Chicago

Stephen Schade said...

Mr. Byrne:

This was certainly a surprise. It is rare that conservatives support something they consider as odious as a tax increase.

However, banks will loan people money up to two and a half times their income. With annual revenues of $61 billion, a $106 billion debt is perfectly manageable.

The state has no control over escalating health care costs; they are going up for everybody. Only a nationalized system, another idea conservatives consider odious, will solve the problem. Why not push for it as well?

What would really shore up the pension fund is a booming stock market. But that would require a Democratic president, something you undoubtedly would find too odious to even contemplate.