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Tuesday, January 27, 2009

Beyond Blagojevich: Illinois is in a state of debt

By Dennis Byrne
Chicago Tribune

As much as Gov. Rod Blagojevich deserves to go, let's not forget who's sending him on his way—the ever-suspect legislature. For what it's worth, the astute political class is unanimous that the Senate will convict him of whatever it takes, and dismiss him from office, perhaps by the end of the week. But when the legislature acts with such alacrity, it is time to be dubious.

Which is why one should take soberly Blagojevich's warning that once he's gone, the way will be cleared for such chicanery as an increase in the state income tax. For all the celebration over the prospects of Blagojevich's departure—and I'm among those who will light off a skyrocket—we've debated little about what will follow. Even with him gone, we'll still be dealing with the festering mess that he and the legislature together have left behind.

The state's financial condition is wretched, perhaps the worst among the 50 states. With the next election almost two years away, legislators might be tempted to increase the income tax. Liberals have long called for an increase and last year some business interests even joined in, arguing that extraordinary steps must be taken in these tempestuous times, a view I once shared.

Illinois' deficits and debt are sky-high. For several years, state revenues had been increasing at a steady pace, but lately that has diminished in the face of the economic downturn. Even if you count the $1.4 billion from the state's short-term borrowing last month, the money available to pay the state's unpaid bills—totaling a historic $1.8 billion at the end of last month—hasn't kept up. Instead of cutting back, like most households are forced to do in an economic crunch, the state's expenditures keep growing. Even in good times, expenditures outstripped revenues, but the economic downturn now has worsened this trend. Base spending during this fiscal year (we're half way through it) increased 5.8 percent, thanks to a $764 million increase in operating expenses, education grants and retirement contributions. Education accounted for the biggest hunk of the increase—up $511 million, or 17 percent—for State Board of Education grants and $205 million, or 36.7 percent, for teachers retirement grants. It's something to keep in mind the next time we hear the whine that "schools don't get enough."

Illinois Comptroller Dan Hynes, who is turning out to be the state's unheralded Cassandra, sees worse ahead. General funds appropriations are up $916 million, but that doesn't include more hundreds of millions to pay required contributions to five state retirement systems. And don't forget, we have to pay off that $1.4 billion in short-term loans.

At the end of this fiscal year on June 30, the state could be holding more than $3 billion in unpaid bills, money that probably will be hijacked from the following year's budget. At some point, we'll be bankrupt, the first state to join the wave of corporate failures. Hynes calls the situation "dire" and potentially "unmanageable," words not strong enough to accurately describe the coming cataclysm.

Boring stuff, all these numbers. But I guarantee you'll feel something other than boredom when you start paying the increased taxes.

One test of the legislature's good intentions is whether, before passing any tax increase, it starts rolling back of some of Blagojevich's insanity, such as free rides for seniors on mass transit or his unilateral and unconstitutional expansion of the state's FamilyCare program. FamilyCare provides health-care coverage for families that make up to $83,000 annually for a family of four.

Fear of an income tax increase is not reason enough for keeping Blagojevich; his deceptions and cynical use of government programs for political gain by themselves demonstrate his unsuitability for government office, which is the essential charge of his Senate trial. Even if he pulls another surprise and resigns between the time I write this and the time it appears (anything is possible with this guy), his departure will still leave a state in shambles. The mess is so convoluted that it can't simply be cleaned up with a tax increase. If the legislature wants to demonstrate that it can govern any better than Blagojevich, then let it start by first lowering expenditures to match revenues.

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