51 Comments - Anonymous - Friday, Feb 1, 13 @ 9:02 am: Jerry Brown coming back for a 2d go at the job worked because he was willing to be honest, lead, and do what was necessary. Can we get Dick Ogilvie back? - RNUG - Friday, Feb 1, 13 @ 9:12 am: Everyone seems to forget IL also implemented pension reform for new hires … it’s called Tier 2. As Rich rightly points out, Quinn only took half measures on both spending cuts and tax increases. - USMCJanitor - Friday, Feb 1, 13 @ 9:16 am: While I wouldnt call what California did cutting to “the bone” They did do cuts. Cali grew its State budget in the previous decade at like 2 or 3x the previous growth trend and population… So cutting them is really just taking it back to a reasonable trend line. I would love to see a chart that shows the last 30 or so years in Illinois with its revenue and spending… see where the actual changes happen (any nice spikes or turns) or see if it has just always been on a course that would take us here. Yes we have to cut, and yes state gov can do important things. But the state does way more than just eduction and prisons… when you see a list of who the state owes money to it makes a regular joe like me scratch my head wondering WTH they are doing. - Small Town Liberal - Friday, Feb 1, 13 @ 9:17 am: - Can we get Dick Ogilvie back? - Right, because Ogilvie was known for his painful spending cuts… I’m a little confused because all I hear from everyone is about the real pain inflicted by Governor Quinn cutting spending on prisons and other facilities, trying to negotiate a reasonable contract with AFSCME, the painful cuts to mental health, etc. At the same time everyone is complaining about the income tax increase and how it’s killing the economy and making us less competitive. You’re telling me even more painful cuts would have suddenly made everyone realize we have a revenue problem? I have my doubts. - Anonymous - Friday, Feb 1, 13 @ 9:23 am: STL-Brown wasn’t known for spending cuts the first time either; Ogilvie did what he had to do. More importatntly, there’s no sense that Quinn has a rational plan and sticks to it. It all comes off as improvising. - Norseman - Friday, Feb 1, 13 @ 9:27 am: Folks, don’t get too excited about California’s pension reform. As RNUG points out California’s reform only applies to new employees. We’ve already done that. “The slow road to savings in budget-strapped California is because the Golden State’s version of pension reform on Sept. 12 only reduces benefits for new public workers instead of targeting existing workers, as more aggressive states have done, said Alicia Munnell, director of the Center for Retirement Research at Boston College.” http://m.pionline.com/article/20120917/PRINTSUB/309179980 - OneMan - Friday, Feb 1, 13 @ 9:27 am: The thing is, people don’t really pay all that much attention to state government. They don’t really understand what the state actually does. By slashing spending, Gov. Brown created a whole lot of hardship, but the pain showed Californians how vital state government can be Bingo, taking forever to pay social service providers does not impact folks directly nearly as much as actual cuts. You don’t know what you had until it’s gone. - Plutocrat03 - Friday, Feb 1, 13 @ 9:30 am: “tax hike eventually took some real steam out of the economy as well” Is that an acknowledgment that tax increases hurt the economy? - Rich Miller - Friday, Feb 1, 13 @ 9:33 am: ===I’m a little confused because all I hear from everyone is about the real pain inflicted by Governor Quinn cutting spending on prisons and other facilities, trying to negotiate a reasonable contract with AFSCME, the painful cuts to mental health, etc.== You’re confused because you’re forgetting your timeline. All that is post tax hike. - Rich Miller - Friday, Feb 1, 13 @ 9:36 am: ===Is that an acknowledgment that tax increases hurt the economy?=== As well as budget cuts. Apparently, you aren’t up on Keynes. - the Patriot - Friday, Feb 1, 13 @ 9:37 am: You people have an odd definition of “spending cuts.” To cut spending, you have to spend less than you did the year before. Each year our budget grows. Quinn cut nothing, he just moved funds around. - hisgirlfriday - Friday, Feb 1, 13 @ 9:41 am: So basically bond ratings are about PR just as much as anything. Kind of makes me wonder how much of MJM’s letter to the unions on pensions was theatrical posturing to make the union hating bond houses happy. - Demoralized - Friday, Feb 1, 13 @ 9:45 am: ==You people have an odd definition of “spending cuts.” To cut spending, you have to spend less than you did the year before. Each year our budget grows. Quinn cut nothing, he just moved funds around. == Then you don’t understand the budget. It’s growing because of the pension payments. To say that nothing is cut shows your lack of understanding. - Rich Miller - Friday, Feb 1, 13 @ 9:45 am: ===Each year our budget grows. Quinn cut nothing, he just moved funds around.=== Operations budget is indeed lower. Reason? State is making its pension payments. Get a clue. - illinifan - Friday, Feb 1, 13 @ 9:48 am: We also have to consider the base line….many of the changes made by states such as California’s new hire policy, or Wisconsin or New Jersey saying employees have to contribute to their pensions often put those new policies or reform on a par with where we are starting from in Illinois. The real issue is the years of the state not contributing and the ramp that is in place to pay off the loans that were made at a faster pace. We also have years of an extremely low tax rate, so often states that are being touted for having strong budgets actually have structured their income in a way that is actually pays for what is promised. - Plutocrat03 - Friday, Feb 1, 13 @ 9:51 am: you aren’t up on Keynes I am. He and his disciples are the dimmest bulbs in the economic universe. My comment was meant as snark. - Small Town Liberal - Friday, Feb 1, 13 @ 9:59 am: - You’re confused because you’re forgetting your timeline. - Fine, I still have my doubts that Illinois would have responded the same as Cali, but point taken. - Ahoy! - Friday, Feb 1, 13 @ 10:01 am: I don’t know how bad California’s pain actually was since I didn’t experience it, so I can’t really say anything with much knowledge, but in general, I take some short term pain for long term stability. Right now in Illinois, we’re just in pain with no end (solution) in sight and I think it’s really starting to wear on people. - dupage dan - Friday, Feb 1, 13 @ 10:04 am: Scott Walker & Jerry Brown - 2 folks who looked at the conflagration and took the tough steps necessary to get their states back on track. Agree with them or not - they took the reins and led the charge. We got PQ…………… - wordslinger - Friday, Feb 1, 13 @ 10:10 am: I wonder how much Brown’s surprise surplus announcement played a role. Everyone likes a surprise of more money. –The unexpected $5 billion increase in California’s projected tax revenue for January may be the result of high- income earners cashing out investments early in anticipation that federal income taxes would rise as part of a congressional deal over avoiding automatic tax increases, the Legislative Analyst’s Office said. U.S. levies on capital gains rose to 20 percent from 15 percent under this month’s agreement in Washington. – - Norseman - Friday, Feb 1, 13 @ 10:17 am: Here’s a little more on the difference between California and Illinois: “States that have avoided funding, such as Illinois, will see pension costs soak up a huge share of future revenue. Illinois may end up exhausting its pension assets and reverting to pay-as-you-go funding. … California and New York are special cases: they have not been persistently bad actors, but their pensions are very generous and place an enormous burden on the state and its participating localities.” and “For example. in 1999. CalPERS reported that assets equaled 128 percent of liabilities, and the California legislature enhanced the benefits of both current and future employees. It reduced the retirement age, increased benefit accrual rates, and shortened the salary base for benefits to the final year’s salary.” State and Local Pensions, What Now? — Alicia H. Munnell - Quiet Sage - Friday, Feb 1, 13 @ 10:30 am: The article says that Brown cut pensions on new employees and does not mention current employees. So California’s example apparently shows that a state’s budget can be brought back into shape without pension cuts to current employees. - Joe M - Friday, Feb 1, 13 @ 10:46 am: “Both states have raised taxes” doesn’t tell the whole story. Illinois: 5% (after being 3% for 20 years California: $0+ $ 7,123 1.00% $7,124+ $14,248+ 2.00% $16,890+ $33,780+ 4.00% $26,657+ $53,314+ 6.00% $37,005+ $74,010+ 8.00% $46,766+ $93,532+ 9.30% $1,000,000+ $2,000,000+ 10.30% One could also argue that California had more room to cut expenses Total state expenditures per capita Illinois: $3599 Califoria: $5532 Source: http://www.statehealthfacts.org/comparemaptable.jsp?ind=32&cat=1 - wordslinger - Friday, Feb 1, 13 @ 10:46 am: –you aren’t up on Keynes I am. He and his disciples are the dimmest bulbs in the economic universe. My comment was meant as snark. – That’s funny, because when they weren’t showboating for the cameras, those Senate GOP Armed Services Committee members all talked about how cutting defense would lead to massive layoffs and a new recession. This makes some sense. http://wallstreetpit.com/98651-only-public-enterprise-can-heal-our-sick-economy/ - Soccertease - Friday, Feb 1, 13 @ 10:54 am: Rich, I would argue employer pension contributions are part of personal services operations. - Logic not emotion - Friday, Feb 1, 13 @ 11:06 am: I read an article yesterday about a lot of professional athletes and others are now looking to move outside of California to save taxes. I know of fairly well off individuals who spend at least 51% of their time in states without income taxes instead of Illinois. It isn’t a level playing field among states or countries and those with the means have options to minimize those taxes. The delimna is determining at what point you receive a higher percentage of their income vs. a higher percentage of zero plus loss of local sales / property taxes. - shore - Friday, Feb 1, 13 @ 11:10 am: the headline should have been moonbeam> soyboy that is all. - VanillaMan - Friday, Feb 1, 13 @ 11:17 am: You forgot to include a big dose of reality. California is awesome. The weather is spectacular. The scenery is world famous. San Francisco and San Diego are stunningly gorgeous. Beaches, warm ocean currents, National Parks, 14,000 foot mountains, Mt. Lassen, Yosemite, Catalina Island, Golden Gate, Santa Barbara… Illinois exists to make money. It isn’t California. When you can’t make money in Illinois, you deal with a whole lot of crappy bitter winters, flat featureless landscapes, and miles upon miles of scenery people spend thousands annually in order to escape from. Illinois is not California. So California has a huge natural edge over us keeping it’s economy going that we do not. California isn’t supposed to even be on the short list of failing economies. It’s ability to turn it around is much easier. Oh, and Keynes focuses too much on the consumption side of an economy and doesn’t work well, certainly doesn’t work well now. Look around, Keynes can’t fix a 21st Century economy in the US, or in Europe. It was oversold as a cure all anyway. - Meaningless - Friday, Feb 1, 13 @ 11:21 am: It looks like an increased statewide sales tax, inreased levies on income starting at 250,000, and reduction in benefits for NEW state employees, along with across the board spending cuts were the key components of California’s formula to get back on track. I don’t know if this would work for Illinois or not, but I do know that Illinois is considering other options that could be devasting for thousands of retirees. Instead of generalizing, I’ll speak for myself, even though there are thousands of other retirees in the exact same position I’m in, or even worse. My wife and I planned our whole lives and futures around my retirement and the guarantees made to me. My wife gave up her teaching career to be a stay-at-home mom and take the primary responsibility for raising our two boys and I would stay in my career as a teacher and a coach of two sports. We found a way to make this work on one income and have no regrets about our decision. We also refinanced our house 3 times and have 20 years remaining on our mortgage. We are currently doing everything possible to help my oldest son pay for his college education and will try to do the same for my younger son who is still in high school. Like everyone else, our meager investments took a major hit a few years ago, which was/is a major setback in our personal finances and the funding of our children’s education. We do not qualify for any government aid for college support as we are slightly above the cut-off line. My wife and I are not lazy people, but we’ve been very frustrated in trying to find any part-time employment to supplement my pension. Neither one of us seem to be very attractive for employment, even though both of us are highly educated, resourceful, and competent individuals. There are numerous volunteer opportunities available to us, but that doesn’t help pay the bills. Any changes to my current TRS pension would be devasting to me, my family, and thousands of other retirees. - 47th Ward - Friday, Feb 1, 13 @ 11:25 am: ===Look around, Keynes can’t fix a 21st Century economy in the US, or in Europe.=== VM, that’s utter nonsense. Both the US and Europe have ignored Keynes and have tried austerity measures to get through the crisis. - wordslinger - Friday, Feb 1, 13 @ 11:27 am: –I read an article yesterday about a lot of professional athletes and others are now looking to move outside of California to save taxes.– It’s quite a revolution, golfers from California threatening to move to Florida. I mean, where can you work on your golf game in Florida? Here are the highest income zips in the United States. Looks like income tax rates aren’t a deal breaker. http://wealth.mongabay.com/tables/100_income_zip_codes-1000.html - wordslinger - Friday, Feb 1, 13 @ 11:39 am: VMan, you make a lot o good points about California. It is, indeed, on its own, the world’s ninth-largest economy. They also have, and we lack, an enormous defense industry — military bases, ship and aircraft builders, etc. Outside of Rock Island Arsenal, Scott AFB and Great Lakes, we don’t have so much of that. - wishbone - Friday, Feb 1, 13 @ 11:42 am: “–you aren’t up on Keynes I am. He and his disciples are the dimmest bulbs in the economic universe. My comment was meant as snark.” Wow, where to start. Europe cut back spending (ignoring Keynes) and is mired in negative growth and high unemployment. The U.S. (thanks to Obama) did modest stimulus spending, and has been on a slow road to recovery ever since. At the national level we need to address the deficit in the long term, but in the short term cutting spending in a recession can be disastrous. Applying Keynesian economics at the state or family level is problematic, and more conventional (and conservative) fiscal policies tend to make more sense. Both Democrats and Republicans fail to make the distinction in scale involved in applying (or deriding) proven Keynesian policies. - RNUG - Friday, Feb 1, 13 @ 11:51 am: Meaningless, IL is actually ahead of CA in this mess … IL already raised the income tax … probably not as much as they should have and should have been permanent instead of temporary IL already cut new employee benefits … Unless IL changes their tax code from flat to porgressive, they can’t selectively raise income taxes .. What is different between IL and CA? CA has a leader who is in charge, has a real plan people can see and understand, has cut to the bone and then some, and knows how to do public relations. IL has Quinn … - steve schnorf - Friday, Feb 1, 13 @ 12:24 pm: soccert-I would agree that normal costs probably are operations, but debt service on unfunded liability shouldn’t be - DINO - Friday, Feb 1, 13 @ 1:16 pm: Wishbone, How has Obama done anything different from Bush did? They both pushed corporate bailouts and stimulus. Difference is that Bush’s idea of stimulus was checks to taxpayers, Obama’s was checks to failing Green companies. Recovery? Household income is down and the only reason that unemployemnt is at 7.9%(it was never supposeed to be 8%)is because people ran out of benefits and are no longer counted. Even though you can now get benefits for what seems like 100 years. Why would they go back to work? - USMCJanitor - Friday, Feb 1, 13 @ 1:23 pm: keynes was big on spending, but he also understood that when times were good you had to save money (or not borrow it) to be able to borrow and spend then pay off… Reading and adhering to only 1/2 of Keynes leads to where we are now, keep spending AND borrowing when times are good AND bad. then you wind up with Illinois and the nation as a whole, deficits every year as far as the eye can see. Now when it is time to Cut, the cuts must be massive simply because we have ramped up to an unsustainable level. Even keynes understood you could not tax to the point of prosperity. But instead could use gov to spend when times were slow. No where will you find in Keynes “borrow every year, spend more every year, never pay anything back” - Small Town Liberal - Friday, Feb 1, 13 @ 1:23 pm: - Difference is that Bush’s idea of stimulus was checks to taxpayers, Obama’s was checks to failing Green companies. - Guess you missed all those ARRA signs everywhere. Another difference, Bush launched into two wars, and instead of trying to pay for them he lowered taxes. Simple math, really. - Grandson of Man - Friday, Feb 1, 13 @ 1:36 pm: Corporate profits are way up under Obama. The Dow broke 14,000 today. Jobs numbers for the last two months have been revised upward. We can’t say Obama is bad for business. - USMCJanitor - Friday, Feb 1, 13 @ 1:51 pm: Is this an obama/bush discussion SmallTown and Grandson or a state of Illinois discussion? or can we blame all of Illinois’ problems on Bush somehow? - DINO - Friday, Feb 1, 13 @ 2:01 pm: Grandson of Man, You can still say the same for Bush. The Dow went from roughly 6,500 following 9/11 to 14,000 in 2007. Unemployment average of his terms was about 5%. Small Town Liberal, Wars end, and can be paid off. Entitlements only increase in cost and participation. So, from a fiscal standpoint, I would much rather have the short term expense of a war as opposed to the long term burden of Obamacare or Bush’s drug coverage for seniors. None of the above would be better though. Oh yeah, let’s not for get the successful UAW, I mean GM bailout Obama touted. Neither Bush or Obama are/were good for this country fiscally. Just because the federal government can print money, doesn’t mean they should. - Judgment Day - Friday, Feb 1, 13 @ 2:04 pm: CA has taken actions. Cuts likely aren’t sufficiently deep, substantial tax increases. There will likely be consequences, both positive and negative, and many probably unanticipated. But as pointed out, CA also has enormous natural advantages, many of which IL does not have. Enough on CA. Let’s get back to IL. I’d say PQ (as governor) needs to do this, but it’s most likely beyond his capabilities - time for creation of a decision matrix. We might want to consider looking at this from an ‘assets’ and ‘liabilities’ picture: Assume everything (people, programs, services) is a asset, then figure out what are the associated liabilities tied to that ‘asset’. Set everything as a date, say 01/01/2013. Asking PQ to be a leader w/o giving him a roadmap is just a waste of time. Others might be able to accomplish that task, but it’s a bridge too far for our current governor. - reformer - Friday, Feb 1, 13 @ 3:17 pm: California starts with a more modern state tax system. It’s income tax is graduated, and its sales tax covers some services. Consequently, tax hikes raise more revenues than a state with a flat income tax and a sales tax that doesn’t apply to services (IL ranks 47th in service taxes). - capncrunch - Friday, Feb 1, 13 @ 3:30 pm: In November 2007, the month before the recession started, 146.7 million people were working and the unemployment rate was 4.7 percent. Today, there are 143.3 million people working and the unemployment rate is 7.9 percent. There are 5.1 more people out of work now. And in the last five years, about 1.8 million new people have entered the labor force. Yes siree Bob, all that Keynesian medicine has worked miracles. - wordslinger - Friday, Feb 1, 13 @ 3:46 pm: –Yes siree Bob, all that Keynesian medicine has worked miracles.– I missed the Keynesian part. When did that happen? There was a spike in FY 2009 (passed in 2008, including a big Social Security COLA and emergency measures in relation to the global financial collapse). Do you see enormous, recessionary increases in federal spending, to get people back to work, as would be advocated by Keynes, since then? http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=200 - 47th Ward - Friday, Feb 1, 13 @ 3:51 pm: This is from Wonkwire today. Make of it what you will, but you can’t deny that if Congress let Obama spend like Reagan spent, our economy would be growing faster and unemployment would be much lower. http://wonkwire.com/2013/02/01/chart-of-the-day-180/ Government spending fuels GDP growth, just as Keynes demonstrated. It really isn’t complicated. As for the deficit hawks, yes, $17T is a big number, but still below 100% of GDP, so keep it in perspective and look at what happened to Japan since 1990. - Just The Way It Is One - Friday, Feb 1, 13 @ 4:14 pm: Hey, AnONymous back at 9:02 am–but, if my memory serves me correctly, Republican Gov. Dick Ogilvie instituted the Illinois Income Tax, and that’s why they voted him out of OFfice…is that what you’d REALLY want as the GOP Gov., or even Candidate, once again carrying the banner??? Be careful what you wish for… - Grandson of Man - Friday, Feb 1, 13 @ 4:16 pm: USMCJanitor, Small Town Liberal and I reasonably responded to DINO, who mentioned Bush and Obama. For Illinois, I am in favor of a balanced approach to solve the budget problems, just like in California. Some people have floated nice ideas to help fix the pension mess, but will our politicians listen? We were just scolded by Mr. Madigan. When some of us went to politicians to propose ideas like the progressive income tax, we were told stuff like the rich will leave, and that we should do a grassroots campaign to change voters’ minds about taxes. So we felt like the politicians were leading from behind. DINO, Do you think only the UAW benefited from the auto bailout, or did it help the economy overall? I read that the bailout helped the economy, as did the stimulus. The CBO and economists from schools like the U of C, Harvard and MIT say the fiscal stimulus helped and has a positive cost-benefit outcome. Yes, I am in favor of cuts, only because I can’t see any other way out of the mess, but they have to be done as humanely as possible. I know people who are absolutely unwilling to accept cuts, but those people can’t muster up much political strength (see the Green Party). - wordslinger - Friday, Feb 1, 13 @ 4:31 pm: –Hey, AnONymous back at 9:02 am–but, if my memory serves me correctly, Republican Gov. Dick Ogilvie instituted the Illinois Income Tax, and that’s why they voted him out of OFfice…is that what you’d REALLY want as the GOP Gov., or even Candidate, once again carrying the banner??? Be careful what you wish for…– Ogilvie was instrumental in getting the Illinois income tax passed, and dragging Illinois into the 20th Century. If you were against that, I’m sure you were a big fan of the personal property tax and other Goober, no-sense taxes that funded government at the time. On another note, for anyone who worked with Ogilvie back in the day, I’ve been doing some research on Dick Cain, who was Ogilvie’s chief investigator as Cook County sheriff and board president, Sam Giancana’s right-hand man, and the Chicago FBIs main outfit informant. Triple agent? He died at Rose’s Sandwich Shop on Grand Avenue from lead poisoning, administered by a shotgun, about the same time Johnny Roselli ended up in parts in an oil barrel off Miami and Giancanna had an unfortune incident making sausage and peppers on Wenonah Avenue in Oak Park. They were all set to go up before the Church Committee on the CIA/Outfit collaboration on Cuba. Anyone remember Cain? - Anyone Remember? - Friday, Feb 1, 13 @ 4:50 pm: The distance (and the Sierras) obscure some important details. USMCJanitor - ==Cali grew its State budget in the previous decade at like 2 or 3x the previous growth trend and population…== Incorrect! California voters put in place in 1979 a Constitutional Amendment via Proposition 4 that limited the increase in government spending. Although it has been modified since, and spending did grow with revenues in the Dot Com revenue bubble, the anti-smoking tax, etc., government spending can not grow (apologies in advance) “Willy Nilly” … . The other item that is being ignored like the elephant in the room is California does not have a constitutional guarantee on pensions. As someone who has marveled at Madigan’s abilities for nearly 30 years, were it not for that constitutional guarantee he would have had the pension issue fixed long ago. - wordslinger - Friday, Feb 1, 13 @ 4:52 pm: –Government spending fuels GDP growth, just as Keynes demonstrated. It really isn’t complicated.– It’s not. When the private sector is going south, you borrow for long-term infrastructure. When the private sector is flush, you pay it back, like we did in the Clinton years, when budgets were in surplus and the T-Bond pit at CME went dark, because the government wasn’t borrowing money. There were a lot of missed opportunities between Jan. 2009 and 2011, but, to me, not going all in for infrastructure to support growth in capitalism in an era of zero inflation was the big one. Problem was, the other guys were clueless. 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