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* My Sun-Times column today is about an issue I’ve discussed several times since the federal “stimulus” plan was first debated. The states are getting the shaft and it is hurting everyone…
This winter, when you’re freezing your tail off waiting extra long for a city bus because of CTA budget cuts, you might want to blame President Obama.
OK, maybe not just Obama. The people responsible for the financial systems meltdown started this disaster.
The economic meltdown that began on Wall Street and then morphed into our current “Great Recession” has all but dried up state and local government revenues.
Obama did support a major cash infusion to state and local governments, but he backed away from a more ambitious plan when “moderate” Republicans and rural Democrats objected. You can blame them for your long bus wait as well.
Illinois did get some money out of the deal, but it wasn’t nearly enough, and the resulting deficit is absolutely crippling.
The political climate makes it impossible to raise taxes to stem the state’s frightening wave of red ink. It’s so bizarre out there that moderate Republican gubernatorial candidate Kirk Dillard now refers to Obama as a “socialist.” That’s the same Kirk Dillard who made a TV ad for Obama’s presidential campaign.
Without revenues, Illinois has been cutting services, borrowing short-term and delaying billions in payments to human service providers and other vendors.
And because the state is in such a bind, it can’t help properly fund the CTA. Gov. Quinn came up with a plan this week to let senior citizens keep their free rides, but it amounts to chump change, and the overall reorganization plan merely delays the day of final reckoning for a year or two — if that.
Meanwhile, transit routes are being slashed and jobs are being cut during the worst employment market in memory.
Even worse, an absolutely essential public asset is being allowed to whither on the vine. Politicians such as Quinn fear that a fare increase will result in a voter backlash. Voters are just fed up with Illinois politicians getting in their pockets, so he and the others do have a point. But how long can the transit system remain viable if it’s being scaled back year after year?
Now, back to Obama.
The projected state deficit is about 2 percent of Illinois’ gross domestic product. Because we can’t print money or borrow long-term like the federal government does, the deficit is a direct drag on Illinois’ economy. For instance, when the state pays a vendor six months late, that vendor has to borrow to make payroll, and because businesses can’t borrow like they used to, workers are let go, or vendors go under.
Illinois is not alone. Revenues have dried up for almost every state and local government in the nation, so they’ve cut, cut, cut. While Obama is trying to hit the economic gas pedal, state and local governments are slamming on the economic brakes. National liberal blogger Duncan Black has taken to calling governors “50 little Hoovers” for their Herbert Hoover-like economic policies of cutting their budgets during an economic catastrophe.
Black, who has a Ph.D. in economics from Brown University, is part of a growing chorus of people who are demanding that the federal government do something to prevent state and local governments from derailing a recovery.
The Democrats who run things in Washington, including Obama, ought to listen. If they want to get re-elected next year, they have to fix the economy. And they can’t make the fix stick if every forward step they take is partially or totally nullified by the states’ budget problems.
Your long bus wait is just a symptom of the overall problem. And it’s going to get worse unless Obama acts soon.
* Related…
* State’s budget crunch squeezing Ill. universities
* University of Illinois student instructors threaten strike
* CTA approves budget without fare increases
* GOP criticizes move to commit state cash to CTA
* We all just got stuck with a fare hike
posted by Rich Miller
Friday, Nov 13, 09 @ 9:36 am
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Previous Post: They got very little right, as it turns out
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Fortunately, since now all the CTA buses are on bus tracker, many people will be able to wait in their cozy homes for the bus instead of out in the cold.
CTABUSTRACKER.COM - Just do it.
Comment by George Friday, Nov 13, 09 @ 9:42 am
Sorry, I just totally ruined your setup.
It was a good one, really!
Comment by George Friday, Nov 13, 09 @ 9:43 am
Very good article, I was disappointed the stimulus did not include no/low interest loans to state and local governments. That would have provided an actual benefit instead of this boon-doggle stimulus bill.
I do think the CTA should look into raising its user fees instead of relying so heavily on state tax dollars.
Comment by ahoy Friday, Nov 13, 09 @ 9:43 am
The CTA doesn’t get much money at all from “state tax dollars”. The only money they have received (unless they extract a bailout) has been the reduced fare reimbursement.
The CTA’s money comes from sales tax revenue in the transit district. They also have RETT revenue now for the pensions, but that has fallen way down, too.
Comment by George Friday, Nov 13, 09 @ 9:47 am
While virtually every economist worth their salt has argued in favor of more aid to states, I fear that the political climate is such that it won’t happen, or will be insufficient. Unless and until private investment picks up substantially, thus increasing tax revenues, public spending is the only way to fill the void.
Florida governor Charlie Crist is a good example. He’s been hammered by conservatives for being an advocate for the stimulus package, and is now desperately trying to distance himself from any past association with Obama.
Comment by The Doc Friday, Nov 13, 09 @ 9:48 am
I don’t see it happening, Rich. The deficit as percentage of GDP is as high as it’s been since WWII, thanks to eight years of borrowing to fight two wars and the bailouts that began when Lehman crashed in 2008.
My guess is that healthcare will be the last big initiative — win or lose — by Obama before he hunkers down for 2010. Plus, it looks like we’re going to escalalate in Afghanistan, and that won’t be cheap.
Comment by wordslinger Friday, Nov 13, 09 @ 9:52 am
–The deficit as percentage of GDP is as high as it’s been since WWII, thanks to eight years of borrowing to fight two wars and the bailouts that began when Lehman crashed in 2008.–
Correcting, that should be the federal debt, not the annual deficit.
Comment by wordslinger Friday, Nov 13, 09 @ 9:53 am
I think this recession is a great thing for state governments. They are being forced to finally come to grips with their fiscal irresponsibility and to make the tough choices necessary as well as becoming accountable to voters.
No need for the 250k a year film office todd stroger got for cook county (our state has 3 now state,chicago, cook county), no need for these free rides for seniors, and certainly there are a lot of other things state government could and should do without.
Comment by shore Friday, Nov 13, 09 @ 9:54 am
===I think this recession is a great thing for state governments.===
Yeah, stick with that line. I’m sure you’ll go far.
Comment by Rich Miller Friday, Nov 13, 09 @ 9:59 am
When the state’s phones to vendors stop ringing, vendors stop shopping and paying state sales and income taxes. Vicious cycle. Losing another 10th of GDP from state and local government spending right now might just send the entire national economy into another big dip.
About time to restore federal revenue sharing that just about ended during the California cowboy’s reign. This would not solve our deficit problem but it could about cut it in half.
Comment by vole Friday, Nov 13, 09 @ 10:01 am
Wait, the state isn’t funding the CTA? How about this:
Fund.
Your.
Own.
Darn.
Buses.
Comment by John Bambenek Friday, Nov 13, 09 @ 10:04 am
At the federal level when there is a crisis like a terrorist attack or perhaps an illegal arms shipment that gets through to hezbollah does the president get a bailout or a “hand of god”? No. This springfield bunch hasn’t distinguished themselves and I’m not really sad to see them have to take hard votes and choices. You yourself have written of Mr. Madigan’s politics before people vision and it doesn’t make me sad to see his caucus forced to go to voters and say we are cutting your services and raising your taxes.
There are other states in a lot better shape.
Comment by shore Friday, Nov 13, 09 @ 10:08 am
–While virtually every economist worth their salt has argued in favor of more aid to states–
Not even close.
Comment by Greg Friday, Nov 13, 09 @ 10:09 am
–At the federal level when there is a crisis like a terrorist attack or perhaps an illegal arms shipment that gets through to hezbollah does the president get a bailout or a “hand of god”? –
No, the federal government borrows or prints money, which the states can’t do. That is a major point of the column, is it not?
Comment by wordslinger Friday, Nov 13, 09 @ 10:14 am
As you wait on your city bus you should thank your lucky stars that you pay a small percentage of what your ride costs. Many other do not have the opportunity to have others subsidize so much of your ride.
The problem with government spending in general and the State of Illinois spending in particular is that there is a complete disconnect between revenues and expenditures. Every idea a legislator has to bolster his/her chances of reelection has to be funded and because it is for the good of the people of the State, the funding portion is ignored. We have lived for decades on the premise that there is a free lunch. Now reality has confronted us.
I don’t get you proposal. The feds do not have any money to spare. They are discussing nationalizing 18% of the entire economy, they are promising a new wave of taxation based on carbon and already printing money so fast that the dollar’s value is falling internationally.
However of you propose to repurpose the unspent portions of the 787B stimulus package currently unspent from the boondoggles proposed there, you may have a plan. How about diverting the billions from the high speed rail initiative for use in the State general fund? That makes more sense than asking the fed to print more money.
Comment by Plutocrat03 Friday, Nov 13, 09 @ 10:23 am
Sorry Rich,
I don’t buy it. Maybe I’m misreading your column, but the federal government should not single-handedly bail out Illinos or other states. Illinois’ government, which has shown itself to be unwilling to make cuts in hard times and way too eager to spend in good times, now should get bailed out? I hope you don’t rail about too big to fail (TBTF) financial firms, because you just made the same argument about Illinois and similar states (if Uncle Sam lets this state fall into severe cost cutting, the whole economy might fall apart).
During what should have been prosperous years, Illinois “leaders” did not put any money in a rainy day fund. They didn’t restructure their pensions. They didn’t cut obvious bloat. And now that fiscal winter’s come, the taxpayer ants should shovel out more food to feed the grasshopper called Illinois? It’s bad enough we’re dealing with the federal government’s red ink. Suggesting that they add Illinois’ (and California’s, New York’s, etc) tab to that bill, especially without stringent conditions or consequences, is irresponsible at best. Heck, even Uncle Sam required 5% dividends from TBTF firms.
Comment by South Side Mike Friday, Nov 13, 09 @ 10:25 am
Employees are losing their jobs at the Village of Orland Park today. No sharing the pain at the top. Dept. heads high salaries and benefits go untouched but people with years of service are being let go. It’s sad.
Comment by Just wondering Friday, Nov 13, 09 @ 10:26 am
Oh, for heaven’s sake. George W. Bush and the GOP get us into two wars that have cost trillions of dollars, plus run an unsuccessful experiment with our economy, posited on the idea that giant corporations left to roam free will somehow make our economy and our country stable, costing us another raft of trillions of dollars, and after one year, you expect Obama to have fixed it all? It’s a lot easier to start a war and destroy an economy than it is to build lasting peace and develop a stable economy. Obama is disappointing in some ways (Gitmo, gay marriage) but blaming him for the state of the economy is laughable.
As for funding our own buses, I agree. Right after you fund your own asphalt highways.
Comment by Thomas Westgard Friday, Nov 13, 09 @ 10:28 am
===How about diverting the billions from the high speed rail initiative for use in the State general fund?===
Most of that is federal money.
Comment by Rich Miller Friday, Nov 13, 09 @ 10:28 am
Ok, Greg. What’s your solution?
Comment by The Doc Friday, Nov 13, 09 @ 10:29 am
People, I’m really not interested in your ideology which is not backed up by facts. It’s tedious, to say the least.
Comment by Rich Miller Friday, Nov 13, 09 @ 10:33 am
Also, I’m not interested in “just say no” comments. If you have something constructive to suggest that would solve the problem, do so. I haven’t seen anything here yet that would.
Comment by Rich Miller Friday, Nov 13, 09 @ 10:34 am
Let’s remember where the federal money comes from that would bail out the states.
Taxpayers.
Let’s remeber where the money would come from if Illinois were to solve it’s own problem.
Taxpayers.
So, what’s the difference?
Comment by dupage dan Friday, Nov 13, 09 @ 10:39 am
===So, what’s the difference?===
The difference is that Illinois has to come up with all the money on its own right away.
Comment by Rich Miller Friday, Nov 13, 09 @ 10:41 am
I think it’s fair to look at states which do not have budget “crises” and ask why.
There is an issue of moral hazard with respect to any federal bailout plans. After all, a federal “bailout” for the states, should it occur, should not reward profligate states while leaving the more frugal ones to soldier on without aid. Yet to give money to states not in crisis increases the cost of the program.
There is also the problem of “shifting,” with state and local governments using federal aid for operating expenses while shifting the freed-up state and local monies to earmarks for state and local pols, to shore up inefficient and poorly run government bureaucracies, and other uses for which they were not intended. The Obama administration said it was aware of the risks of shifting but I don’t believe they were entirely successful in containing it. With that much money flying around, there is a huge risk of waste and corruption, not to mention the implicit encouragement of kicking the state budget can down the road.
Comment by cassandra Friday, Nov 13, 09 @ 10:46 am
Again, Cassandra, if you can think of a better idea that has a very reasonable chance of passing which balances the state budget and stops the drag on the Illinois economy, please do so.
Comment by Rich Miller Friday, Nov 13, 09 @ 10:48 am
I love to drive my car though I do take public transportation lots, rapid transit, commuter rail. I even occasionally ride a bike, although I’m no bike commuter. But, I question whether we truly analyze the flow of people accurately in our region. can we make it better, for publiv transit and for cars?
Are these cuts in the bus routes really that problematic? Has anyone done an analysis of the walking distance between bus routes? driving through the city it seems that right now there
are lots of buses, often in multiple, on a street. some of this is eliminated with the tracker that stops the practice of drivers altering the schedule to alternate stops and save work for themselves. some of this is the express buses on the same routes as all stop buses. I think the transit system should be based on the rapid transit routes, how to connect them (someone please create a bus route that goes from the end of the Brown Line to the Blue Line to facilitate airport travel) , and the distance of buses from rapid transit. in between those routes, can we encourage walking?
lines without bus stops also facilitate the flow of car traffic. and, like it or not, the percent of those in cars around Chicago is
80%. those 80% need to move faster. think how much less stressful life would be if there were easier traffic flow.
so, maybe we can save more on the transit system by doing better with less. analyze the entire system, not ridership by line.
Comment by Amalia Friday, Nov 13, 09 @ 10:49 am
While that is true, Rich, paying later involves interest which compounds the problem. Is it really not possible to resolve this without help from the Fed? Easy cash from the Fed would result, I think, in a mentality that would mean less fiscal responsiblity than we have even now. “Don’t worry, Uncle Sam’ll bail us out”.
Lot’s of pain now, more responsibility later. That should be our motto. Clear reform on how the state does business - No unfunded mandates, more cuts (tought tho they may be). Once you show the electorate that then a short term tax increase with an ironclad sunset clause to resolve the current backlog. I realize this is not likely, given the current climate. With MJM at the helm none of this would happen - too likely to cause the loss of his majority.
I have to admit, tho, to partisan feelings. The blame will fall on the dems which will make it easier for the GOP to sweep the next election. Providing, of course, they don’t screw the pooch.
We ain’t the only ones screaming for the bailout. Doesn’t look like it’s gonna happen.
Comment by dupage dan Friday, Nov 13, 09 @ 10:53 am
There are 21 people in Illinois responsible for sending legislation to Obama before he signs it or vetoes it.
Comment by JonShibleyFan Friday, Nov 13, 09 @ 10:56 am
“And now that fiscal winter’s come, the taxpayer ants should shovel out more food to feed the grasshopper called Illinois?”
You’re overlooking something here. In the fable the ants would have survived the winter just fine on their own regardless of what happened to the grasshopper.
However, taxpayers aren’t going to survive the “fiscal winter” unscathed regardless of what happens to state government. Massive cuts, layoffs and deterioration of infrastructure have a ripple effect that affects EVERYONE, including private businesses.
I understand that we can’t go on spending and spending and spending forever and a line has to be drawn somewhere, but please don’t pretend that we can divide ourselves neatly into “taxpayers” on one side and “tax eaters” on the other. Those groups overlap a lot more than people realize.
Comment by Secret Square Friday, Nov 13, 09 @ 11:01 am
===don’t pretend that we can divide ourselves neatly into “taxpayers” on one side and “tax eaters” on the other.===
Exactly. We are all tax eaters to one extent or another.
Comment by Rich Miller Friday, Nov 13, 09 @ 11:07 am
I would like to see the reasoning behind the belief that budget cutting derails economic recovery.
Comment by Levois Friday, Nov 13, 09 @ 11:18 am
===I would like to see the reasoning behind the belief that budget cutting derails economic recovery. ===
1929-1933.
Comment by Rich Miller Friday, Nov 13, 09 @ 11:24 am
It is an Illinois problem, Rich, not a federal problem. If “the political climate” in this state won’t permit the necessary fee and tax increases to solve this state (Actually, a regional) problem, then that simply says to me that it really isn’t that big of a problem. The people impacted clearly don’t want to shell out the razzbuckskies to fix it, so they don’t see the problem either. Period. Give Obama a break. He has much bigger national issues to address, and Chicago’s transit’s financial woes ain’t among them. Besides, the feds have no money themselves other than what the Chinese are willing to loan.
Comment by Skirmisher Friday, Nov 13, 09 @ 11:25 am
Rich–you are right on. The stimulus provisions regarding maintanence of effort dictate that the state pending for education and health care must continue, even if the state doesn’t have the revenue, so the feds have to step in with more $$$$. BTW the state still has not received its federal stimulus funds for higher education even though it committed to the MOE requirements for state support levels. That’s one of the main reasons the public uiversitites are having cash flow problems right now.
Comment by Friday the 13th Friday, Nov 13, 09 @ 11:27 am
===It is an Illinois problem, Rich, not a federal problem.===
It is a national problem. Did you miss yesterday’s blog post?
===He has much bigger national issues to address===
No, he doesn’t. It’s the economy. And this government and most other governments are dragging the economy down.
Comment by Rich Miller Friday, Nov 13, 09 @ 11:28 am
I recognize that high speed rail $$ is Federal. My point was that there is money the Feds are committing to for projects that are less important than the current needs.
2/3 of the 787B stimulus package remains unspent and is planned for future projects. It would make sense to bag some of the nice but not critical projects and repurpose a portion of that money for the current needs of the states. If that money is structured as a loan, then the stimulus fund would be refilled when the economy improves and the delayed projects would then be funded.
Comment by Plutocrat03 Friday, Nov 13, 09 @ 11:29 am
“someone please create a bus route that goes from the end of the Brown Line to the Blue Line to facilitate airport travel”
Not sure if this what you are talking about, the it is mere steps from the Brown Line terminus at Kimball to the 81 westbound Lawrence bus, which takes one directly to the Blue Line to O-Hare.
Comment by vise77 Friday, Nov 13, 09 @ 11:29 am
=I would like to see the reasoning behind the belief that budget cutting derails economic recovery=
Government cuts budgets; CUTS JOBS and creates more unemployment. Those former employees no longer shop, spend money, eat at restaurants etc. The shop owner now has fewer customers and they are forced to let workers go. The restaurant closes its doors and there goes all those employees……on and on and on.
Comment by Just wondering Friday, Nov 13, 09 @ 11:31 am
I wonder if there is an opportunity for the state to engage is some end-around, long-term indebtedness to alleviate some of the deficit, namely through Moral Obligation Bonds.
MOBs (nice acronym) were invented by John Mitchell (yes, that one) when he was the bond counsel Wizard of Wall Street as a way for Gov. Rocky to specifically skirt New York state constitutional limits on indebtedness similar to Illinois’.
Money is borrowed with no legal pledge to pay it back; debt service is subject to annual appropriation.
The hammer wielded by the small muni bond fraternity is that if a state defaulted, they would never be lent money again for any purpose. To my knowledge, no MOB has ever defaulted.
Maybe some of the experts at Chapman and Cutler or other bond law firms could weigh in.
Comment by wordslinger Friday, Nov 13, 09 @ 11:36 am
We have stupid state government. It has been stupid for over a decade. During the economic boom during that time, Illinois didn’t wise up. It didn’t reform it’s fiscal situations. It didn’t address the structural deficit. It didn’t do anything to repair the sucking black hole that everyone knew was a sucking black hole back in 2002. We all knew it would get worse if we didn’t fix it. What did our stupid state government do?
They spent 40% more. They looked under sofa cushions. They promised what couldn’t be delivered. We had an historically corrupt governor infighting with his own party, which is empowered politically to run this entire state.
How did the Democrats win in 2006 with an obviously corrupt governor? Because voters knew the day was coming when the good times would end, and they hoped they would be the last in the line to lose their goodies. They knew that if the GOP got into power in 2006, the hurt would start then, and they put it off by re-electing the Freebie-Promising Party in Power.
This situation is no surprise. We’ve been watching this slow-motion train wreck for over four years - during an economic boom!
Same with the other stupid state governments. Out of fifty states, we have a handfull of stupid governments, bumbling and wasting their taxpayer’s wages during boom times.
Yeah, we’re in a humongous jam. Do you see any changes being made to ensure that any cash flowing into our stupid state government is handled differently? Neither do I! Do you see any reforms by either party to ensure that we won’t suffer under future Blagojeviches or Ryans? Neither do I! They continue to do nothing.
So, what is the cure for stupid government? Reality The longer these stupid governments get to shun the reality facing them, the longer they will be stupid, and in office making future stupid mistakes.
Citizens are getting creamed out here. We have changed our buying habits. We have rearranged our priorities. Now, stupid government leaders - do the same! We will continue getting hurt, but we need to see shared sacrifices. Does anyone understand how to equally share the suffering coming our way? How many regal nest eggs and pork projects will finally see the axe?
This stinks. The longer we piddle around, the longer the stink will remain. Fire the incumbants to reestablish a voter-government connection, then start the cuts. And do it fairly.
No sacred cows!
Comment by VanillaMan Friday, Nov 13, 09 @ 11:44 am
VMan, that’s just the sort of fact-free ideological rant that I warned against.
Comment by Rich Miller Friday, Nov 13, 09 @ 11:53 am
Okay, Rich, I have to agree that the inability (Unwuillingness) of state governments to put their own economic houses in order is in fact a major drag on the national economy. But are you really proposing that Obama just throw open to doors (Again) to the candy store, borrow more money from abroad, and just shovel federal funds into the bottemless sinkhole of imcompetently managed state and local governments??? Economists have been warning for years that Illinois’ reckless disregard for sound fiscal policy would bring on a hard day of reckoning, but even with that day upon us there is virtually no one in either party willing to stand up and propose real solutions. Things will unfortunately have to get very much worse, with widespread impacts to voters (Not just state employees and venders) before that happens. More federal money will just let them postpone being adults until after the next election. Or the one after that…
Comment by Skirmisher Friday, Nov 13, 09 @ 11:56 am
===More federal money will just let them postpone being adults until after the next election.===
What it will postpone is great hardship, regardless of your over the top hyperbole. There needs to be some breathing space while revenues recover.
Again, if you have a better idea, tell us all where to cut $11-13 billion which won’t hurt the economy even further.
Just saying no to everything isn’t a solution, it’s mindless obstructionism.
Comment by Rich Miller Friday, Nov 13, 09 @ 11:58 am
Also, Skirmisher, as is clearly noted in my column, part of the futility of this gargantuan federal spending that you rail against is that state and local governments have been counter-acting the stimulus with their cuts, layoffs, delays, etc. If DC had listened to people like me months ago, the country itself might be in better shape as a whole.
Comment by Rich Miller Friday, Nov 13, 09 @ 12:10 pm
I agree Rich,
The House version of the stimulus contained funds for state budget stabilization. Ben Nelson led the “moderate” push in the Senate to remove those funds. Dumb move. And how many GOP votes did Nelson win over with this dumb move? 3.
That’s the result of “bi-partisanship” in DC. What good is having a majority if you don’t know how to use it?
Comment by 47th Ward Friday, Nov 13, 09 @ 12:34 pm
So Rich, your answer is essentially that the federal government should bail Illinois out with a blank check, with no reforms, no cuts, and no impetus to address the structural deficiencies that exist because gosh, it’s so hard to actually get anything meaningful done in IL government.
I know there’s pain already. I know some of it is severe. But when you’ve been living high on the hog, beyond your means for over a decade (under both parties’ leadership), yes, it will be painful to correct. But it must be done in the next year or two, because when things get better, IL leadership will still be too yellow-bellied to make a tough decision.
So, what are the options? Yes, painful cuts that may hurt some social service providers. Will some people fall through the cracks of government programs and need to rely on private charity? Yes. Whenever the economic music stops, the poor always hold at least some of the hot potato.
Second, a significant income tax increase is necessary (yes, I am a Republican). If Virginia, which is widely regarded as a very pro-business and good-tax state, can have an income tax with a highest marginal rate of 5.75% (starting at only $17K taxable income), Illinois can figure out a way to increase its income tax to around 5%, even if it means sacrificing some other revenue by throwing property tax relief. Politically palatable? Not yet. But I think voters and legislators will feel differently once real cuts are made, not just the easy ones.
Comment by South Side Mike Friday, Nov 13, 09 @ 1:07 pm
Three things need to happen together to avoid an FY11 meltdown:
A) A new federal stimulus package that injects money into the state budget.
B) Some version of a progressive income and corporate tax hike with an expanded base of service taxes with a focus on “luxury” services.
C) Some more budget cutting that uses protections for the most vulnerable as a funding priority when making decisions about those cuts.
In theory, A will help stop the bleeding until B can actually grown the state’s revenue base.
Comment by Montrose Friday, Nov 13, 09 @ 1:07 pm
Federal revenue sharing used to contribute about 25% of state revenues. The source of this revenue sharing was from us, the taxpayers residing in all 50 states.
Right now, if there are still social security surpluses, it might be a good time to take that and give it to the states. As a self employed person who pays both the employer and employee share of FICA taxes, I’d be happy to share half of my FICA taxes with the state instead of having the feds abscond with it to pump into general revenue (to partially offset the Bush tax cuts). But I would attach one big string — that our governor and state legislators grow some and quit lying about their having done something to get us out of the mess.
Comment by vole Friday, Nov 13, 09 @ 1:09 pm
===your answer is essentially that the federal government should bail Illinois out with a blank check, with no reforms===
Don’t be a moron. Where have I ever written that? Ever?
Your presumptions truly are insulting and idiotic. Try setting aside your hardcore ideology before you comment here.
Comment by Rich Miller Friday, Nov 13, 09 @ 1:10 pm
daley,quinn,madigan,stroger,cullerton,hynes. All career politicians, all of whom have been around awhile, if they can’t lead and come up with something other than to call d.c. and ask for a bailout or to raise taxes they should not be in government.
Government is not an entity created to serve the state democratic party and to provide careers for these people.
You can delete my comments all you want but these leaders had time for the olympics, for obama campaigning, the blago trial all sorts of things and now the best they can come up with is what?
I also don’t see how its on taxpayers to come up with the ideas. These are leaders with staffs, they have access to think tanks, they are paid to be leaders.
Comment by shore Friday, Nov 13, 09 @ 1:12 pm
shore, your endless rants aren’t helping at all. They’re just mindless, partisan rants which bring nothing to the discussion except empty anger. Go elsewhere with them.
Comment by Rich Miller Friday, Nov 13, 09 @ 1:13 pm
Did Moody’s just issue us one of the worst credit ratings in the country? I was watching Chicago Tonight yesterday, and the Prez of the Civic Federation was saying how unlike other states, we were specifically in our mess, not because of the economy, but primarily because of poor decision making by our elected officials. Doesn’t it have to go both ways? Gov. Quinn said a year ago that there would have to be pain and cutting before we increased any revenues? Where is the pain? The people that have been making the decisions for the past 10 years in this state have put us in this mess, and they should be held accountable for it. They’re just doing the same thing by delaying the problems- like the latest plan with the CTA.
Why don’t we have an honest discussion about real cuts that need to happen? Didn’t President Cullerton say when he was sworn in that he would have a meaningful discussion about real pension reform? What happened to that? The tough choices just keep getting put off because they aren’t politically expedient. And it happens on both sides of the aisle.
Comment by Bring Back Boone's Friday, Nov 13, 09 @ 1:29 pm
===Where is the pain? ===
What, you want more pain? We’ve got 10 percent unemployment, businesses closing, people going without insurance and you want pain?
Comment by Rich Miller Friday, Nov 13, 09 @ 1:30 pm
Pain isn’t a good word, but how about tough decision making-such as pension reform. That wouldn’t increase the unemployment rate, but would help to resolve future debt and borrowing.
Comment by Bring Back Boone's Friday, Nov 13, 09 @ 1:37 pm
I would rather that any and all future stimulus funding go directly to the people who need it.
For example if the goal is protect homeowners from foreclosure, then the federal government should issue checks to the banks covering 1 year of mortgage payments. The loan would have to be repaid to the government by the homeowner once he or she becomes financially secure again. The repayments would be automatic withdrawls from the borrower’s paychecks for the rest of time or for however long it takes to satisfy the loan.
The feds went wrong by simply giving billions of dollars to the banks and telling them do the right thing by homeowners. We see how that didn’t quite work out.
I would also like to see a policy put into effect whereby no one could be foreclosed on or evicted for a 1 yr period because the banks would be getting federal money on behalf the American people who have fallen on hard times.
Just as the banks sqaundered the stimulus money,or did not do with it as it was intended, I don’t trust the states all that much either. Indiana is sitting on a surplus, as are many states, despite the national economic downturn. It really is a question of leadership. The state’s that were fortunate enough to have disciplined leadership in office before and as the economic downturn hit appear to be doing better now, than those that did not.
Because we (Illinoisians) are going into an election year, I don’t trust the present political leadership in this state to use federal stimulus money wisely and properly right now. Maybe after the election the money might be handled a little better.
“Even worse, an absolutely essential public asset is being allowed to whither on the vine. Politicians such as Quinn fear that a fare increase will result in a voter backlash. Voters are just fed up with Illinois politicians getting in their pockets, so he and the others do have a point. “—Rich Miller
Yes, had the CTA raised it fares, there would have been a voter backlash. But not against Quinn. The backlash would have been against Daley going into his 2011 election. As we see Metra did not get any help and is going to have to raise its fares. Some Pace routes do serve the city of Chicago and we know that Pace provides all paratransit services to city of chicago residents. So, it’s interesting how the CTA and Pace got help this week from the state, but not Metra.
Comment by Will County Woman Friday, Nov 13, 09 @ 1:42 pm
–The political climate makes it impossible to raise taxes to stem the state’s frightening wave of red ink.–
and every single one of us that does not demand a solution of our so called leaders - NOW - are a critical part of the problem. Obama should demand of his home state - that it start by dealing with some fiscal reform on their own first - before one more cent from the feds -
Comment by angry in the collars Friday, Nov 13, 09 @ 1:45 pm
well, I re-read my last post and I sure can’t find any “over the top hyperbole”. Looks more like an accounting of grim reality to me. However, I do not necessarily disagree with you entirely. I think the economic stumulis money was for the most-part mis-spent by self-serving politicos and in fact would have done far more good if given as block-grant funds to shore up sate governments. However, that money would also have been mispent if states were not first required to pass whatever legislation was necessary to correct long-term structural deficit issues. In any case, Obama blew that opportunity in his first days in office and it will be remembered as the greatest blunder of his administration. I really don’t think he can now come up with the money now for a second stimulis package of any sort.
I truly wish I could see a smoother road ahead for us, but I came to the conclusion years ago that states such as Illinois and California will have to bring themselves to total fiscal collapse before they develop the will and discipline to correct their structural budget issues. That is going to hurt me long before, and far more severely, than it hurts you, I am afraid, but I see no other course. A shot of federal funds without structural reforms is just another papering over of the problem and only delays the inevitable. And lest you accuse me of a partisan rant, I wish to state that in my opinion the only political party in Illinois that has been even more fiscally irresponsible than the Illinois Democrats are the Illinois Republicans.
Comment by Skirmisher Friday, Nov 13, 09 @ 1:47 pm
===I re-read my last post and I sure can’t find any “over the top hyperbole”. ===
Then you’re a hopeless case. A smattering…
===just throw open to doors (Again) to the candy store, borrow more money from abroad, and just shovel federal funds into the bottemless sinkhole of imcompetently managed====
Gee, no hyperbole there I’m sure.
Comment by Rich Miller Friday, Nov 13, 09 @ 1:53 pm
===What, you want more pain? We’ve got 10 percent unemployment, businesses closing, people going without insurance and you want pain?===
Rich, not for individuals. I don’t think anyone here wants or wishes more pain for individuals or businesses in Illinois. I think what most people are referring to is pain felt by the State of Illinois government. So far, there have been no major meaningful sacrifices or cuts officially instituted by the state (ie, renegotiation of contracts, real pension reform, eliminating double dipping, the things YOU have promoted time and again). They have coasted to date on the backs of their vendors and state universities. Sure, there’s been some press conferences, but name one hard decision that they’ve passed yet. Heck, they couldn’t even overturn Blago’s free-ride-for-seniors p.r. gambit. And yet I believe that the leadership in Illinois is nearing the end of the road. There are no more diversions before authentic tough decisions are made. I think the fear is that if Washington were to make good on Illinois’ liabilities, nothing would change. We’ll still be stuck with the status quo.
You call me a hardcore ideologue. I ask you, how many hardcore ideologue Republicans acknowledge a need for a significant income tax increase?
I worked for an inner city Chicago non-profit mentoring organization for 5 years (mind you, one that survived without state funding and only a minimal $10-15K from the city, since discontinued). I’ve seen real need, Mr. Miller, and I don’t want the poor to suffer more. But allowing the state to pass the buck until the next crisis will only cause more pain than addressing the issue now. That’s not partisan ranting, but the truth.
Comment by South Side Mike Friday, Nov 13, 09 @ 1:55 pm
Perhaps Bring Back was trying to ask where is the pain for the leaders whose bad decisions have gotten us here.
Those of us in the private world are dealing with the bad economy, but the political elite continues to collect their salaries and bonuses in many cases.
It is not only at the State level. There are Village administrators who are collecting 200K salaries, many many other government workers collect generous salaries, but as pointed out earlier in this thread, the folks fired and laid off are not he big kahunas.
The rescue of the State should be considered much like a bankruptcy filing. Redefine you mission, pare down to essential staff and develop a revenue model that will soundly take the organization forward.
Comment by Plutocrat03 Friday, Nov 13, 09 @ 1:55 pm
===I don’t think anyone here wants or wishes more pain for individuals or businesses in Illinois. I think what most people are referring to is pain felt by the State of Illinois government.===
Do you really think that “the government” is just some entity not comprised of people which also provides services to people?
And while you provide a few good examples, the reality is that it means little in the overall sense.
Comment by Rich Miller Friday, Nov 13, 09 @ 1:57 pm
yes, and the workers are the ones who keep getting their pension funds raided and given furlough days. What about things like TIF reform. It was just in the paper that the TIF districts generate close to a billion a year. Instead of renovating Willis Tower what about using the money for the CTA, or the other laundry list of items underfunded items?
Comment by Bring Back Boone's Friday, Nov 13, 09 @ 2:06 pm
The State of Illinois government won’t feel pain with those massive cuts. It will be people, like Rich says.
Real cuts that would make a difference in the massive deficit - essentially what most of you are calling for - aren’t going to be simple personnel cuts or pension restructuring.
As has been discussed many times here, you could eliminate every state worker, and only save about $3 billion.
To cut $11-12 billion, you need to kick seniors, children and mothers off healthcare, fire teachers, close schools, end assistance for people with disabilities, and shutter prisons.
So - if you are against all that, then you need to rethink all that gibberish in those 65 comments above.
Comment by George Friday, Nov 13, 09 @ 2:13 pm
WS, I know we covered the moral ob debt on a couple of SWIDA issues in metro-East, but? Were those incinerators that burned tires and stuff to generate electricity moral ob? I ought to know but I just can’t remember. We let them go down.
Comment by steve schnorf Friday, Nov 13, 09 @ 2:21 pm
Steve, I’m not sure. I’been out of that business for a while. I was just curious if it might be a live option, to get vendors caught up if nothing else, since we’re in all honesty contracting debt with them.
Comment by wordslinger Friday, Nov 13, 09 @ 2:27 pm
Forgive this post for being a bit basic, but I haven’t seen anyone just come out and say this. There are many things responsible for both the state and federal fiscal shape we’re in. A recession sees less spending (read: less goods purchased - less sales tax revenue) and rising unemployment (read: less income tax revenue). As a country we’re not making as many physical goods, but moving towards services provided by people like attorneys, accountants, hair dressers, etc. In 1960, 41% of U.S. consumption dollars were spent on services like those listed above, but by 2000 this percentage had risen to 58% (From “The Way We Tax: A 50-State Report” - www.governing.com). There needs to be a change in the way we tax, not just by Illinois, but by all states - as to not create flights for services outside of states. The money is going somewhere - we’re making it - and we’re surely spending it, but I believe we have to approach it with a little more common sense. While we can cut at the state or federal levels, this crisis cannot be fully solved this way. We MUST figure out a way to produce more revenue.
Comment by Student Friday, Nov 13, 09 @ 2:33 pm
Didn’t the CTA in 2007 issue $1.9 in bonds to shore up one of the most underfunded public employee pension plans in the nation? Wasn’t it advised not to because the payoff of prior debt wouldn’t work out for taxpayers? Didn’t the state sell about $10 billion in bonds a few years ago to shore up its pension plans? Didn’t it recently sell or approve the sale of more bonds for pension plans? Isn’t Evanston, on the glorious Northshore, presently soliciting citizens for solutions on how to balance its books, which are out of whack due to public employee pensions? Isn’t it a fact that many of the fiscal woes facing the state and local government units like the CTA are caused in large part by unbelievable gold plated employee pensions and other employee benefits like healthcare insurance when they retire at 55?
Isn’t Chicago’s budget buckling because of its employee pension obligations? Aren’t there areas on the CTA system deemed too unsafe for use because Mayor Daley cannot afford the cost of new policemen, whose retirement benefits are the creme de la creme of an already astoundingly generous system. Isn’t the shortfall in public employee pensions in the US estimated at $1 trillion.
And isn’t it a fact that if the retirement benefits of public employees (federal, state and local) were brought in line with those paid in the private sector, the CTA’s fiscal problems, as well as those of other government units, would be manageable in these difficult times?
Nursing the CTA back to health at this point would not replace the private sector jobs leaving Illinois. It would be a perverse reward for profligacy. I would rather see CTA patrons who lose service receive a stipend to find alternative transportation or perhaps encourage an already growing unlicensed jitney trade.
We must move away from this thinking that systems like the CTA are too big and important to fail.
Comment by Cook County Commoner Friday, Nov 13, 09 @ 2:35 pm
===encourage an already growing unlicensed jitney trade.===
I spent a few months in a city with one of those jitney systems. It was miserable. You think traffic is bad now? Just replace the CTA with that goofy idea.
Comment by Rich Miller Friday, Nov 13, 09 @ 2:39 pm
==What about things like TIF reform==
Apples and oranges. TIFs impact municipal taxing bodies. TIFs are often rampantly abused, particularly in Chicago, but that’s a different conversation than the one we’re having here.
The bottom line here is that companies in general aren’t spending - on investment, on expansion, on research. Instead, they’re pulling back by cutting jobs and hoarding cash. The temporary solution is public intervention (aka stimulus) to bridge the gap until the private sector can once again drive the economy.
Comment by The Doc Friday, Nov 13, 09 @ 2:48 pm
Commenters are cranky today, and Rich, you’re uncharacteristically getting hooked into it. I got hooked into the first paragraph that (sort of) hung it on Obama, and then completely overlooked the following points that make it clear it’s not just him. So I’m in this too. Maybe we all need to rest up over the weekend.
To answer the substantive question, I think it’s a matter of having clear federal goals and then determining the appropriate state allocation for that goal, and conditioning the federal money on that state allocation. How much is enough from the state is a ton of work, but I think that’s how you make sure the fed isn’t carrying too much of the weight while the states pull a Herbert Hoover.
Comment by Thomas Westgard Friday, Nov 13, 09 @ 3:22 pm
===I got hooked into the first paragraph that (sort of) hung it on Obama, and then completely overlooked the following points that make it clear it’s not just him.===
You should’ve seen some of the e-mails I got from people who only read the first graf in the Sun-Times and then dashed to their computers. Hilariously over the top anger. lol
Comment by Rich Miller Friday, Nov 13, 09 @ 3:34 pm
I am late to this discussion but here are my thoughts.
Froma macro economic perspective- something has to start the flow of cash again. In Illinois, I beleve it is also an issue of through put- meaning- we can not responsibly expect to grow- so where can we lean our processes to do more- not necessarily cut jobs- but eliminate duplicative services- like Entrepreneur centers - they do the same as SBDCs. How many different levels of government do a small part of the same process- can it be done better- eliminate townships- that would free up some tax dollars- they are a leayered service. That is not a job but an elected office. If we reduced the paperwork and triple contact - does that free up man hours to do more? Is everything we do worthwhile and drive an impact? Doing business in Illinois is difficult and costly- especially when we consider Wis. and Iowa- we need to look at that. The challenge with electing Reps. every two years is that they are constantly campaigning- which makes it difficult to make hard decision that are good for the long run but painful in the short or to a niche group.
I say we look at the regulation system over the banks- so we can free up the lending cycle again- raising tax revenues and employment by putting money back into the market. Banks’ portfolios are out of alignment- they made loans on assets that no longer hold their value- but they can not lend because companies are not cash flowing.
This is like a whirlpool in a backyard swimming pool- someone needs to start the flow again.
I would prefer not to increase the size of the money supply- it is getting scary to me.
Comment by Inish Friday, Nov 13, 09 @ 3:53 pm
I follow your theroy RIch, but I just don’t think adding more moeny to the supply is a good strategy long term- you can not borrow your way out of debt- it just drives the cost up because a dollar is worth less. We need to look at the state pensions- it is unrealistic and can not be supported. But not for those already in the system but for those coming into the system. Thereis something to be said for federal large capital projects like the Tennessee Valley of the depression era- big porjects for public good that will put people to work, who will spend money and need services- startign the flow again.
I will say- I see companies producing again- but we need to pla for the GIANT commercial development bubble that is about to explode with hte next 6 months.
Comment by Inish Friday, Nov 13, 09 @ 3:58 pm