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A glimpse into the future?
Wednesday, May 21, 2014 - Posted by Rich Miller * Remember this story from February 2011, the month after Illinois enacted an income tax increase?…
Gov. Christie had earlier vetoed a bill to restore an income tax surcharge on millionaires and has handed out a ton of money in corporate tax breaks. He has opposed every tax hike measure that has come down the pike. Keep in mind before we continue that just about every penny of Illinois’ tax hike has gone to make the state’s pension payments. * New Jersey’s fiscal chickens have now come home to roost…
Actually, this means the chickens won’t be roosting until Christie leaves office. * This isn’t meant as an endorsement of an income tax hike extension here. It’s simply a reminder that a state has to pay its bills. Gov. Christie stuck to his orthodoxy through thick and thin. And now, his state’s pension crisis will become much worse. Christie, by the way, has given bigtime support to Bruce Rauner, who has blasted the new pension reform law for requiring the state to make its full pension payments. Rauner also says he wants to get rid of the income tax hike, but won’t say how he’ll fund government after that happens. Like Christie, Rauner will almost assuredly have to deal with a hostile Democratic legislature. You gotta wonder if New Jersey is a template.
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- Anonymiss - Wednesday, May 21, 14 @ 11:55 am:
>> You gotta wonder if New Jersey is a template.
“Illinois: Taking after New Jersey, and surprised by the results.”
- truthteller - Wednesday, May 21, 14 @ 11:56 am:
Rauner’s rhetoric will prove to be as phony as Christie’s. Why anyone would believe Rauner would be able to cut taxes yet pay off Illinois’s $6 billion backlog of bills and its $100 billion pension liability is beyond comprehension.
No matter how expensive Rauner’s suit, it’s empty.
- John A Logan - Wednesday, May 21, 14 @ 12:03 pm:
807 million dollar shortfall? To have such problems.
- Jimmy CrackCorn - Wednesday, May 21, 14 @ 12:03 pm:
== Illinois’s $6 billion backlog of bills ==
It is down to $3.2 billion, as of today
http://ledger.illinoiscomptroller.com/
- Archimedes - Wednesday, May 21, 14 @ 12:04 pm:
Many private businesses did the same thing until ERISA forced pension funding. States, since they are perpetual entities, can underfund and claim they will still make the needed payouts as they come due.
And we see how well that works….
- Bluefish - Wednesday, May 21, 14 @ 12:05 pm:
Nothing says “I’m a responsible leader” like shirking your responsibilities.
- Norseman - Wednesday, May 21, 14 @ 12:09 pm:
When you read about bad actors in properly funding their pension obligations New Jersey and Illinois lead the list. Rich is so correct that Rauner will follow the Christie example of irresponsible governance. Hopefully, we’ll not have a Rauner traffic jam.
- MrJM - Wednesday, May 21, 14 @ 12:10 pm:
Our elected officials should be required to get this as a tattoo.
– MrJM
- Grandson of Man - Wednesday, May 21, 14 @ 12:12 pm:
“It is down to $3.2 billion, as of today”
Thanks for posting this good news on our bill backlog.
Looking at states’ unemployment numbers, New Jersey is improving more or less like the rest of the country. In this context, I’m not sure what corporate tax breaks brought the state except for this debt issue.
“Why anyone would believe Rauner would be able to cut taxes yet pay off Illinois’s $6 billion backlog of bills and its $100 billion pension liability is beyond comprehension.”
Maybe some trickle down/Laffer magic?
- Federalist - Wednesday, May 21, 14 @ 12:13 pm:
Don’t know about the New Jersey budget, but Illinois continues to expand existing and initiate new programs while proclaiming their so broke they can not afford the pension system.
It’s lie a person in debt, buying a new car, adding more to their credit cards for all types of purchases and then saying how they can not afford their utility bills.
Typical for Illinois and few if any politicians will address it. The answer is always the pensions as the problem. Even the unions of state employees or SUAA are afraid to address these issues except to say we need more taxes.
- PublicServant - Wednesday, May 21, 14 @ 12:14 pm:
===Our elected officials should be required to get this as a tattoo.===
Oh great! A publicly funded tattoo program.
- CircularFiringSquad - Wednesday, May 21, 14 @ 12:15 pm:
Wait ShakeyMitt Rauner’s dark money RGA Paymaster Chris Christie is skipping a pension payment?
Oh no, can’t be.
Actually he did this his first year too and the Midwest media preferred to cover this up
So if one of Mitt’s mentors blows off the pension. How can Mitt wrap PQ?
“Well No Body’s Perfect” Mitt was heard to mumble
Fire, Aim, Ready!…Another day another blunder
- 47th Ward - Wednesday, May 21, 14 @ 12:18 pm:
===“In New Jersey you can be certain taxes are going down over the next three years, and in Illinois you can be certain they are going up.”===
Maybe we can meet in the middle? New Jersey’s income tax rate is 5.525% for an individual earning $40,000, then it goes up from there progressively until it tops out at 8.97% for incomes above $500,000.
How many Illinoisans want to trade tax rates with NJ? Anyone? Buehler?
http://taxfoundation.org/article/state-individual-income-tax-rates
- Yellow Dog Democrat - Wednesday, May 21, 14 @ 12:19 pm:
I think it is also worth noting that Illinois less-than-stellar job creation numbers are most likely an unintended consequence of not Illinois’ tax hike, but its “temporariness.”
Businesses hate uncertainty. Uncertainty impedes, delays, forestalls big decisions. And I think it is likely that the uncertainty of what was going to happen after the tax hike sunset probably did more harm than good to Quinn’s re-election hopes.
Would Illinois deal with the structural deficit by slashing spending…perhaps spending my company depends on? Will it lower personal taxes and raise corporate income taxes, or expand the sales tax to include services I provide?
It is hard to quantify the impact of uncertainty, except when you look at how much the bond houses despise it. But it ought to be at least acknowledged. And lawmakers and interest groups ought to give it some thought before kicking the can down the road even further.
Related, it became clear rereading the Tribune editorial that the Quinn administration must do a better job of incessantly reminding folks of all of the spending reforms and cuts he has made.
$2 billion in Medicaid, right? Deep cuts to state agencies. A huge cut to personnel costs when you look at the pension bill. Reducing the backlog of unpaid bills substantially.
Joe Voter is under the impression that it has been spending as usual in Springfield. I know that it is hard for Democrats to talk about those cuts because we hated making them, It was a Sophie’s Choice.
Well, we need to fight through the pain because we need to take credit for a theme Madigan hit upon: Courage.
Say what you want, but it took courage for Quinn to tackle pensions. And it took real courage to look voters straight in the eye and tell them that in order to fulfill our moral obligation to promote the Common Good, we cannot let the tax hike sunset.
- Just Trying to Survive - Wednesday, May 21, 14 @ 12:20 pm:
People will believe whatever they want to believe, irregardless of their intellect or lack thereof. If they want to pay less in taxes, they will believe everything Rauner says and to hell with paying bills even tho his approach defies logic. It seems apparent that we have alot of people with undiagnosed thinking disorders.
- Yellow Dog Democrat - Wednesday, May 21, 14 @ 12:25 pm:
Rich:
To the post, all signs point to Rauner pushing to phase out the tax hike instead of end it abruptly.
Of course, the best laid plans of mice and men go out the window if the pension bill is declared unconstitutional.
Then we probably go back to the Cullerton compromise as a starting point. But unions are not gonna be so eager to compromise is the SC takes the doomsday option of the table.
Plus, the extremists within the GOP caucus will be asking Rauner to carry water for them, even if they are in the minority. That will make putting a centrist plan together even more difficult.
- MrJM - Wednesday, May 21, 14 @ 12:26 pm:
I’ll bet we’ve got guys in Statesville who could do it — and they’re only paid two-bucks-a-day.
– MrJM
- Rich Miller - Wednesday, May 21, 14 @ 12:27 pm:
===irregardless of their intellect or lack thereof===
When one assaults another’s intelligence, one shouldn’t use words that do not exist.
- 47th Ward - Wednesday, May 21, 14 @ 12:28 pm:
===all signs point to Rauner pushing to phase out the tax hike instead of end it abruptly.===
Thanks YDD. I was beginning to think I was the only one who caught that. In effect, this position, if accurate, means Rauner supports an income tax hike.
No wonder he doesn’t want to talk about his plan.
- steve schnorf - Wednesday, May 21, 14 @ 12:28 pm:
Math is pretty inelastic no matter where you live
- Rich Miller - Wednesday, May 21, 14 @ 12:29 pm:
===I was beginning to think I was the only one who caught that===
We had a big blog post on that several days ago.
- muon - Wednesday, May 21, 14 @ 12:29 pm:
If we’re down to 3.2 billion at the Comptroller’s office and the office processes an average of about 2.8 billion in General Funds vouchers per month, then it looks like the state is down to about a 35 day pay cycle for most vouchers in the fund.
- Mokenavince - Wednesday, May 21, 14 @ 12:30 pm:
**Y.D.D Courage**
Madigan got us into this mess. Quinn is rudderless. If this is you idea of courage were in worst shape than I thought.
Neither Quinn or Madigan comes to mind when courage is involved.
- Rich Miller - Wednesday, May 21, 14 @ 12:31 pm:
===If we’re down to 3.2 billion at the Comptroller’s office===
The guv’s budget office said last week there was another $1.4 billion still sitting at the agencies.
- muon - Wednesday, May 21, 14 @ 12:39 pm:
Even with another 1.4 billion at agencies the total outstanding would be 4.6 billion which is less than the amount of vouchers one would expect the state to receive in 60 days.
- 47th Ward - Wednesday, May 21, 14 @ 12:40 pm:
===We had a big blog post on that several days ago.===
Yes, May 8th. Sorry Rich, I must have missed it.
- wordslinger - Wednesday, May 21, 14 @ 12:43 pm:
Geez, you have a max personal income tax rate of 8.97% and you’re still skipping pension payments?
What the heck is Republican about any of that?
- Anonymous - Wednesday, May 21, 14 @ 12:50 pm:
Federalist, do you have any proof or citations that: “Illinois continues to expand existing and initiate new programs”
The Center for Tax and Budget Accountability just issued a report that states:
“it should be noted that contrary to public perception, decision makers have not used any of the new revenue generated by the temporary tax increases under TABSA to fund growth on current services.
In fact, spending on current services was $1.2 billion less in nominal dollars in FY2014 than in FY2011, when the tax increases under TABSA became effective.”
- Arthur Andersen - Wednesday, May 21, 14 @ 1:20 pm:
Just for information and context here-the Jersey pension system is around $100 billion in assets and about 65% funded as of last year. In 2011, Christie passed a pension bill that eliminated. COLAs and other annual increases while raising employee contributions.
- VanillaMan - Wednesday, May 21, 14 @ 2:07 pm:
Illinois is a template for New Jersey, not the other way around. Corrine jacked taxes high, so Christie had a cushion.
- RNUG - Wednesday, May 21, 14 @ 2:10 pm:
- Yellow Dog Democrat - Wednesday, May 21, 14 @ 12:25 pm:
The Culelrton “compromise” won’t be legal either … it doesn’t gove a choice of keep what you have.
- Yellow Dog Democrat - Wednesday, May 21, 14 @ 2:10 pm:
Mokenavince:
Madigan supported the much smaller Edgar “tax swap” plan in 1997, and the smaller Netsch tax swap plan before that.
It was suburban Republicans who killed budget reform two decades ago, so do not blame Madigan.
Democrats and Republicans both want to spend money.
Probably 80 percent of that spending they agree on.
Democrats would like a little more safety net for human beings, Republicans would like a little more safety net for corporations.
Unfortunately, we don’t have 80% agreement on revenue, which is why we have defaulted to borrowing — from pensions, from state vendors, from future generations — in the past.
But sometime around Blago’s indictment, borrowing hit an all-time low in public support.
While anywhere from 50-80% of voters oppose spending cuts, depending on the program, and anywhere from 20-60% oppose tax increases, depending on the revenue stream, only about 7% of voters support increase borrowing in polling I have seen.
Makes me wonder if Democrats ought to be using the threat of increased debt rather than increased property taxes if the income tax hike expires.
But…I haven’t seen the best and most recent internal polling, so I am only guessing.
- A guy... - Wednesday, May 21, 14 @ 2:29 pm:
=== 47th Ward - Wednesday, May 21, 14 @ 12:40 pm:
===We had a big blog post on that several days ago.===
Yes, May 8th. Sorry Rich, I must have missed it.===
Three Our Moderator’s and 3 Hail Barton’s, go in peace son. lol
- Michelle Flaherty - Wednesday, May 21, 14 @ 2:48 pm:
If we follow the Christie method, that $6 billion pension payment straining the budget would be more like $1.2 billion.
Problem solved.
Let Edgar and Thompson figure out how to pay off their unfunded liabilities, we live in the now.
- Federalist - Wednesday, May 21, 14 @ 3:06 pm:
@anonymous
First the $1.5 billion in the Birth to Five initiative, is in Quinn budget, To be accurate that is over 5 years but that still is a new program and very expensive.
The expansion of Medicaid under ACA to include several hundred thousand more people will not be free. And while the FEDS promise to pick up most of the tab for the next few years, it will still cost the state money over a long time. Look at it’s cost history.
Obviously anyone can cherry pick but these are real examples. The state GRF budget has increased from $26 billion in FY05 to a projected $38.1 billion in FY15. In the last two years it will have increased c. $2.6 billion.
You state that the CTBA says that “In fact, spending on current services was $1.2 billion less in nominal dollars in FY2014 than in FY2011,” Do they mean the state budget, and more specifically services, has really declined in this period? And what is this ‘nominal” dollars language? Ummm. Yes, I know what it means but it is classic obfuscation as far as taxpayers are concerned.
As to the Center for Tax and Budget Accountability they are masters of ‘liberal’ spin just as the Civic Committee are masters of ‘conservative’ spin. Whatever they say is very often twisted beyond common sense logic.
- Enemy of the State - Wednesday, May 21, 14 @ 3:12 pm:
Somebody please keep Christie away from IDOT and our bridges.
- Just Trying to Survive - Wednesday, May 21, 14 @ 3:28 pm:
Rich? Perhaps a better choice was available, but………
http://www.merriam-webster.com/dictionary/irregardless
- Assess - Wednesday, May 21, 14 @ 3:58 pm:
Quinn has shown political courage in campaigning for a tax hike in 2010 & 2014. He made an eror in making the hike temporary.
- Yellow Dog Democrat - Wednesday, May 21, 14 @ 4:29 pm:
Good point, RNUG.
- Arthur Andersen - Wednesday, May 21, 14 @ 5:06 pm:
Michelle, lol and good point as always.
To my prior post-I had a typo and left out a data point. The New Jersey pension has $80 billion in assets, and their unfunded liability is $47 billion.
- steve schnorf - Wednesday, May 21, 14 @ 5:49 pm:
It seems that the truth is odd on one issue here today. Yes, the state has added some new initiatives, but yes, we are spending less GRF on the agencies than we were a few years ago. Odd, but I think true.
- Jimbo - Thursday, May 22, 14 @ 8:46 am:
==one shouldn’t use words that do not exist==
Glad you said it Rich. That word drives me absolutely bonkers