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The most important session ever?

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* My weekly syndicated newspaper column…

“It’s so quiet,” sighed Pippin in the movie version of J.R.R. Tolkien’s “The Fellowship of the Ring.”

“It’s the deep breath before the plunge,” counseled Gandalf.

“I don’t want to be in a battle,” Pippin said, “but waiting on the edge of one I can’t escape is even worse.”

That exchange pretty well sums up the current climate in the General Assembly. It’s very quiet. Too quiet.

Everybody knows that big, tough decisions are looming and inevitable, and they’re all tiptoeing around Springfield — peering over their shoulders and whispering about the coming fight that deep down they are starting to realize they cannot escape. The bloodiest of all battles is just around the corner, and they know it.

The most natural human reaction to a crisis is to either run away or try to deny reality. Maybe, some think, the General Assembly could just solve part of the gigantic and ever-growing $2.7 billion hole that the Medicaid program has blown in the state budget.

Or it could kick the can down the road on pension reform until after the election, when dozens of lame-duck legislators can be used to pad the roll calls.

But Gov. Pat Quinn said at least one credit agency has threatened Illinois with what’s known as a “double downgrade” of its bond rating if both the Medicaid and pension crises aren’t resolved this spring.

A double downgrade would lower the state’s credit rating by two notches instead of one and likely would result in a public relations disaster. But it also would put the state dangerously close to junk bond status, if not right in it.

The last time Illinois faced a double downgrade was just before the income tax hike was approved. The state was given the same threat a few days before the General Assembly rammed through major pension reform for new public employees in the spring 2010 spring legislative session.

So, Quinn’s position is that the big stuff needs to be done this spring — or this summer, in case the job isn’t completed by the end of May. No ifs, ands or buts about it, his people say.

“We come to it at last, the great battle of our time,” Gandalf said.

It won’t be much longer before our great Statehouse battle is in full swing. The first major volley beyond the trash-talking in Quinn’s budget address was launched last week when the governor detailed his tough but reasonable plan to patch a $2.7 billion Medicaid budget hole. On Friday, Quinn revealed his pension reform plan.

The legislative session is scheduled to adjourn at the end of May. Between now and then, there will be much complaining and whining, with threats issued from all sides from those about to lose what they have.

But the threat with the biggest teeth will probably turn out to be that double downgrade. The state has so much bond debt and such a strong desire to do more capital spending that it cannot ignore those warnings. The New York bond houses always win in the end, and this year may be no exception.

I’ve been telling friends for weeks that this is the most important legislative session of my lifetime. This spring is when Illinois government leaders decide whether they want to continue living in a dream world of spending as much money as they wish without ever worrying about how to pay for it or whether they finally decide to face the grim reality of their own making.

“My dear Frodo, Hobbits really are amazing creatures,” Gandalf said. “You can learn all there is to know about their ways in a month, and yet after a hundred years they can still surprise you.”

The long-term (and short-term) fiscal health of Illinois hinges on what our legislative Hobbits do in the next six weeks. They must take that big plunge toward responsibility and surprise all of us.

And the governor needs to stick to his guns and demand they complete their task, no matter how long they have to stay in session.

Discuss.

posted by Rich Miller
Monday, Apr 23, 12 @ 11:39 am

Comments

And yet the University of Illinois feels that this is a great time to act like there is no problem with the budget. They want to keep on building buildings that are useless and raise tuition and fees to cover this massive spending spree.

Comment by Publius Monday, Apr 23, 12 @ 11:57 am
If legislators are Hobbits, then who is Gandolf?

Comment by Punley Dieter Finn Monday, Apr 23, 12 @ 12:00 pm
“This spring is when Illinois government leaders decide whether they want to continue living in a dream world of spending as much money as they wish without ever worrying about how to pay for it or whether they finally decide to face the grim reality of their own making.”

My bet is with the dream world. The best predictor for future behavior is past behavior.

Comment by Confused Monday, Apr 23, 12 @ 12:02 pm
Dream On
Dream Believer
Keep Dreaming

A massive gaming bill will once again be rolled out as the salvation. Cuts will be minimal (less than $1b). The bill will fail. The ratings agencies will do a onestep downgrade because some pension changes will be eneacted and the rating agencies will take there time assessing their impact and monitor the court challenges.
Save the column Rich, you’ll get to use it again next year.

Comment by Aristotle Monday, Apr 23, 12 @ 12:16 pm
Love the Tolkien references. Excellent column.

Comment by Freeman Monday, Apr 23, 12 @ 12:18 pm
Good column, especially the last sentence, which captures the bottom line perfectly. “the governor needs to stick to his guns…” - I’m wondering if he will.

Comment by Robert Monday, Apr 23, 12 @ 12:21 pm
Rich,

Your analysis is spot on. Loved the LOR references.

The one point I would quibble with is whether the ratings agencies can accurately predict anything, but that is a whole ‘nother column. And actually, it doesn’t matter, because they have the power to move the markets.

Any bets on a bill to make the (mostly) temporary income tax increase permanent? That would be my guess for “new” future revenue.

Comment by Retired Non-Union Guy Monday, Apr 23, 12 @ 12:29 pm
I think they will be talking about this session for years to come.

Comment by Mouthy Monday, Apr 23, 12 @ 12:30 pm
Mike Madigan: Sauron or Saruman?

Comment by Anonymous Monday, Apr 23, 12 @ 12:31 pm
“This spring is when Illinois government leaders decide whether they want to continue living in a dream world of spending as much money as they wish without ever worrying about how to pay for it or whether they finally decide to face the grim reality of their own making.”

That from the article implies that Illinois has too much government and spends money like a drunken sailor - but that is not the case.

Illinois is dead last among the 50 states in the number of state employees per capita. Illinois is in the bottom five of all 50 states in total state expenditures per capita.

There is money in Illinois - it has the 5th highest GNP of all 50 states. There just has never been the will to have a progressive income tax structure like the majority of state have, where those who make larger incomes, pay more a larger percent.

Comment by Joe Melugins Monday, Apr 23, 12 @ 12:33 pm
I bet making the income tax permanent will occur after the November elections.

Comment by Aristotle Monday, Apr 23, 12 @ 12:33 pm
Loved the LOTR take on it all!

Rich, when you say the state has so much bond debt, I’m curious how much we have. I always thought most of our debt was soft.

Comment by Regular Reader Monday, Apr 23, 12 @ 12:34 pm
To me, putting on the brakes on the growth in health-care spending is the biggie and the one we’ll continue to deal with on all levels of government and in the private sector for some time.

There’s really no point to putting that one off.

The pensions don’t scare me so much, but you might as well go with Quinn’s proposal and then meet in the courts. They’re going to get involved at some point anyway.

And although I greatly admire the work of rating agency analysts, I no longer trust rating committees at the agencies at all. Their motives are not transparent and suspect.

Comment by wordslinger Monday, Apr 23, 12 @ 12:41 pm
i really love how those who are not affected (meaning its not their pension that’s getting gored) say go ahead and go to court.

Comment by Anonymous Monday, Apr 23, 12 @ 1:22 pm
I continue to request the next article reference the holy trilogy - Star Wars.

Comment by Waffle Fries Monday, Apr 23, 12 @ 1:27 pm
Madigan is Gollum, and the Dem majority is his precious.

Comment by Boone Logan Square Monday, Apr 23, 12 @ 1:32 pm
“I really love how those who are not affected (meaning its not their pension that’s getting gored) say go ahead and go to court.”

Just repeat the mantra “It’s unconstitutional”, five thousand times and the problem will go away.

Comment by wishbone Monday, Apr 23, 12 @ 1:35 pm
The Gov is anti-gun, isn’t he?

If they do upend the pension system, I hope they don’t go hogwild committing to spend the savings on other stuff (until after the courts get through finding whatever it is constitutional).

Comment by titan Monday, Apr 23, 12 @ 1:36 pm
–The Gov is anti-gun, isn’t he?-

What’s that mean?

Comment by wordslinger Monday, Apr 23, 12 @ 1:55 pm
@Rich: You’re always good, but this is some brilliant writing.

To the point:

=== The most natural human reaction to a crisis is to either run away or try to deny reality. ===

Therein lies the rub. Illinois politicians face a p.r. nightmare and trouble getting re-elected. The next time we want to borrow goo-gobs of money, we could pay more in interest rates.

But are politicians problems really a “crisis” for us?

And given that we went ten years between capital bills the last time, and nobody really thinks we’re gonna be borrowing $30 billion anytime soon, should we really be rushing things through in the next five weeks?

Rich, I’ll take things much further than you did. Faced with what we perceive as a “crisis”, we almost always do the wrong thing:

- Stick our head in the sand;
- Cut off our nose to spite our face;
- Eat our seed corn.

And on the opposite end of the budget spectrum, in “boon” times we tend to spend money on new programs or expand existing ones with little thought to whether those costs are sustainable in future years.

Our manic-depressive budget state is two sides of the same coin. The very same cognitive tendencies that create panic in our brains when we go into “crisis mode” and lead to irrational cuts to achieve short-term savings also lead to our euphoric (Rod would’ve said drunken-sailorish) behavior when we find our wallets fattened by good fortune.

And just as we need to think rationally and long-term when times are good, we need to be calm, cool, collected and thinking long-term today.

That’s not to say we shouldn’t put a plan into action, but it should be well-thought. It certainly shouldn’t be driven by the re-election hopes of a relative handful of legislators. Nor borrowing that isn’t gonna happen until 2015 at the earliest.

And we probably want to admit that our pension, health care, and other budget pressures took decades to create and aren’t likely to be solved in one fiscal year.

Comment by Yellow Dog Democrat Monday, Apr 23, 12 @ 2:05 pm
“It’s the dismal tide” - No Country for Old Men

Comment by veritas Monday, Apr 23, 12 @ 2:13 pm
“My dear Governor, Mushrooms really are amazing creatures,” Gandalf said. “You can learn all there is to know about their ways in a month, and yet after a hundred years they’ll still do what they are told.”

Comment by zatoichi Monday, Apr 23, 12 @ 2:15 pm
One budget for the Governor, lost in the corn
One for the House Speaker on his great throne
Three for the other tops (see their mouths foam)
Thousands for the voters trying to afford their home
Ten for the unions whose ax may be gored
Ten for large businesses who tax incentives hoard
None for video gambling–the wait has us bored
None for providers with an empty cupboard
One budget to rule them all, one budget to find them, one budget to find them all and in the darkness bind them
In Springfield where the shadows lie.

Tolkien does that to me. That or the new generic for my Lexapro isn’t quite doing the trick.

Comment by Earnest Monday, Apr 23, 12 @ 2:50 pm
What happens to pension reform if the approximately 20,000 state/university employees that are eligible to retire DO retire rather than choose from Quinn’s two options? That is a possibility you know. Great pension reform enacted and no one left to pay into the fund.

Comment by Jechislo Monday, Apr 23, 12 @ 3:25 pm
I hope they do something constructive for this state, it has been way to long that these issues havent been addressed. Im sure their is someway they are gonna address these issues halfass though. If i had bonds Id bet on halfass to win this derby.

Comment by Anon Monday, Apr 23, 12 @ 3:26 pm
===What happens to pension reform if the approximately 20,000 state/university employees that are eligible to retire DO retire rather than===

There were wild predictions of widespread doom when so many took advantage of early retirement in 2003.

Comment by Rich Miller Monday, Apr 23, 12 @ 3:36 pm
I agree it is exceedingly quiet in the General Assembly. I am not sure that I agree that there will be a battle royal over either Medicaid or public sector pensions. I do think there should be such a battle, because good public policy requires it. Unfortunately, I expect late session bills containing elements of proposals for the solutions to both the Medicaid and public sector pension problems.

Groups like the Black caucus, and Hispanic caucus will be given air time in private meetings by the Democrat party leadership and various largely meaningless concessions in terms of costs will be made to bring them into line and they will in their vast majority vote up the bills. There will no doubt be some drama, but it will largely be theatrics.

Republicans will only oppose these bills that will likely not go as far as the Governor has proposed going on either Medicaid or pensions if they are sure they are in fact going to pass. If that is in question then a certain number of Republicans will be given the green light by their leadership to break ranks and make sure the compromise bills pass. The extent to which the compromise bills will satisfy the bond rating agencies will just have to be whatever it is and the Civic Federation be damned.

I simply can’t imagine that these bills would go though the committee process and be thoroughly debated, it will all likely be done relatively rapidly. Because of the lack of serious debate and deliberation many wrong choices will be made and the talking heads will denounce the legislative process as they normally do. The unions will march about, the service providers will also, I doubt we will see marching bankers which would be a real show indeed, but in the end the deal will be done fast.

Comment by Rod Monday, Apr 23, 12 @ 3:50 pm
@Joe Muligans-

Its quite possible to have too little money and still make unwise decisions, just as its possible to be flush with cash and make unwise decisions.

Whether you’re down to your last greenback or just won the lottery, people make unwise decisions because they are thinking about today–or not thinking at all–instea of thinking about the future.

Rather than sailors, we spend our money more like Carpenters. Six months out of the year we’re out of work…so we skip child support and house payments, don’t go to the doctor, put everything on credit cards. The other six months of the year, when we’re flush with cash, we’re out at the bars every night and have two or three girlfriends.

Comment by Yellow Dog Democrat Monday, Apr 23, 12 @ 4:09 pm
Rich Miller - Monday, Apr 23, 12 @ 3:36 pm:

Just because they muddled through doesn’t mean things are fine. Some of us retirees who have been back would contend the predictions came true …

Comment by Retired Non-Union Guy Monday, Apr 23, 12 @ 4:17 pm
No use talking any more about it. Put it in a bill or two, pass it, sign it into law. We’ll see you in court, get the laws declared unconstitutional, and then I’ll be back here saying I told you so. Pay your bills.

Comment by PublicServant Monday, Apr 23, 12 @ 4:42 pm
I’m not trying to speak in hyperbole, but I sincerely doubt that this State’s leaders will ever right the ship. The old ties too great, the old bonds too strong, there’s just no way the leaders will do what it takes, and for that matter, I’m not convinced the voting electorate will allow leaders to do it either. The vocal constituencies hold enough sway that leaders hungry for power will never be able to do what is necessary and right.

The only way this state will conceivably “fix” the budget will be to raise taxes significantly once the GA’s backs are against the wall (default on bonds or pension checks). They will never make reforms or cuts that amount to substantive change beforehand.

Comment by Shemp Monday, Apr 23, 12 @ 5:19 pm
Originally posted by Wordslinger:
“And although I greatly admire the work of rating agency analysts, I no longer trust rating committees at the agencies at all. Their motives are not transparent and suspect.”

Lot to agree with there, but the reality is these days the ratings agencies are absolutely beyond terrified that they’ll get it wrong again, so they are being beyond ultra conservative (not political, financial) on credit ratings.

“…get it wrong again…” = official corporate position. In fact, the ratings agencies “got it wrong” because they sold out to the banksters who were creating the MBS’s.

After they screwed up so badly on the complete MBS disaster, the rating agencies are sweating blood over all sorts of other rating issues, not to mention the entire student loan nightmare/credit ratings.

You ought to see the ratings analysis work being done on those - talk about covering ones self for potential outcomes..

But if one of the big three (S&P; Moody’s, & Finch) is serious about a double downgrade threat (assuming it’s not Quinn talking out of his imagination), then it’s likely not political.

The ratings folks are desperately trying to re-establish their credibility, because there’s lots & lots of folks out there who want to hang them over MBS issues.

And let’s not kid ourselves - the State of Illinois is an easy mark, and a good place to start to re-establish one’s credibility if you are in the biz of issuing credit ratings.

Comment by Judgment Day Monday, Apr 23, 12 @ 5:48 pm
This is nothing that a rational military policy, some legal recreational pot, & racetrack slots can’t fix.

Comment by Kasich Walker, Jr. Monday, Apr 23, 12 @ 6:14 pm
“And yet the University of Illinois feels that this is a great time to act like there is no problem with the budget. They want to keep on building buildings that are useless and raise tuition and fees to cover this massive spending spree.”

I understand taking issue with building expenses right now, but raising tuition and fees? U of I is funded by the state at 1990s levels now with 2012 inflation and 2012 backlog in state payments.

Unless you’re looking for U of I becoming a laughing stock like Florida is for eliminating their computer science program, tuition and fees are going to go up.

Comment by hisgirlfriday Monday, Apr 23, 12 @ 6:24 pm
“What happens to pension reform if the approximately 20,000 state/university employees that are eligible to retire DO retire rather than choose from Quinn’s two options?”

Then maybe the 1 out of 2 new college graduates that are unemployed or underemployed will have their unemployment rate go down a little bit?

Drastic wage cuts after CAT broke the union didn’t stop people from applying to work at CAT for drastically reduce wages and benefits. A job at the state with all those paid holidays? Still a pretty good deal even with the crap retirement.

As long as the bondholders and investment banks in New York hold all the cards in our economy, everyone else’s wages are going down or staying flat whether you’re in the private sector or public sector.

Comment by hisgirlfriday Monday, Apr 23, 12 @ 7:06 pm
@hisgirlfriday - Well then let’s all capitulate in the race to the bottom, while the top 1% reap the benefits of raping the middle class for their risks-gone-wrong.

Comment by PublicServant Monday, Apr 23, 12 @ 7:50 pm
==There were wild predictions of widespread doom when so many took advantage of early retirement in 2003.==

Since then, we’ve had two governors who have so mistreated the merit comp managers and professionals that they can no longer replace the ones who leave. Chasing any of the remaining ones out with this pension reform will just make things worse for the remainder and make it harder to hire replacements. How much is this going to save the administration when they have to start paying market rates to get people to stay or to hire replacements?

Comment by anon Monday, Apr 23, 12 @ 8:29 pm
Apologies to Tolkien…

From the Return of the King:

…Then suddenly one day, for he had been too busy to give thought to his adventures,he remembered the gift of Galadriel… “Open it!” said Frodo. Inside it was filled with a grey dust, soft and fine, in the middle of which was a seed, like a small nut with a silver shale. “What can I do with this?” said Sam.

“Throw it in the air and let it do it’s work!” said Pippin…

The GA likewise May just as well be wishing for a bit of pixie dust…

“The wealth of Illinois is in her soil and her strength lies in its intelligent development - Andrew Sloan Draper”.

From the Fellowship of the Ring:

…”For you little gardener, and lover of trees,” she said to Sam, “I have only a small gift.”She threw into his hand a little box of plain grey wood, unadorned save for a single silver rune upon the lid. “Here is set G for Galadriel” she said; “but also it may stand for [General Assembly] in your tongue. In this box there is earth from my orchard, and such blessings as Galadriel has still to bestow upon it. It will not keep you on your road, nor defend you against any peril; but if you keep it and see your home again at last, then perhaps it may reward you…For our Spring and Summer [pensions] are gone by [or never were], and they will never be seen again save in memory…

Comment by Das Man Tuesday, Apr 24, 12 @ 7:56 am