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* Crain’s Chicago Business rides to the governor’s rescue…
From their lofty perch in Midtown Manhattan, the editors of the Wall Street Journal opined on the years-long budget stalemate here in Illinois. The deadlock has naturally drawn the notice of investors who happen to hold state of Illinois bonds—bonds that could soon be downgraded to junk if Gov. Bruce Rauner and his archnemesis, House Speaker Michael Madigan, don’t come to terms on a budget by the beginning of the next fiscal year, July 1.
If the Journal’s editors intended to help resolve the Springfield deadlock for the good of bondholders—not to mention the people who live and work in Illinois—then they missed the mark. In fact, they made matters much, much worse.
That’s because partisan brinkmanship of the sort they’re dishing out is one of the biggest reasons Illinois is in the shape it’s in now. The Journal drubs Rauner for saying he’ll accept a four-year increase in the state income tax and expand the sales tax, labeling such concessions “capitulation” and “a political defeat by any definition.” Implying that Team Rauner’s tax hike talk is a sop to credit rating agencies that “never met a tax increase they didn’t like,” the Journal writes that Rauner “doesn’t want to run for re-election next year as Governor Junk.” […]
Given the long, hard battle that’s been fought over these very elements of Rauner’s “Turnaround Illinois” agenda, to cite such shortcomings now is essentially to cheer for both sides to harden their positions. But this state can’t afford more tantrums. Rhetoric like this only adds fuel to a partisan fire that’s threatening to immolate Illinois. We agree with the Journal that Madigan is the stumbling block that has prevented Rauner from realizing what he campaigned on, but campaigns are about vision; governing is about seeing clearly. Yes, Madigan is stubbornly in the way. But he cannot be wished away—nor can his constituents. Acting as if they are not there is to enter Fantasyland—and Illinoisans have no further need for fairy tales.
So here’s a thought inspired by a famous headline from another fine New York newspaper: “Illinois to Wall Street Journal: Drop Dead.
I agree with Crain’s. We need a practical solution here. And I’ve never been a fan of that WSJ editorial page.
But, on one specific level, I totally agree with the Wall St. Journal. Rauner did indeed pledge to roll back the income tax rate all the way down to 3 percent by the end of his first term. Instead, Rauner chose a 2-year impasse over tax reduction. That’s totally and completely on him. Period.
And, remember, the governor and his wholly owned state GOP subsidiary have repeatedly blasted Speaker Madigan for suggesting in late 2015 that a good place to start would be returning the tax rate to 5 percent…
The state GOP launched a Twitter campaign attacking Madigan by promoting the hashtag #taxhikemike. It includes a video publicizing Tax Hike Mike’s plan, building it around his comments at the City Club.
“Mike Madigan thinks raising your taxes is funny,” the narrator states.
Then the video shows Madigan being asked and answering the question, as audience members laugh at the delicacy of the issue and Madigan smiles broadly.
“Mike Madigan wants to raise your taxes by 33 percent … and thinks it’s funny,” the narrator concludes.
Doesn’t it make you just want to grab Tax Hike Mike by his tax-hiking neck and give it a good tax-hiking wringing? That’s the response the advertisement is designed to elicit.
If they had returned the rate to 5 percent (or even 4.95 percent, as the governor claims to favor now) in 2015, they could’ve lowered it over time with gradual cuts and other reforms. Instead, we’re stuck in a hopeless morass.
So, kindly spare me the hand-wringing over a little editorial. Rauner’s a big boy who promised to “take the arrows.” Let him deal with it for a while. It’ll build character. /s
posted by Rich Miller
Thursday, Jun 22, 17 @ 9:35 am
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#TaxHikeMike stalled and scuttled the honest look where everyone, including Raunerites, knows Revenue isn’t a “give” but a required element.
Rauner tries to frame “revenue” as a give, making clear his phony idea is a sham to get a budget.
Comment by Oswego Willy Thursday, Jun 22, 17 @ 9:40 am
When you’re used to getting your way with everything, because your money leverages power, then you are not accustomed to taking criticism. You also are not used to compromise or the subtleties required when forced to take other peoples’ ideas into account.
Rich is exactly right that there was a way to get where he wanted to go if Rauner had the patience, humility, and skills. He had to govern to get there and he wasn’t willing to do that.
I hope the state will remember this.
Comment by Blue Bayou Thursday, Jun 22, 17 @ 9:41 am
This could be an opportunity for a successful businessman to flip the script and get the reforms he wanted merely by taking a “fiscal conservative” position. Support revenue that actually covers the expenses and pays down the debts. That would take every argument away from his opposition.
Comment by Anonymous Thursday, Jun 22, 17 @ 9:42 am
Sorry, I was that last anonymous.
Comment by Dilemma Thursday, Jun 22, 17 @ 9:42 am
@Dilemma–
This seems always to have been the opportunity for Democrats: we pay the most by trying to pay little.
Now we have a story of the possibility of missed vaccinations on account of the budget impasse. The savings from those missed payments will erased quickly and tragically.
Comment by JPC Thursday, Jun 22, 17 @ 9:50 am
Tax rates, while good to bash your opponents with, are a distant second to destroying unions, and the state workforce.
Comment by PublicServant Thursday, Jun 22, 17 @ 9:51 am
==nor can his constituents==
To me, this is the most important line of the column. Replacing Madigan with any other Dem wouldn’t make a practical difference. The Turnaround Agenda simply had no purchase with Democratic voters.
Comment by Arsenal Thursday, Jun 22, 17 @ 9:52 am
==If they had returned the rate to 5 percent (or even 4.95 percent, as the governor claims to favor now) in 2015, they could’ve lowered it over time with gradual cuts and other reforms.==
Considering the absolute mess Quinn left behind with a budget not prepared for the new 3.75% rate, I thought Rauner had an out early on to bump it up to 4.25-4.5% for a couple of years. He should’ve taken it.
Comment by City Zen Thursday, Jun 22, 17 @ 9:55 am
==no purchase with Democratic voters==
Interesting and appropriate choice of words.
Comment by City Zen Thursday, Jun 22, 17 @ 9:56 am
Run a progressive income tax constitutional amendment. Set the initial rates to where most people will pay less than an increased flat tax. That is one of the items Rauner and the 1.4% truly fears. Sell it to the public as a Millionaires Tax. Try to get a few R votes to move it; promise them almost anything you get the votes.
If Rauner sees that bill moving, he will rush to prevent it. You’ll have R’s green on the budget bills and you’ll see a R flats tax bill magically appear.
The other possibility would be a increased state contribution / reduced property tax swap. While it would be popular, it doesn’t carry the same level of threat to Rauner that a progressive income tax does.
Comment by RNUG Thursday, Jun 22, 17 @ 10:00 am
Rauner’s failure is a case study of the pitfalls of electing a governor with no political experience and tons of money.
Not knowing how to meld together a political and governing strategy is one thing…but having all the money in the world creates an arrogance that is resistant to changing course when “Plan A” fails.
Comment by Roman Thursday, Jun 22, 17 @ 10:02 am
===I thought Rauner had an out early on to bump it up to 4.25-4.5% for a couple of years. He should’ve taken it.===
The “Thompson Pivot” was there for all to see…
… then came the Decatur PowerPoint.
It was never about the tax rate, or budget, or even this “overall” Turnaround Agenda”
Be it property tax relief, even Fair Share, it always begins and ends with Labor, and that 2012 “Wedge” remark Rauner himself gave.
Comment by Oswego Willy Thursday, Jun 22, 17 @ 10:03 am
The revenue increase alone won’t make Illinois solvent over the long term and in the short term it will continue to drive out companies and individuals who seek a more stable economic environment.
But the even larger problem is the unwillingness to address pension and retiree healthcare costs. When you can’t reform your spending problems and they grow as if on autopilot, then no reasonable amount of revenue increase gets you to solvency.
Comment by In A Minute Thursday, Jun 22, 17 @ 10:03 am
I agree with Rich’s comments here. Rauner has played all the wrong cards so badly that if he were CEO in the business world (he would probably be fired) but he would at least clean house on all his top advisers.
Comment by Ahoy! Thursday, Jun 22, 17 @ 10:05 am
And boy, does he ever need character building…
Comment by El Conquistador Thursday, Jun 22, 17 @ 10:09 am
Ignore the words, focus on the actions. Rauner is never going to agree to a tax hike.
The best case is when elements of the House GOP decide they’ve had enough with the burn-down-the-state program, Rauner quickly vetoes the tax hike and can be overridden.
Best of both worlds: the state doesn’t disintegrate, schools open on time, and Rauner continues to run as the anti-tax crusader. Of course, he will takes those GOP members who voted for the tax increase out in primaries.
Comment by Moe Berg Thursday, Jun 22, 17 @ 10:14 am
The ONLY thing that Bruce has done since acceptin’ the job is to blame someone else. Time to fire him and send him back to managin’ the fountain drink dispenser at the nursin’ home like he used to do. Maybe he could get a promotion to fillin’ the napkin dispensers.
Comment by Mike Cirrincione Thursday, Jun 22, 17 @ 10:16 am
Rauner is misunderstood by many. If squeeze the beast is the objective, his actions make perfect sense.
Honestly pursuing the objective would be wildly unpopular, so the purpose of his propaganda machine is to distract and deflect or lay it off on Madigan.
The propaganda machine also provides cover for Rauner’s complicit, bought-and-paid for GOP caucuses. He couldn’t do it without them.
Rauner is not incompetent, stupid or crazy. He’s achieving what he can for as long as he can.
Comment by wordslinger Thursday, Jun 22, 17 @ 10:18 am
Maybe the GA should have gotten the fiscal house in order as promised when they passed the tax hike and stated that 3.75% would be sufficient after they took care of the backlog of bills. Instead it was business as usual with the intent of making the tax hike permanent and the Madigoons couldn’t pull it off.
Comment by Arock Thursday, Jun 22, 17 @ 10:19 am
If Illinois had a progressive income tax they could significantly reduce property taxes.
Comment by Chicago 20 Thursday, Jun 22, 17 @ 10:20 am
== But the even larger problem is the unwillingness to address pension and retiree healthcare costs. ==
Long term, pension costs were addressed with Tier 2. We just have to pay up until Tier 2 solves the problem.
Retiree health care costs were addressed by forcing (and it was forced) all Medicare age state retirees into a Medicare Advantage program. Just ask any retiree about their increased co-pays and deductibles; they’ll tell you they are paying a lot more now.
And if you were really referring to employee healthcare costs, Rauner could have gotten some of that also over time, but he got greedy and tried to get all of it at once in the first contract.
Comment by RNUG Thursday, Jun 22, 17 @ 10:20 am
Once upon a time Miller “agreed with almost every single word” of the WSJ’s Chicago-based editorial writer. https://capitolfax.com/2009/05/04/your-weekend-must-reads/#comments
Comment by Once Thursday, Jun 22, 17 @ 10:21 am
===… stated that 3.75% would be sufficient after they took care of the backlog of bills.===
Rauner begged, pleaded, ran against the tax being permanent. While getting the bills down to a reasonable cycle, the Dems obliged Gov-Elect Rauner
If you are saying Rauner has been grossly inept at governing, forcing himself to require a tax increase Rauner said he didn’t need, who am I argue, LOL
===Instead it was business as usual with the intent of making the tax hike permanent and the … couldn’t pull it off===
You’re right again. Rauner is the Status Quo.
I knew you’d finally get up to speed, lol
Comment by Oswego Willy Thursday, Jun 22, 17 @ 10:25 am
I think Wordslinger is right when he frequently raises the “starve the beast” (or some similar term) argument. This state is blue and getting more blue all the time. Pat Quinn and Blago gave them a gift. The GOP couldn’t reasonable think they had a good chance to hold this much power in the forseeable future. Thus, if you want to effect significant conservative change (or “1%’er” change, as there’s a difference), you aren’t going to get it by tinkering. Even if Rauner now agrees to basically the same income rate as Quinn’s, even if he doesn’t get much of his TA (and he’s getting very little of it), he’s dug this state into such a budget hole that it will enforce a conservative agenda on the state for years. Major new education or infrastructure programs? Where’s the money coming from? We’ll be struggling just to pay off the pensions and restore the old status quo, and with a smaller tax base to boot. Without a progressive tax you are severely limited in how much more you can raise taxes, especially as all the local governments have been raising them as well and Chicago has big increases on the horizon.
Starve the Beast worked for Reagan and David Stockton. It may work for Rauner too.
Comment by lake county democrat Thursday, Jun 22, 17 @ 10:25 am
The only think GovJunk has really accomplished is creatin’ new product for what we like to fresh product for the what we call the “high yield debt market” If you talk in the industry those guys are licking their lips and hoping for more….6.3% for the CPS paper was great for them.
Comment by Annonin' Thursday, Jun 22, 17 @ 10:26 am
What if this is the govenors plan, to make who he wants to get rid of vote green, so he can use it in the primary to reshape illliois in his own image, and if he go’s down he’s taking the GOP with him
Comment by Rabid Thursday, Jun 22, 17 @ 10:27 am
Blue Bayou says “I hope the state will remember this.”
That’s like ‘hoping’ the guy who lost his arm in wood chipper will remember that.
Kinda hard to forget, don’t you think?
Comment by don the legend Thursday, Jun 22, 17 @ 10:32 am
I wasn’t joking @ 10:00 am about running a progressive income tax amendment. Rauner can’t stop it getting on the ballot if the House and Senate approve it; the Governor has no action on such a bill. The only thing he can do is spend multi-million to try to defeat it at the polls.
Comment by RNUG Thursday, Jun 22, 17 @ 10:37 am
I often think that the GOP’s finger-pointing to the Madigan quote about raising taxes to 5% is appropriate. The Speaker said, “as a starting point, we should raise taxes.” Instead, he should have said, “as a starting point we should reduce spending, then raise taxes by whatever we can’t cut, and if that is back to 5% so be it.”
Comment by Just Me Thursday, Jun 22, 17 @ 10:40 am
@RNUG
==We just have to pay up until Tier 2 solves the problem.==
You’ve said this several times on different threads here and there is no doubt merit to the long term resolution you suggest will ultimately occur. Perhaps I missed it and if so I apologize, but have you a year/timeline in mind when you believe the tier 2 fix will have substantially alleviated the pension problem? (assuming the state survives that long)
Comment by Responsa Thursday, Jun 22, 17 @ 10:47 am
A permanent tax increase in exchange for no changes permanent or temporary to the cost drivers of escalating government spending is an impossible sell
Comment by Lucky Pierre Thursday, Jun 22, 17 @ 10:49 am
== but have you a year/timeline in mind when you believe the tier 2 fix will have substantially alleviated the pension problem? ==
Approximately 20 - 30 years out. Wile depend on the life expectancy of current Tier 1 employees and retirees, and also depend on the number of Tier 2 employees hired, etc. It took between 13 and 45+ years to dig the hole, depending on which point you want to measure from.
The 45+ is measuring from when the 1970 Pension Clause was put in.
The 13 is from when Blago did the pension bonding and ramp reset.
There are other points in between that could also be chosen.
Comment by RNUG go Thursday, Jun 22, 17 @ 10:59 am
So how did the budget come out after our most recent income tax increase? I assume we were balanced coming out of that and all the problems started when the temporary increase rolled back.
Comment by Hmmmmm Thursday, Jun 22, 17 @ 11:03 am
Wait Lucky. I thought we needed term limits. Today it’s spending reform. You really do twist whichever way the wind blows don’t you
Comment by Demoralized Thursday, Jun 22, 17 @ 11:08 am
== A permanent tax increase in exchange for no changes permanent or temporary to the cost drivers of escalating government spending is an impossible sell ==
Which cost drivers do you want to eliminate:
Public health
Child protection
Food assistance
Road building and maintenance
Public safety
Education
Income assistance to the needy
Food assistance to the poor
Elderly care
Corporate tax breaks
Public education
Pinstripe patronage contracts to political favorites
Health insurance support of ACA mandates
Recreation - state parks, etc.
Other - pick your own favorite, but eliminating state employees (unless you also cut programs) is off limits because you have to have employees to actually deliver services
Please identify your choices and expected State cost savings (since some of the categories are up to 90‰ federally funded)
Comment by RNUG Thursday, Jun 22, 17 @ 11:10 am
What we need… is an honest chief executive.
Comment by Winnin' Thursday, Jun 22, 17 @ 11:12 am
What I want… what’s most important to me is that I have a guarantee: no more attempts on my… turnaround agenda. #FakeGovernorRauner
Comment by don the legend Thursday, Jun 22, 17 @ 11:28 am
== I assume we were balanced coming out of that and all the problems started when the temporary increase rolled back. ==
Depends on exactly how you define balanced. We were paying the budgeted amounts, slowly working down the backlog of bills and we’re paying most current bills in a timely manner; by that definition it was balanced.
But … the Edgar / Blago revised pension ramp payments were less than actuarially required levels and the employee health insurance was underfunded, running up to two years behind, and not gaining.
So that budget was balanced in terms of income and expenses, but not actually adequate to what was owed.
It was a lot better than today with no budget.
Comment by RNUG Thursday, Jun 22, 17 @ 11:39 am
LCD, Reagan didn’t starve the beast. He was positively Keynesian in peace-time, pump-priming deficit spending. The T-bond pits jumped during his tenure — long-term debt for annual operations.
His goal was to accelerate the collapse of the Soviet Union by forcing it to match the defense build-up.
Comment by wordslinger Thursday, Jun 22, 17 @ 11:48 am
In reference to two most recent past Illinois Governors the WSJ editorial labeled “one a crook, the other a snook.” Prose of that variety is usually found in the sports section.
Comment by Keyser Soze Thursday, Jun 22, 17 @ 12:21 pm
RNUG all of the following should be cut to some degree:
Public health
Food assistance
Road building
Education (state should not pay for pensions created at the local level)
Income assistance to the needy
Food assistance to the poor
Elderly care
Corporate tax breaks
Pinstripe patronage contracts to political favorites
Recreation - state parks, etc.
Comment by Ron Thursday, Jun 22, 17 @ 2:07 pm
And state elected officials need pay cuts and benefits slashed. We should have a volunteer legislature.
Comment by Ron Thursday, Jun 22, 17 @ 2:07 pm
Let me ask you a question, Ron. Do you think anyone could be elected to the Illinois General Assembly or governor on that budgetary platform you just laid out?
Comment by Rich Miller Thursday, Jun 22, 17 @ 2:09 pm
A few thoughts-
A “solution” that is 30 years away is no real solution. Politicians will find some way to derail that during that time.
Convene a constitutional convention now to change the pension provision to allow for equitable adjustment of pension obligations and add a provision saying only defined contribution plans moving forward. Fix the pension problem in 3 to 5 years.
Comment by In A Minute Thursday, Jun 22, 17 @ 2:36 pm
== Convene a constitutional convention now to change the pension provision to allow for equitable adjustment of pension obligations and add a provision saying only defined contribution plans moving forward. Fix the pension problem in 3 to 5 years. ==
The IL SC has already ruled current employees (and retirees) are protected. Even if you remove the Pension Clause, the pensions were explicitly given the status of a contract. Under Federal law, you can’t impair contracts and you can’t retroactively and coercisively change them.
So how are you going to legally do that? How are going to negate the existing pension debt, since the problem is actually the debt? Are you going to change Federal Contract Law also?
Comment by RNUG Thursday, Jun 22, 17 @ 4:04 pm
== all of the following should be cut to some degree ==
Ron, by what percentage? Most of those, where not limited by the Feds, suffered multiple 10% per year cuts under Quinn. I can’t say how badly they’ve suffered under Rauner because there are no budgets to compare to.
So, what percentage cut to each item listed?
Comment by RNUG Thursday, Jun 22, 17 @ 4:10 pm
10% is a good starting point.
Comment by Ron Thursday, Jun 22, 17 @ 4:12 pm
Rich, I suppose you’re right. We live in the Trumpian age, where politicians blatantly lie to the american people and win!
The truth is, Illinois can’t afford to do what it’s done in the past. We need austerity budgets.
Comment by Ron Thursday, Jun 22, 17 @ 4:14 pm
“Politicians will find some way to derail that during that time.”
Yep, all it takes is another Edgar. We really need to amend the constitution so this can NEVER happen again.
Comment by Ron Thursday, Jun 22, 17 @ 4:15 pm
I took my family to Starved Rock recently. There was no fee to get in. That is utterly ridiculous in a state that has no money. They should charge at least charge to park there.
Comment by Ron Thursday, Jun 22, 17 @ 5:03 pm