By: Ted Dabrowski
Governor-elect J.B. Pritzker may have celebrated his win over incumbent Bruce Rauner, but his resulting hangover will last for more than a day. In fact, expect it to last Pritzker’s entire term.
Pritzker spent $160 million of his own money to be the governor of Illinois, more than double what Gov. Bruce Rauner put in. With that, Pritzker bought the right to take on the fiscal and economic mess of what is the country’s most dysfunctional state.
He may celebrate now, but his own campaign promises for more spending and higher taxes will set him up for failure. Combined that with the mess Illinois is already in, and Pritzker could see the state collapse around him. Call it the winner’s curse.
And the state’s credit rating continues to teeter just one notch above junk. No state has ever before been junk rated.
Chicago and CPS are in even worse shape. They are both junk rated, with CPS deep in junk territory. If Illinois doesn’t collapse on its own, count on Chicago to bring down the entire state.
And the state has no rainy day fund to withstand an eventual recession. In fact, Illinois has the exact opposite of a rainy day fund. It has a stack of $8 billion in bills it can’t pay down. You won’t find another state in the country with that much weight around its neck. Numerous studies say so.
Pritzker should expect immediate pressure from the unions that helped get him elected, in particular AFSCME. That union’s contract negotiations have been in “impasse” for more than three years under Gov. Rauner. Rauner held tough on behalf of taxpayers, but AFSCME outlasted him. That was their strategy all along – to wait for a more “friendly” governor.
If Pritzker gives in to AFSCME’s demands, that contract will cost ordinary Illinoisans $3 billion more than Rauner’s last, best offer. The details are here.
Not only will that contract deepen the state’s yearly budget deficit, it’ll push up the state’s pension liability, too.
That’s especially galling considering how well Illinois state workers are already compensated.
Perhaps nothing is more ominous though, than the state’s growing domestic outmigration. For several years running Illinois has lost a net of 100,000 residents each year to other states. In all, Illinois has lost a net of 1.37 million people to other states since 2000.
Illinois’ tax base is shrinking. And if it weren’t for a large influx of Hispanics in recent decades, Illinois would have shrunk even more.
The net result is that Illinois’ population has actually declined four years in a row, an outcome shared only with struggling West Virginia.
Those depressing results aren’t a surprise for anyone doing the math. I’ve written about those who’ve looked at the numbers and said “I’m outta here,” from a colleague who’ll save $1 million in taxes over the next 20 years to a small-town Illinois mayor who saw a better future for his children in the South.
And what’s worse, Pritzker isn’t likely to get any good news in the near future.
Amazon’s HQ2 is locating elsewhere, to nobody’s surprise. If the reports are true, Amazon will select Long Island, New York, and Arlington, Virginia. Amazon is obsessed with data, and given the mess Illinois and Chicago are in, you know the math didn’t escape them.
Which brings us to Pritzker’s campaign promises and his plan for tax hikes. As we’ve already written, he can’t possibly keep all his spending promises and at the same time keep taxes on the middle class flat. The math shows it’s impossible. Wirepoints ran the numbers.
Pritzker and Illinois House Speaker Mike Madigan could be forced to drop the more extreme elements of their spending and tax agenda as things get worse and outmigration accelerates. They may be too busy performing financial triage. And there’s always the chance that the financial markets force them into accepting some reforms.
But I wouldn’t bet on that. Both Pritzker and most certainly Madigan have shown a willingness to ignore Illinois’ fiscal reality.
Pritzker does so at his own peril. In Illinois, the winner’s curse is real.
He may want to ask Rauner about it.