If Illinois had a buck for every time a panelist said “we’ll have to live within our means” at a City Club of Chicago forum this week our financial mess would be gone.
Waste an hour if you want watching the tape of it linked here: Illinois Finances: What’s Next? Its only real significance, however, is to illustrate how nobody will put forth even a rough outline of any combination of higher taxes and spending cuts that will stabilize our situation.
The silliest comments came from Rep. Elaine Nekritz (D-Northbrook), who the press regards as an expert on pension matters. She was asked if Illinois can live within the new 4.99% personal income tax rate. Yes, she says, “we can continue to pay the pensions” and all the rest though services will suffer badly.
No, she’s just rattling off the standard deception that funding the pension schedule set by the legislature means something. In fact that schedule underfunds them by billions, deepening the unfunded liability. Exactly how many billion is hard to say right now because the legislature recently reduced the already deficient funding schedule. The budget is already badly out of balance even with that inadequate funding, and the new education funding bill she supported calls for at least $300 million more for schools for each of the next ten years.
Laurence Msall of The Civic Federation at least talked tough but he, too, offered no solution. Lately, he’s been pushing the idea of state taxpayers assuming liability for the whole pension debt of Chicago Public Schools. Good luck with that. And his earlier proposal of state tax increases almost twice as big as what we got wouldn’t have solved our problems.
Then there was a representative of Moody’s. Credit ratings dominated not just her comments but most of the panel’s — as if they are a meaningful proxy for how well we are doing. They’re not. Those ratings are just about the likelihood of bonds defaulting, not about what’s good for service recipients or taxpayers. And the credit raters aren’t very good at rating bonds anyway. They’ve missed or been late to recognize every major financial crisis in memory, including the subprime mortgage meltdown of 2007.
Yvette Shields of The Bond Buyer could have been much more informative than she was. She’s the best reporter we have, though you need to remember she writes for the narrow interests of her audience — the muni bond world, which is mostly crony capitalist. We link to everything she writes that’s not behind a paywall.
Illinois continues to snore with foot firmly on the gas pedal as we proceed into the abyss.
–Mark Glennon is founder of Wirepoints. Opinions expressed are his own.