By Ted Dabrowski and John Klingner
If you’ve been following Illinois budgets for some time, it’s déjà vu all over again.
An unbalanced budget. No reforms. More spending. And of course, more tax hikes.
Gov. Pritzker unveiled his $42 billion state budget for 2021 this week. The budget increases spending by $2 billion, or 4.1 percent, over 2020 and relies on the passage of a progressive tax amendment to appear balanced.
In his speech, the governor once again rejected any attempt to get retirement debts under control through a pension amendment, insisting instead that a progressive income tax is a panacea to Illinois’ problems.
Pritzker is making the same mistake he did last year. He’s failing to tackle Illinois’ deep problems.
This is not a budget for a state that’s just one notch from a junk credit rating. It’s not a budget that deals with the nation’s worst pension crisis, the 2nd-highest property taxes, the 2nd-worst rate of out-migration and falling real home values.
Instead, it’s a budget that gives billions more to a political class that has proven to be the most corrupt in the nation. That will only invite more abuse.
Here are some key facts:
- Pritzker’s 2021 budget is not balanced even when the governor’s $1.4 billion in progressive tax revenues are included. The state’s statutory retirement payments will still be about $4 billion short of what’s actuarially needed for pensions and short another $2-3 billion for retiree health insurance debts. As a result, the state will accrue billions more in debt outside of the budget, just as it has done for years.
- The governor reports $225 million in savings due to “operational efficiencies, possible agency consolidations, and the elimination of excess boards and commissions.” That amount represents less than one percent of the 2021 budget and is dwarfed by the overall $2 billion increase in the budget.
- Pritzker’s budget promises to make a near-$500 million “historic investment” in preK-12 education. That increase comes despite the fact that Illinois’ total per-student spending is already the highest in the Midwest. Illinois spends 30 percent more than Wisconsin per student and 50 percent more than Indiana.
- Pritzker’s attempts to shore up a “rainy day” fund with $100 million falls far short of what Illinois needs. Illinois is grouped with New Jersey as the two least-prepared states in the country for a recession. $100 million represents less than 0.25 percent of the budget and is meaningless as long as the state is burdened with billions in unpaid bills.
One of Governor Pritzker’s most egregious comments during the address was his condemnation of a constitutional amendment for pensions as a “fantasy” because it would be thrown out under federal law.
He’s either dishonest or uninformed, because recent experiences in Rhode Island and Arizona prove otherwise. The real fantasy is expecting Illinois to right its fiscal ship without real pension reform, which requires either a constitutional amendment or bankruptcy.
Pritzker also said that if the progressive tax amendment is voted down, state discretionary spending will have to be “inevitably cut” by 15 percent. If he put that question to voters they’d say they want cuts, but not in the areas Pritzker is threatening.
Pritzker’s talk of cutting state spending is what Illinois actually needs – but the cuts need to come in the right places. Pritzker is wrong to threaten cuts to the core services Illinoisans need. Instead, he should champion structural reforms: the consolidation of local governments, a push for a pension amendment, a drop in labor costs and a significant reduction in mandates on municipalities.
One last thing. Here at Wirepoints, we don’t think the problems in Illinois are insurmountable. But what we do think is that they are much more severe than Pritzker admits they are.
What we’re arguing is that those problems need to be truly addressed. And that’s something Pritzker hasn’t done.
To see Wirepoints’ full response to Pritzker’s budget, watch our interview with Illinois Channel’s Terry Martin.
Read more about Illinois’ bad budgets and its financial crises:
- Illinoisans overwhelmed by a ‘shadow mortgage’ of pension debts
- Illinoisans feel the pain of stagnant incomes and skyrocketing property tax bills
- Illinois enacting a progressive tax is like Sears attempting a turnaround by hiking prices
- IRS migration numbers confirm flight of Illinois’ wealthy – Our Monthly Crain’s Article
- New IRS data reveals winners and losers of wealth migration across 50 states
- Why an aging and shrinking Illinois is a threat to public sector pensions