Tuesday, July 11, 2017

Waiting for the next catastrophe

After an unprecedented stand off that lasted nearly three years, the Democrat-controlled Illinois General Assembly's two houses passed a budget for the state by overriding a veto of all three bills by Governor Bruce Rauner. The override in the House was particularly momentous, because it was led by Rauner's arch political enemy, Chicago Speaker Mike Madigan, who is all set to be the longest-serving Speaker of any state in US history, and has reigned over half a dozen former governors from both parties. Madigan's House managed the successful veto override by flipping several Republican votes to its side, just barely crossing the minimum number needed.

With this budget, the can has effectively been kicked further down the road than it was already before. The headline number is, of course, the 32% increase in individual income tax that begins with effect from Jul. 1, 2017. But the budget also raises many more taxes without freezing already sky-high property taxes, as the Governor demanded. What's worse, the budget does not include any spending reforms or changes to Illinois' out of control pension system that has been deliberately under-funded by politicians for decades. By all standards, this is a desperate budget passed by a desperate house to avoid a bond rating downgrade.

The problem is, that downgrade has not been avoided - it is still imminent in the future unless the state can clean its mess up. Unfunded pension liabilities and unpaid bills from the last two years together form massive pieces of debt that the budget simply does not address. Yes, essential services like IDOT and the university system, not to mention local school districts, do get a much-needed breath of life (despite cuts), but a crisis will come soon enough to bring everyone back to square one. This budget is a disaster and bad news for the residents of the state. 

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