Illinois State of the State: “We cannot tax and borrow our way into prosperity”

Governor Bruce Rauner focused largely on the financial stress plaguing Illinois during his 2018 State of the State Address and Budget Address. The Land of Lincoln is one of the world’s largest economies, boasting diverse industries, numerous Fortune 500 companies, Lake Michigan, and the city of Chicago. The governor expresses disappointment that despite all the advantages, Illinois is still falling behind.  According to the newly released 11th edition of Rich States, Poor States: ALEC-Laffer State Economic Competitiveness Index, Illinois dropped four spots to 48th out of 50 in terms of economic outlook, largely due to massive tax increases passed in 2017.

Property taxes in the state continue to worsen. Rauner notes, “Ordinary people — the ones without clout or connections or money to pay high-powered lawyers — are victims of a system rigged against them.” Illinois Policy Institute details how property taxes are crushing the state’s taxpayers and are outpacing income growth. Last year the Illinois Legislature overrode Rauner’s veto and massively increased both personal income and corporate income taxes. As noted in our Townhall column last year, it should come as no surprise that nearly 700,000 Illinois residents left the state between 2007-2016, according to Census Bureau data compiled in Rich States, Poor States.

Another key sticking point is the state’s unhealthy public pension system. Rauner pointed to the need for accountability, a fairer cost-sharing scheme and lower overall costs. An article in The Wall Street Journal earlier this year detailed one illogical idea by Illinois state legislators to address the problem—the issuance of over $100 billion in new state bonds. Rather than meaningful pension reform, the Editorial Board noted, “The real goal with these bonds is to shift the pension-liability risk from public workers and retirees to investors and taxpayers. This would liberate politicians to spend more and remove any incentive unions have to reform pensions.” According to ALEC’s report, Unaccountable and Unaffordable 2017, Illinois has the third-worst funding ratio in the country, with more than $380 billion in unfunded liabilities when using a realistic rate of return. Pension costs consume nearly a quarter of the state’s budget, which will continue to increase absent real reform. Rauner is on the right track in demanding the legislature act.

Amid partisan political squabbles that have resulted in little getting accomplished in Springfield, the governor notes other politically-divided states have successfully taken bipartisan steps toward a more sustainable path. “We have the power to take similar steps… the question is whether we have the will to take them.” Rauner acknowledges it will be a tough road, but the alternative is impending fiscal disaster for the state. “It is time we do what the people of Illinois want. Halt the advance of taxes. Stop spending money we don’t have. Get our pensions under control. And give power back to the people.”