McCaleb: Is Statehouse conversation fake because it ignores Illinois' fiscal reality?

By Dan McCaleb, Illinois News Network | May 5, 2017

By definition, fake news ignores the facts. It disregards and/or distorts the truth to deliver a message that is far removed from reality.

I would argue that much of the news coming out of the Illinois Statehouse is fake.

I say "news" but I mean more than that. Much of the conversation surrounding the budget impasse is fake.

News media, lawmakers, public employee unions, gossip peddlers ... all are culpable to some extent.

Illinois is on the brink of fiscal insolvency yet the conversation still focuses on the need for Democrats and Republicans to compromise so a budget – any budget – can be passed.

But passing a budget and saving Illinois aren't the same thing. In fact, passing a bad budget will only worsen the state's outlook.

Illinois needs massive structural reforms: to pensions, to workers' compensation, to overly burdensome regulations that have stifled economic growth, to lopsided rules and regulations that overwhelmingly favor state-worker unions to the detriment of taxpayers.

Short of these absolutely necessary reforms, bankruptcy might be the only option.

But no one is talking about that.

What are the facts?

Illinois' five public pension systems are underfunded by $130 billion. That number grows every day that the General Assembly does not do something drastic to reform the systems.

Illinois' backlog of bills to its vendors tops $13 billion. That number also grows every day lawmakers don't pass a balanced budget. Because of court-ordered spending during this nearly two-year budget impasse, the state is spending billions of dollars more than it brings in.

The nonpartisan Commission on Government Forecasting and Accountability projects the state will collect something shy of $32 billion in revenue in fiscal 2017.

How does a state with annual revenue of about $32 billion that is spending closer to $38 billion balance its budget but also make up a $130 billion pension shortfall and pay off an additional $13 billion in unpaid bills?

If Illinois were to dedicate 100 percent of its operating revenue to the pension shortfall and unpaid bills, it would take more than four years to make up the difference. Of course, the state can't dedicate all of its revenue to paying down its debt. That would mean shutting down every single state service and laying off every single state employee.

Democrats and some Republicans think the state can tax its way out of its fiscal mess. But raising taxes would ignore Illinois' very real outmigration problem.

Illinoisans already pay the highest local and state taxes in the country, and many are protesting by relocating to other states. From July 2015 to July 2016, Illinois lost more than 114,000 residents to other states on net. Our state's residents literally are being taxed out of their homes.

Anyone really think that by taxing its residents more, the state is going to reverse that trend? Yet that's exactly the "solution" many are pushing for.                              

Fewer Illinoisans means fewer taxpayers and consumers, which only increases the burden on those who remain and further adds to the state's problems.

Illinois' economy is stagnant because of poor policy decisions, including overly burdensome regulations. The state has fewer jobs than it did in 2000, while its neighbors are increasing jobs at much faster rates because they have created more business-friendly environments.

The lack of a budget isn't Illinois' biggest problem. It's a problem, but it's far from the state's worst.

There is a small number of people who think bankruptcy might be the best option for Illinois, but none of those people are part of the direct conversation in Springfield.

Bankruptcy would require Congressional action and mean the state's creditors – bond holders, retirees owed pensions, public schools and universities, businesses and more – would receive pennies on the dollar. Yet many of these same creditors – public employee unions in particular – are fighting against the very reforms the state needs if it is to have a chance.

No one wants bankruptcy, but if significant structural reforms aren't put into place soon, bankruptcy might end up being the only option.

Four bills currently in play in Springfield would guarantee Illinois' bondholders first dibs on tax dollars in the event the state defaults on its loans. Supporters of the bills say the chances of default are minuscule or none, but there the bills are.

While the possibility of default and bankruptcy without major reforms should be THE conversation, it's barely a whisper.

The conversation is all about needing to compromise on a state budget.

When it comes to the reality that is Illinois' dire fiscal condition, that's fake.

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