April 18, 2007


Attorney General Lisa Madigan is no Judy Baar Topinka. When Madigan challenges Governor Rod Blagojevich in the 2010 Democratic primary, she won't lack money, manpower or credibility. Blagojevich will spend $15 million to beat her, but she will match him dollar for dollar -- and win.

Jockeying for 2010 permeates all that transpires in Springfield, and the governor's "tax fairness" proposal lays out his strategy. Preparing for the "fight of the century," Blagojevich seeks more tax revenue to avoid a catastrophic state fiscal crisis in 2008 and 2009, which would doom him in 2010. Illinois House Speaker Mike Madigan, conversely, hopes for such a crisis, to help elect his daughter. And Illinois Senate President Emil Jones, a Blagojevich ally, backs a tax hike but doesn't want to jeopardize his 37-22 Democratic majority by putting them on record if Madigan is going to kill it in the House.

In the last century, with the exception of Jim Thompson, who was re-elected three times and who served from 1977 to 1990, no Illinois governor has won a third term. Republican Bill Stratton lost in 1960, and Republican Dwight Green lost in 1948. The only incumbent to lose a primary was Democrat Dan Walker in 1976.

Among Springfield insiders, the governor's fiscal program has been dubbed "Blagojevich First," as his first and foremost motivation is to keep himself in office. It would generate $33 billion in new revenue beginning in 2008: $16 billion in new pension obligation bonds and $10 billion from leasing the Illinois Lottery, to be allocated to pension debt, and $7 billion in business taxes. Spending for education would rise 23 percent, by $1.5 billion in 2008 and by $10 billion over 4 years. Spending on roads and infrastructure would rise by $1.5 billion. The unfunded liability of state pensions, which is now $41 billion, including a $22 billion of underfunding for teachers, would be reduced by $27 billion. And $2.1 billion would be spent for expanded health care coverage for 1.4 million uninsured adults, rising to $4 billion annually in 3 years.

That means imposing $7 billion in new taxes on Illinois businesses, in the form of a tax of 0.5 percent on the gross receipts exceeding $2 million of manufacturers, retailers, wholesalers and construction companies and a tax of 1.8 percent on professionals, including lawyers, lobbyists, doctors, dentists, accountants and any other licensed individual. In addition, a 3 percent payroll tax would be levied on any business with more than 10 employees.

If successful, Blagojevich can claim to have "solved" the state's fiscal ills without having raised either the state income tax or the state sales tax -- which he pledged not to do. The flood of new revenue will appease the state's teacher lobby, which wants higher salaries and pension protection. Plus, with billions more being spent on state construction and health care, Blagojevich can hit on the contractors and providers for millions in campaign contributions.

Blagojevich said that he wants to "ease the burden on the middle class." But businesses exist to make a profit, and any additional costs (or taxes) are either passed on to the consumer in the form of higher prices or, if impossible, passed on to the employees in the form of layoffs or wage reductions. According to critics, the new taxes represent a 25 percent increase in the taxes and fees assessed on corporations.

Madigan, however, has his own three-pronged "Madigan and Madigan First" strategy -- dubbed "M&MI." First, he emerges as the "champion" of Illinois business and ensures that the Blagojevich proposals are dead on arrival in the Illinois House, where he controls the 66-52 Democratic majority with an iron fist. Then he hits up business interests for contributions to himself, to Democratic state representatives, to the Illinois Democratic Party (of which he is chairman) and to Lisa Madigan. By taking a conservative, anti-tax, pro-business stance, Madigan marginalizes the Republicans and focuses all business ire on Blagojevich. After killing the tax hike and having the governor loudly excoriate him, Madigan will raise at least $5 million from corporate sources.

The fine hand of Madigan is already at work. Democratic legislators are complaining that with $33 billion in new revenue, there should be either a reduction in either the property tax or the income tax. Liberals have resurrected the concept of a tax swap -- raising the income tax while granting property tax reductions. With all these proposals swirling in the wind, the General Assembly will do what it does best: nothing.

Second, by blocking Blagojevich's tax increases, Madigan protects his fellow House Democrats, deprives the Republicans of an attack issue in 2008 and keeps his majority. To elect Lisa Madigan in 2010, Mike Madigan must still be the speaker.

Also, once it becomes obvious that "Blagojevich First" won't pass the House, Jones will refuse to call it for a vote. It's a game of "You first." Blagojevich needs to get his plan passed quickly by the Senate and then have the Democratic senators pressure their House colleagues. Madigan will postpone consideration until June to allow business interests time to bombard their local legislators.

And third, by tanking "Blagojevich First," Madigan will prove that he's the top dog in state government and that the governor is an ineffectual tax hiker who can't exert leadership. The governor will surely rip Madigan as a "tool" of big business, to blame him for the inevitable fiscal crisis.

State revenues are increasing by $900 million annually through economic growth. Spending, which was $53 billion in 2004, rose to $57 billion in 2007 and is expected to be $60.1 billion in 2008. That means either finding at least $2 billion in new funding or making cutbacks by June, when fiscal year 2008 begins. If the gross receipts tax and the payroll tax pass, the state general revenue fund will grow by $7 billion, avoiding a fiscal meltdown.

In 2003 the governor closed the budget hole by borrowing $10 billion from the pension system. As a result, in 2008 the pension shortfall will be $641 million, rising to $719 million in 2009 and to $759 million in 2010.

In prior years Blagojevich always trotted out a stopgap fiscal gimmick. The idea was to avoid a tax hike, push hard decisions into the future, and get re-elected in 2006. But the future is now. In his second term Blagojevich must prove that he is able to solve, not just delay, problems. And the Madigans want Blagojevich to fail. Of course, they run a twofold risk: First, that voters will blame Blagojevich and all Democrats for the fiscal mess and support a Republican for governor. And second, that the next governor would have to push through a tax hike in 2011. But politicians never worry about tomorrow until tomorrow. The goal is to win the next election and focus on governing later.

Blagojevich raised a combined $50 million in the 2002 and 2006 election cycles. He surely can raise another $20 million by 2010, but only if he looks like an effective governor and a likely winner. His summer-long television ad barrage last year transformed Topinka from a credible state official to an abject buffoon. Even so, he won by just 314,750 votes, slightly more than his 2002 margin of 252,080 votes.

Madigan, as the 13th Ward Democratic committeeman, is a powerful force in Chicago politics, especially on the Southwest Side. In 2002 he delivered 12,043 primary votes for his daughter in his ward, to just 6,821 for Blagojevich for governor. On the Southwest Side, Lisa Madigan would beat Blagojevich by 2-1 in a primary. On the Northwest Side, where the governor is still feuding with his father-in-law, Alderman Dick Mell, and where there is no state patronage, the Democratic committeemen would gleefully back Madigan.

As attorney general, Madigan has compiled a competent, consumerist record. A Blagojevich-Madigan primary would be a referendum on the incumbent. To win, Blagojevich would have to run as a "reformer," taint Madigan with the alleged sins of her father, and go negative on her, unearthing some personal or professional flaw. If he does, he will enrage the speaker, prompting him to raise and spend even more money and to call in more markers. Also, Blagojevich is enormously unpopular Downstate, and Madigan will make sure his Downstate House members get plenty of money to deliver their districts for his daughter.

Back in 1976, Mayor Richard J. Daley ordered Mike Howlett, then the popular secretary of state, to challenge Walker. Howlett won the primary 811,721-696,380, but the party was split, and Republican Thompson won the election by 1,390,137 votes. In 2010 Blagojevich and Madigan could so demonize each other as to render both unelectable.

But remember this: There are nine separate investigations into state hiring and contracts. If there's a spate of indictments and convictions before 2010, Blagojevich may be unelectable . . . or may not even be governor.