November 30, 2011
ILLINOIS IS "MOST BANKRUPT STATE" IN AMERICA, SAYS TREASURER RUTHERFORD
ANALYSIS & OPINION BY RUSS STEWART
Illinois is the "most bankrupt state in the nation," asserts Republican state treasurer Dan Rutherford. According to Rutherford's office, Illinois' indebtedness is a staggering $192.1 billion, almost four times the annual budget of $53 billion. "That debt is the highest in the nation," Rutherford said.
With a $12 billion annual structural budget deficit of expenditures over revenues, "We are spending $3 for every $2 in revenue, and the solution of our current governor is to borrow more money, delay payment of state bills and raise taxes," Rutherford said.
Despite the passage of an income tax increase on individuals and corporations, revenues still lag $5 billion behind expenditures. The state has $7 billion in unpaid bills, largely to Medicaid, nursing home and social service vendors. According to Rutherford, the state owes $44.7 billion on bond issues, which must be repaid through 2036. In 2002 the state's bond debt was $12 billion; now it's $44.7 billion, an increase of $32 billion in a decade. In April the state borrowed $3.7 billion to partially fund a pension payment. Of the total debt, $25 billion was borrowed to fund state pensions. In addition, $2.4 billion is owed to the federal government for unemployment insurance claims, with $240 million in interest.
To supposedly solve the 2011 budget shortfall, Democratic Governor Pat Quinn proposed borrowing $10 billion. "That's insanity," Rutherford fumed. "We can't spend 25 years paying for 2011's budget." In fiscal year 2012, debt repayment, including principal and interest, will increase from $360 million to $2.9 billion, and it will continue at that level until 2019. Through 2036, taxpayers will pay interest of $17 billion to satisfy a principal bond debt of $27.6 billion.
Then there's the state pension issue. The state, based on actuarial projections, owes $170 billion to current and former state employees, including $85 billion in unfunded pensions, $44 billion in projected health-care costs, $13 billion in borrowed debt and $4 billion in 2011 pension borrowing. That means that every year there will be at least $7 billion in unfunded state retiree costs, Rutherford said.
According to the state's pension system, mandated pension payments will rise by more than $1 billion in 2012, from $6.4 billion to $7.5 billion, including debt service. That means that any economic rebound -- and there are projections of $1.3 billion in new revenues in 2012 -- will be immediately consumed by the pension monster.
It also means that, from 2012 onward, at least $10.4 billion annually, or a fifth of the state budget, will be allocated to bond and pension debt. Since the general revenue fund is $36 billion, and half of that amount is supposed to be allocated to education funding, there will be an annual Illinois "fiscal crisis."
"This reckless spending means every household in Illinois owes $40,000 in debt repayment," Rutherford said. In a huge understatement, Rutherford argues that Illinois "faces an unprecedented fiscal crisis" and "is on the verge of financial disaster." It's already in the abyss.
So what's the solution?
"No more debt," argued Rutherford, who proposed a cap at the current level of bonded debt. "The borrowing stops, and a freeze on spending at 2011 levels. We must spend only as much money as the state brings in." And, of course, hope for an economic rebound.
Democrats, naturally, deride Rutherford as the proverbial Chicken Little proclaiming that the sky is falling, and ascribe to him ulterior motives -- like wanting to be governor. That is not an inaccurate supposition. Rutherford does not deny his interest in running for governor in 2014, but, in an explosion of candor, he asks a salient rhetorical question: "Who would want it?" The state's fiscal problems are cascading from bad to worse, and they may be insoluble, he said.
However, Rutherford made a sage prediction. "Pat Quinn will run again," he said. "Once you're governor, you don't give it up." State Attorney General Lisa Madigan, the daughter of Democratic Illinois House Speaker Mike Madigan, might instead run for the Illinois Supreme Court, eschewing a nasty 2014 primary against Quinn.
Let's read between the lines: In 3 years, absent a strong economic recovery, being Illinois' governor will be akin to having a deck chair on the Titanic after striking the iceberg. Every day will be fiscally and emotionally painful. If a Democrat is governor, budgets will be incessantly chopped and taxes continually hiked; if a Republican holds the seat, budgets will be axed and those gored will yelp. The governorship, rather than being a steppingstone to the U.S. Senate or the presidency, will be a dead end . . . with 4 years of misery and media abuse.
Just 35.5 percent of the respondents to a recent poll by Southern Illinois University "approved" of Quinn's job performance, and a meager 14.9 percent thought Illinois is "moving in the right direction."
Such a low estimation of Quinn is not unanticipated. The governor is a vacillator, a prevaricator and a political buffoon. Despite almost 40 years in politics, dating back to the 1970s when he was an organizer for Dan Walker, Quinn's inconsistency and mendacity is legendary. Consider the following:
Unions. The American Federation of State County and Municipal Employees and other public employee unions donated $575,000 to Quinn's 2010 gubernatorial campaign, and Quinn signed an executive order giving state employees an 11.2 percent pay hike over 5 years, but this year he canceled the 2 percent hike for 30,000 state workers to save $75 million and imposed 24 furlough days, saving another $18 million. Quinn glibly argued that the General Assembly did not fund the hikes, so the collective bargaining agreement was void. AFSCME sued, the case went to arbitration, and the hikes were upheld. Quinn has appealed. In 2014 unions and state workers will stick it to Quinn.
Gambling. Quinn vetoed the Chicago casino bill, claiming that it was a "willy-nilly" bill and vowing to "retain our culture." He was irked by the authorization of slot machines at racetracks and airports. Chicago would have had a casino with 4,000 slots. The revenue in other casinos is substantial: Harrah's ($246 million), Grand Victoria ($287 million), Hollywood ($181 million) and Empress ($143 million). A Chicago casino would have generated at least $400 million. Chicago politicians, scrambling to close their $500 million budget hole, will remember Quinn's intractability in 2014.
Reform. Quinn has hypocritically made state government the repository for a phalanx of defeated and discredited Democratic politicians. Losers in the 2010 election Dan Seals, Julie Hamos and Alexi Giannoulias have state jobs, and just recently Quinn named John Rice, the defeated 36th Ward alderman, as chief transportation officer for District 1 of the Illinois Department of Transportation, which is the area south of Springfield, at a salary of $120,000. Quinn lives in Galewood in the 36th Ward. In 2014 Quinn can be assured that new 36th Ward Alderman Nick Sposato, who is running for Democratic committeeman in 2012, will not be aiding the governor.
Consumer protection. Quinn has built his career on his alleged affinity for the consumers, but when it really mattered, he was a wuss. The "Smart Grid" utility rate increase, also embodied in the trailer bill, was vetoed by the governor and then overridden by the Democratic legislature. Nothing could be more illustrative of Quinn's impotency and irrelevancy.
Social services. One of Quinn's power bases has been the vast social service empire which leaches on state government. "Providers" get money for "services," and support Democrats. By vetoing $376 million from the 2011 budget, including $276 million for Medicaid vendors and hospitals, Quinn enraged his base.
Social issues. Quinn, who once was a death penalty advocate, signed the repeal of the death penalty and is now an opponent. In 2010 Quinn got $250,000 from the pro-choice Personal PAC and signed an order banning contracts with Catholic Charities because the agency refused to place foster and adoptive children with gays. The Catholic hierarchy is livid.
So what happens in 2014? Quinn, either consciously or unconsciously, is doing his utmost to irritate, annoy and estrange everybody. Quinn beat Dan Hynes in the 2010 primary by just 8,372 votes. In 2014, against Lisa Madigan or even Lieutenant Governor Sheila Simon, he would be a certain loser. But he may get a free pass, because no Democrat really wants to be governor.
As for the Republican field, Rutherford, of Pontiac, is the frontrunner, although he may opt to run for secretary of state if Jesse White retires. Last year Rutherford was elected treasurer by 161,049 votes. Bill Brady, a Bloomington state senator, beat state Senator Kirk Dillard of DuPage County, by 193 votes in the 2010 primary and lost to Quinn by 31,834 votes. Both will run in 2014. Dillard faces a tough 2012 primary against Chris Nybo, a Tea Party-backed state representative. If Nybo wins, Dillard's through. Jim Oberweis, a three-time statewide loser, is running for state senator in 2012, and he may run for governor again.
Illinois is a fiscal disaster, and whoever tries to cure it -- or, in Quinn's case, ignore it -- will be a political disaster.