Tale of two neighboring states: A failing Illinois and a Wisconsin Success story
January 23, 2012
I suspect that the Chicago Tribune’s article came first in the lineup on Thursday, January 19, Topinka: Illinois’ Unpaid Bill Crisis Just Keeps Getting Worse, and that it served as the spring board for the following day’s opinion piece on January 20 in The Wall Street Journal, The Greece Next Door, which contrasts Illinois’s credit rating downgrade to positive happening in Wisconsin. http://chicago.cbslocal.com/2012/01/19/topinka-illinois-unpaid-bill-crisis-just-keeps-getting-worse http://online.wsj.com/article/SB10001424052970204555904577164944279702590.html?mod=djemBestOfTheWeb_h
Both articles instead of fostering a sense of citizen pride for their state, should serve as a siren of despair and a wake up call Illinoisans.
As related by Illinois State Comptroller, Judy Topinka, on a WBBM fellow report by Regine Schlesinger on January 19:
“Illinois keeps falling farther behind on its debt. Officially the state has a backlog of more than $4.25 billion in unpaid bills. But Illinois State Comptroller Judy Topinka says when one factors in other bills, the figure is closer to around $8.5 billion. Those other outstanding bills include tax refunds, employee health insurance, and bills that have not yet reached her desk.
Topinka says this is extremely disappointing, since a year ago, the state sharply increased income taxes. Said Topinka, ’After the largest tax hike in our history, the state continues to be in this precarious fiscal position with persistent payment delays, and frankly, the situation is unlikely to significantly improve in the near term.’
Some state officials say the solution is more borrowing to pay the bills, but Topinka says the solution is to cut spending.” http://chicago.cbslocal.com/2012/01/19/topinka-illinois-unpaid-bill-crisis-just-keeps-getting-worse
The The Wall Street Journal commentary had this to say about the dismal fiscal management of IL, before continuing on with a glowing picture of Illinois’s north of the border state, Wisconsin, contributing its improved financial status to Governor Walker’s now maligned pension reforms:
“Run up spending and debt, raise taxes in the naming of balancing the budget, but then watch as deficits rise and your credit-rating falls anyway. That’s been the sad pattern in Europe, and now it’s hitting that mecca of tax-and-spend government known as Illinois.
The WSJ article goes on to inform readers about Moody’s downgrade of Illinois’s state debt to A2 to A1 — the lowest among all 50 states — despite the recent one year anniversary to raise individual income taxes by 67% and the corporate tax rate by 46% by Governor Quinn and fellow Democrats.
Given that Illinois raised $7 billion in extra revenue through its 2011 income tax rate increases, intended, by the way, to put the state back on sound fiscal footing and to improve its credit rating, The Wall Street Journal has every right to question why Democrat state legislator during 2011 made no effort to either curb spending or tackle meaningful Medicaid and Pension reforms so desperately needed, facts upon which Moody lowered Illinois’s credit rating.
Recently Governor Quinn branded Republican lawmakers as unrealistic when they suggested that the 2011 income tax increases should be repealed as failed policy.
According to the Illinois Policy Policy Institute, John Tillman, CEO:
“The tax hike flunked. It failed to put Illinois on sound fiscal footing, it failed at restoring confidence in government’s ability to meet serious challenges head on. It failed to strengthen the state’s economy. It failed to create opportunity and prosperity. it failed families and the businesses that want to be a part of making Illinois great again.” http://illinoispolicy.org/news/article.asp?ArticleSource=4614
Even with the additional $7 billion in revenue, which seemed to disappear down a rat hole or into thin air, spending grew in Illinois, bills went unpaid, pension reform stalled, Illinois’s unemployment problem worsened, and the tax hike made Illinois less competitive and forced businesses to leave the state.
To add insult upon insult, recently Governor Quinn tendered a bond sale of $800 million of new 10-hear general obligation bonds which is to be used to pay for investment in schools, roads, mass transit, and other key capital projects across the state.
As reported in the already named WSJ article, because of Moody’s downgrade of Illinois state debt from A2 from A1, “The state’s cost of borrowing for $800 million of new 10-year general obligation rose to 3.1% — which is 110 basis points higher than the 2% on top-rated 10-year bonds of more financially states. This translates into millions of dollars of extra cost for already cash-strapped Illinois.
To one Illinois lawmaker, who just happens to be my own IL House representative in District 58, Democrat Karen May, she is not in the least concerned by recent reports in the press about Illinois’s credit rating and recent $800 bond sales.
Rep. Karen May had the following to say to her constituents in a Internet newsletter on Friday, January 20:
“You may have seen recent reports in the press about Illinois’ credit rating and recent bond sales. Some press reports didn’t tell the whole story, and the state’s bond sale actually went quite well. Certainly, our credit rating is of concern, however our recent bond sale was well received by investors and demand was high. At 3.9 percent, Illinois’ bonds sold for the lowest interest rate since at least 1976, according to the Governor’s budget office. This is good news, despite dire predictions.”
Karen May is living in a world of fantasy, as are most Democrat lawmakers Illinoisans have sent to Springfield.
(Note: As Rep. May is not running for another term in the House this November, there is an open House seat in District 58. I have endorsed Dr. Mark Neerhof as my candidate of choice for May’s House seat. As a practicing obstetrician, having served patients in the Chicagoland area for more than 20 years, Dr. Neerhof qualifies as a businessman and would bring his knowledge to the House to fix the broken Medicaid system, along with his fervent desire to cut spending and deal with pension reform.).
Although credit-rating agencies have explicitly warned against borrowing to pay for operations, Illinois doesn’t get the message. It just keeps on borrowing.
As noted by Illinois State Comptroller Judy Topinka:
“Moody’s made it clear that it would view further borrowing to pay current obligations as a negative act that would cause another downgrade. The only way out of this mess is to keep cutting spending, provide for a business climate and, for once let growth outpace spending.” http://articles.chicagotribune.com/2012-01-11/news/ct-edit-borrowing-20120111_1_pension-costs-pension-reform-comptroller-judy-baar-topinka
A little more than half way through The Wall Street Journal editorial of January 20, revelations are made to reveal the reasoning behind Illinois as The Greece Next Door to Wisconsin. Wisconsin’s Governor Walker is credited for his ”plan to require government workers to pay a larger share of their health-plan costs, and to shore up the pension system by trimming future retirement liabilities”
Despite the union-financed attempt to remove Walker from office, unlike Moody’s warnings to Illinois, “Moody’s has praised Mr. Walker’s budget as “credit positive for Wisconsin,” adding that the money-sving reforms ring “the state’s finances closer to a structural budgetary balance.”
As a result:
1. Wisconsin has jumped from 41st to 17th in the ranking of state’s business climate; Illinois dropped to 48th from 45th.
2. Governor Walker balance the budget without new taxes.
Wisconsin voters better wise up to the positive happening in Wisconsin before they throw out Governor Walker and see their state return to the not so Good Old Days!
Research led me to this excellent article published in the City Journal by Christine Schneider, Winter 2012, It’s Working in Walker’s Wisconsin (The governor’s controversial labor reforms are already saving taxpapers million. http://www.city-journal.org/printable.php?id=7771
Illinois voters better keep an eye on the positive results in neighboring Wisconsin where serious pension reform took place and
Governor Quinn is at least acknowledging that Illinois’s gaping pension obligations is making it impossible to fund other obligation such as education, health care and public safety, but will Democrats once again be cowed by powerful unions from whence comes votes and political campaign contribution?