IL

In what may be an unintentional, but nonetheless devastating critique of the blue model for state governance, Natasha Korecki of Politico discusses the slow motion train wreck that is Illinois. She writes:

Illinois has compiled $14.6 billion in unpaid bills. It’s running a deficit of $6 billion, and its pension liability has soared to $130 billion [some reports have this number much, much higher].

That’s not the worst of it. The state’s nearly two-year failure to pass a budget has sent its bond ratings careening toward junk level, downgraded a staggering eight notches below most other states.

With university enrollments plummeting, large-scale social service agencies shuttering and the Chicago Public Schools forced to borrow just to stay open through the end of this school year, Illinois is beginning to devolve into something like a banana republic — and it’s about to have the most expensive election the state has ever seen.

Exactly how does a state recover from a $130 billion pension liability? A liability that occurred because criminally (IMO) irresponsible state politicians acceded to the demands of public sector unions (who traded unrealistic pension payouts for votes). And after acceding to those demands, those same politicians refused to fund their pension liability, using the money for projects (giveaways?) that would garner additional votes.

CBS Money Watch is reporting that bankruptcy is being considered:

A financial crunch is spiraling into a serious problem for Illinois lawmakers, prompting some observers to wonder if the state might make history by becoming the first to go bankrupt. At the moment, it's impossible for a state to file for bankruptcy protection, which is only afforded to counties and municipalities like Detroit.

Chapter 9 bankruptcy protection could be extended to states if Congress took up the issue, although Stanford Law School professor Michael McConnell noted in an article last year that he believed the precedents are iffy for extending the option to states. Nevertheless, Illinois is in a serious financial pickle, which is why radical options such as bankruptcy are being floated as potential solutions.

I suspect that last year IL lawmakers were comfortable in their assumption that Clinton and the Dems would be in charge of Washington when crunch time came. A bailout or special legislation allowing the state to avoid it obligations (to vendors, to bond holders, and to its citizens) were likely. But the current administration and congress make that highly unlikely. The proverbial can has reacted the end of the road.

On top of their pension problem, Illinois hasn't passed a state budget in two years—it's GOP governor at loggerheads with the Democratic State legislature. The state ranked worst among all states in the tax burden it places on its citizens with an effective rate of 14.76 percent. To put this is real numbers, IL removes $8,011 of spendable income from the median household income (over and above the federal tax burden).

I have to wonder what the most progressive members of the State legislature might recommend to solve this problem, particularly as some of them lobby for universal healthcare at a statewide level. Would it be yet another tax increase on "the rich.?" Those numbers don't add up, but in a blue state, that "solution" does have an appeal.

There's only one problem—the "rich"—that means people earning upward of $77,000 per year—are leaving the state. This wealth flight is supported by copious government data and is occurring not just in IL but in other blue states with above average tax burdens.

Politicians think that voting at the polls is the most important indicator of public acceptance of their policies. I disagree. Voting with their feet seems to be the best and most effective way for taxpayers to avoid irresponsible governance and ineffective leadership.