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June 22, 2017

Illinois’ Fiscal Dumpster Fire Is a Lesson

Gov. Bruce Rauner called it a “banana republic,” and then proceeded to capitulate to Democrat demands.

If you recently bought a lottery ticket in Illinois, the odds are stacked against you — way against you. The Land of Lincoln has gotten itself into such a financial pickle that it may not even be able to pay out lotto winnings, meaning the chance of striking it big would be, literally, zero.

Years of fiscal mismanagement have finally caught up with Illinois, and the state is now facing $130 billion in unfunded public pension liabilities and nearly $15 billion more in debt. And because of certain court-ordered payments the state is required to make, the Illinois comptroller recently sounded the alarm that mandated bills will equal 100% of the state’s monthly revenue. In case the obvious needs emphasis, this is a problem.

It’s so bad even Republican Governor Bruce Rauner didn’t mince words. “We’re like a banana republic,” he said recently. “We can’t manage our money.”

The crisis should hardly be a surprise. As George Will noted last year, despite the state constitution’s requirement of a balanced budget, Illinois hasn’t had such a budget in 25 years.

Additionally, as the Illinois Policy Institute (IPI) notes, pension reform has been staring state lawmakers in the face for 20 years. But objects at rest tend to remain at rest, and nothing brings out the inertia in government-union-backed elected officials like suggestions of public pension reform. Hence, the state’s staggering pension debt today.

Gov. Rauner campaigned on lowering the state’s income tax. Butting heads with the Democrat-controlled legislature, however, has led to nearly three years of budget gridlock. Illinois has not had a full-state budget since Rauner’s election in 2014, instead passing stop-gap measures — just like Big Brother at the federal level.

As Investor’s Business Daily notes, “Not surprisingly, the Democrats would like higher taxes to fill the budget holes. … At the heart of it all is the so-called Blue State model of governance of the Democratic Party. It views government as an ever-expanding and always-available ATM to meet all needs, social and otherwise, with a ready supply of taxpayer cash.”

Yet as Margaret Thatcher noted with her typical wit, governments that apply the socialist approach of viewing taxpayers’ money as government’s money “traditionally do make a financial mess. They always run out of other people’s money. It’s quite a characteristic of them.”

Unfortunately, it looks like Illinois hasn’t fully learned this lesson. Instead of continuing to hold fast to the principles he’s pledged allegiance to for three years, just yesterday, Rauner caved, offering to hike the state income tax by 32%, expand the sales tax, and add a new tax on cable and satellite TV.

The Wall Street Journal pulled no punches in a scathing editorial, calling Rauner’s move a “capitulation” and “a political defeat by any definition.”

Even worse, as the Journal notes, Rauner’s offer doesn’t include critical fiscal reforms and doesn’t fix the pension crisis.

What will the state get for the capitulation? According to IPI, not much. Even with the tax hike, the state will likely be back in deficit by 2020. The Journal echoes this gloom, noting that while Rauner “may come out the political loser … the citizens of Illinois will suffer the most.” For that, it must be noted the real blame lies with the Chicago Democrats who really run the state. Rauner simply found the Chicago Machine to be too powerful.

While some are raising talks of a federal bailout, IPI’s Ted Dabrowski rightly warns this is a terrible idea: “A federal intervention on that scale would permanently damage healthy competition among states for people, jobs and ideas.”

Indeed, if lawmakers can run a state into the ground and then go to Uncle Sam for help, quickly lining up behind Illinois would be states like New Jersey, Connecticut and Massachusetts. (You’ll notice they’re all Democrat states.) Then there’s Puerto Rico, the Democrat-heavy island that aims to become the 51st state in hopes of receiving such a bailout. But make no mistake, taxpayers in “flyover country” have little interest in rescuing these states from their own stupidity.

That’s why Illinois’ lesson should be a lesson for all states. Decades of recklessly overspending taxpayer dollars and overpromising cushy pension benefits for government workers are bound to catch up with you.

That’s one set of Mega Millions numbers you can count on.

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