Anatomy of a failed lib­eral state

Schools, roads and safety get short­changed to pay for public em­ployee pen­sions

The Washington Times Weekly - - Commentary - By Stephen Moore

When I grew up in the north sub­urbs of Chicago in the 1960s and the 1970s, the state of Illi­nois was still a fi­nan­cial and in­dus­trial pow­er­house. The Land of Lin­coln had a low rate flat in­come tax, the prop­erty taxes were rea­son­able, the state ran bud­get sur­pluses, and Illi­nois was the home of such iconic mega-em­ploy­ers as Cater­pil­lar, Sears Roe­buck, and the Chicago Mer­can­tile Ex­change.

The public schools were pretty good back then and a ded­i­cated corps of teach­ers put kids first — they didn’t walk out on strike and they didn’t have the fat pen­sions they can get now when re­tir­ing at age 55.

Mayor Richard Da­ley (“the boss”) ruled Chicago for decades and it was “the city that works.” Yes, you had to pay off the unions to get things done, but this was a cost of do­ing busi­ness. Things did get done.

Fast for­ward to too­day and what a sad state of af­fairs. Last week the state had to em­bar­rass­ingly an­nounce that it doesn’t even have the money in the bank to pay lottery win­ners. Now the jack­pot win­ners are su­ing the state to get their right­ful money.

Per­haps the state will need a sec­ond lottery to raise money to pay off the win­ners from the first lottery.

Chicago is so broke that its bonds are junk sta­tus and Mayor Rahm Em­manuel had to go hat in hand last week to Spring­field for bailout money to pay the bills. Ac­cord­ing to For­rest Clay­pool, who is the new chief ex­ec­u­tive for the Chicago school sytem: “We are re­ally now at a point where fur­ther cuts would reach deep into the class­room.” Teach­ers have been laid off and ex­tracur­ric­u­lar ac­tiv­i­ties have been cut. Yes, the fi­nan­cial cri­sis is wreak­ing havoc, but to ask the state to kick in money is a laugh­able propo­si­tion — like Puerto Rico ask­ing Greece for a loan. Spring­field is plum out of money too.

To protest ad­di­tional ser­vice cuts, the Wall Street Jour­nal re­ports that par­ents are go­ing on hunger strikes. But it will take more than di­vine in­ter­ven­tion for the cash in­flow to meet ex­pen­di­tures.

Why should res­i­dents of other states care about this fi­nan­cial melt­down in Chicago and Spring­field Illi­nois. The an­swer is that Chicago is the ca­nary in the coal mine when it comes to the gov­ern­ment pen­sion cri­sis. Pen­sions to re­tired teach­ers and state em­ploy­ees are bleed­ing the state dry. Since 2006, an­nual pen­sion pay­ments have grown ten­fold, from $60 mil­lion to over $650 mil­lion. A state bud­get of­fice spokesman tells me that “nearly one of three state tax dol­lars now goes to pay­ing pen­sions for re­tired mu­nic­i­pal and state em­ploy­ees.”

Mean­while tax in­creases on the rich un­der the pre­vi­ous gover­nor failed to raise much money, but did ac­cel­er­ate an ex­o­dus of money and tal­ent out of the state. A new Illi­nois Pol­icy In­sti­tute study based on latest IRS data finds a record num­ber of peo­ple have been flee­ing Cook County. “The in­come of the peo­ple who left Cook County in 2012 was $2 bil­lion more than the in­come of the peo­ple who moved into Cook County.... The 2011 and 2012 out-mi­gra­tion will cost the county nearly $30 bil­lion in tax­able in­come over the next decade.”

It couldn’t get much worse, right? Wrong. The state has been op­er­at­ing with­out a bud­get new for more than two months. Ven­dors are rou­tinely go­ing two or three months with­out get­ting paid be­cause the vault is empty. The Democrats who rule the state leg­is­la­ture and serve their mas­ters, the Illi­nois teach­ers unions, passed a bud­get this sum­mer that is $5 bil­lion in the red out of a $34 bil­lion bud­get flout­ing the state’s bal­anced bud­get re­quire­ment.

Repub­li­can Gov. Bruce Rauner, who in­her­ited this calamity, is the state’s last best hope. He has ve­toed the state bud­get and re­jected the unions’ de­mands for more taxes. Prop­erty and sales taxes (which can reach 10 per­cent at the cash register in Chicago’s Cook County) are al­ready nearly the high­est in the na­tion.

The rich that the unions want to tax have been leav­ing for Florida and Ari­zona and Texas. Mr. Rauner ar­gues that Illi­nois al­ready has one of the five worst busi­ness en­vi­ron­ments in the na­tion.

Worst of all, the Illi­nois Supreme Court ruled that pen­sions can’t be touched be­cause they are con­trac­tual obli­ga­tions. So fund­ing for schools, roads, and public safety get short­changed so that public em­ploy­ees can keep cash­ing in on ben­e­fits far more gen­er­ous than what pri­vate sec­tor work­ers/taxpayers re­ceive. This is jus­tice? No won­der res­i­dents are go­ing on hunger strikes.

It’s a bat­tle Royale that pits the unions bosses against the taxpayers. And it’s a fight that Mr. Rauner can’t lose. If he does, the ex­o­dus from the state will look like the floods of Hun­gar­ian refugees try­ing to get to western Europe.

The shame of all this is that Chicago is a world class city. It is the cap­i­tal of the Mid­west and by far the most de­sir­able city in the re­gion to live in. It should be and could be Amer­ica’s Hong Kong if it weren’t for the la­bor agree­ments that are shred­ding ba­sic gov­ern­ment ser­vices and mak­ing the city un­af­ford­able.

What is scary is that the fis­cal virus that has in­ca­pac­i­tated this once great city and state may soon spread to a city or town near you.

Amaz­ingly na­tional Democrats are say­ing with a straight face that to help Amer­i­can work­ers and make the coun­try great again we need more pow­er­ful unions. Stephen Moore is a se­nior fel­low at the Her­itage Foun­da­tion and a Fox News con­trib­u­tor.


A job seeker fills out an ap­pli­ca­tion dur­ing a job fair in Chicago. The city is so broke that its bonds are junk sta­tus and Mayor Rahm Em­manuel had to go hat in hand last week to Spring­field for bailout money to pay the bills.

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