Yesterday, I wrote a piece called Overheard at the “Celebrating Scott Walker” Rally: The Illinois Jobs Wasteland.I pointed out that, contrary to the GOP talking points, Illinois is not as bad off as they’d like us to believe. At least one rightie was delighted by my post!
He sent links to a couple of posts from the Echo Chamber that make reference to the recent downgrade of Illinois’ debt and the causes for that downgrade. Matt himself wrote about the reasons for Illinois’ ugly economic circumstance.
The Illinois budgetary record is not pretty. Heading into 2011, Illinois faced a budget deficit of over $13 billion and passed a massive tax increase both to personal income and corporate income tax rates. They’re still broke. With a pension system in shambles, Illinois also borrowed massive amounts of money to make this year’s pension payment.
In September, Illinois laid off 1,900 public employees and closed seven state facilities. Also, much to the chagrin of Wisconsinites who drive to or through Illinois, toll rates in the state have increased on average by 88%.
Illinois, like California, was a victim of the catastrophic CDO disaster on Wall Street. When the banksters crashed the economy, they took down quite a few public pension funds with them.
And yes, tolls (taxes) on the roads went up. Oh well. Illinois was acting responsibly to attempt to increase revenue.
But the public employee numbers are startling (all data comes from the FRED database at the St. Louis Federal Reserve)
Illinois laid off 1,900 public sector workers while in Wisconsin, Walker relied on the so-called “Budget Repair Bill” to do the dirty work for him so he could keep his hands clean.
In September of 2011, Illinois had 856,600 public employees. 1,900 workers represents a mere 0.2% of the total Illinois public workforce.
On the other hand, the so-called “Budget Repair Bill” drove 14,000 Wisconsin public sector workers to quit or retire representing 3% of the workforce.
The impact of the so-called “Budget Repair Bill” was to drive workers out of the workforce and into early retirement was brutal to Wisconsin’s economy.
The effect is the same, it drives workers out of the workforce and drives demand down. This, in part, explains why the Coincident Economic Index is on the decline for Wisconsin while the Index is on the rise for Illinois.
As to the reasons for Moody’s downgrade, contrary to the nonsense in the wingnut press and op-ed pages,
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 rise in taxes implemented in Illinois represented one of the good things the state did to manage their problems. The problems stem almost exclusively from the pension underfunding facing Illinois. Here’s what Moody’s actually wrote.
SUMMARY RATING RATIONALE
The downgrade of the state’s long-term debt follows a legislative session in which the state took no steps to implement lasting solutions to its severe pension under-funding or to its chronic bill payment delays. Failure to address these challenges undermines near- to intermediate-term prospects for fiscal recovery. It remains to be seen whether the state has the political willingness to impose durable policies leading to fiscal strength, though in the recent past it has reached consensus on difficult decisions, such as temporary income tax increases enacted last year that stabilized state finances and reduced the state’s need for non-recurring budgetary measures. Illinois retains the sovereign revenue and spending powers common to all U.S. state governments. These powers, along with Illinois’ legal provisions giving G.O. debt service priority over other state spending, support the move to a stable outlook.
The state, like Washington DC, is struggling with a crippled political process. It’s not about increased revenue through taxes, it’s about a broken political system. Wisconsinites are well on the way to repairing our political system by recalling Scott Walker and the other austerity vultures which should help turn our economy around.