Illinois Republicans caved this week to a package of tax hikes intended to solve the state’s budget woes. The fiasco offers an instructive lesson to Nevada and other states on the dangers of policies intended to curry favor with public-employee unions at the expense of taxpayers.
Illinois hasn’t had a budget in two years and has $250 billion in pension debt and billions more in outstanding obligations. In 2016, the state lost more than 37,000 residents, its third straight year leading the nation in population decline. Credit rating agencies have threatened to downgrade state bonds to junk status.
Gov. Bruce Rauner, a Republican, won election as a fiscally responsible reformer who favored creating an attractive business climate and opposed tax hikes. But he has been stymied by tax-and-spend Democratic lawmakers and powerful government unions that have long dominated Illinois’ politics.
On Tuesday, the governor vetoed three spending bills that imposed massive permanent tax increases — exceeding 30 percent — on individuals and corporations. Gov. Rauner wants any tax increases to be temporary and to freeze property levies, conditions rejected by liberal legislators.
Within hours, Democrats in the state Senate, with the help of a handful or Republicans, overrode the governor’s vetoes. The lower house followed suit on Thursday.
Many news accounts describe the situation as the result of a political conflict between the state’s Republican governor and the legislature’s Democratic leadership. In fact, the financial meltdown stems from decades of progressive fiscal policies and unrestrained spending that have saddled Illinois with massive public pension bills while quashing entrepreneurialism and economic growth.
The budget “deal” does nothing to significantly alter this current trajectory, although it does include some spending reductions. A Wednesday Wall Street Journal story on the matter nicely summed up this house of cards: “Part of the package would allow Illinois to borrow billions of dollars through the sale of state bonds. Those funds would go toward paying down the state’s $14.6 billion in unpaid bills.”
This is like a spendthrift family careening toward bankruptcy taking out one more high-interest credit card to pay down their maxed-out plastic.
“Budgets in Illinois won’t be balanced or stay balanced,” the governor insisted, “unless our economy grows faster that our government spending. We have been ignoring that truth for 35 years.”
All this is worth remembering when Nevada’s legislative Democrats turn a blind eye to the state’s growing public-pension liabilities, as they do every legislative session. The Illinois experience should be at the forefront of the debate when Silver State progressives advocate that state workers be allowed to collectively bargain. It should be front and center when Democrats in Carson City attempt to roll back modest reforms designed to curb government union excesses during contract negotiations.
The dysfunctional Land of Lincoln stands as a monument to fiscal irresponsibility. The question is, why do so many liberal policymakers act as if there is no limit to how much private-sector wealth the public sector may consume without generating these types of adverse consequences?