Wanna read something scary?

Posted by Nolan Miller on Jul 9, 2010

Filed Under (Uncategorized)

The New York Times ran a long piece last week about Illinois’ budget problems.  We are dangerously close to passing California as the biggest fiscal mess in the country, if we haven’t already.  Virtually everything is scary, but I found this to be most disturbing:

The state’s income tax burden is not terribly high — Illinois ranks in the bottom half of states — and its government is not terribly large. (The budgets in New York and California, per capita, are much larger).

The Tax Foundation ranks Illinois’ total state and local tax burden (2008) as 30th highest out of the 50 states and Washington DC.  Federal government data (2009) ranks Illinois 22nd highest in terms of state and local spending per capita, 12th highest in terms of debt per capita, and 17th in terms of GDP per capita.   Relative to other states, we have a very large unfunded pension liability, and as Jeff has pointed out, it is probably even larger than the official numbers show.  And, there are reasons to think that the unfunded pension liability is a symptom of the problem rather than its cause.  Unemployment is high here, but arguably our problems predated the current recession.

Which brings us to the big question.  How did we get into the state we’re in?  If we had an unsually high, or low tax burden, then maybe that would be the cause, and moving taxes in the other direction would help.  If we had an unusually large government, maybe trimming the size of government would be the solution.  But, none of these indicators point to why our state is doing so much worse than others.  The Times article suggests the following:

More broadly, Illinois is caught between blue state convictions about social safety nets and a red state aversion to taxes. For years, the Democratic-controlled legislature has passed budgets that are, in effect, in deficit. Lawmakers routinely skip around the state’s balanced-budget law, with few consequences. (Republicans are near monolithic in voting against any tax increases and borrowings. When one broke ranks to try to keep the pension solvent, he was stripped of a committee position, reducing his pay and pension.)