And he can take the Democratic leadership in the General Assembly down with him.
After late-night votes in the middle of the Memorial Day weekend, and with almost no fanfare--all of which, I'm sure, was intentional--the Illinois General Assembly last night passed a pension-holiday bill that will in theory save the state $2 billion over the next two years by diverting that money from the five state employee pension funds. (Truth in advertising: I am a state employee, and my pension fund is one of the ones that will be shorted--again--although the plan in which I participate is, fortunately, immune to the predations of the Democrats in Springfield.)
However, the "savings" that will be realized in the short term are dwarfed by the longer-term debt that the measure will incur. Article XIII, Section 5 of the Illinois Constitution effectively defines pension benefits as a matter of contractual right, which cannot be either diminished or impaired. We're still paying for the last time the state decided to go on a "pension holiday," in the early 1980s, trying to make up for the contributions not made and the earnings they would have made had they been paid on time. In fact, the pension funding required under the 1995 restoration act is one of the reasons the state is $1.2 billion short for the next fiscal year: making up unpaid pension contributions now accounts for something like 15%-20% of the state's annual budget. The governor's own Office of Management and Budget observed,
in the FY 2006 budget book itself (PDF link, p. 13),
"Nothing represents the structural deficit more in Illinois than the severity of our unfunded pension liabilities--the highest in the country." (My emphasis.)
So of course the logical thing to do would be to create even more unpaid pension contributions that would have to be paid back at some future date. And the reason for doing it? So the legislature can adjourn on time for the first time since Blagorgeous took office in 2003, so neither the gov nor the lege will have to bite the bullet and raise taxes--even though that would be the fiscally responsible thing to do--and so he won't have to try to attract Republican votes to get his budget proposals passed, as he has every year thus far.
I'm sorry, but I don't consider any of those ends an appropriate justification for the means, which is balancing the state budget (if it can indeed be called that) on the backs of the people who work for it--and their children and grandchildren, who will be paying for this act of temporary insanity to the tune of around $26 billion over the next 40 years. To put that number in perspective, the budget that was enacted for the 2005 fiscal year that ends in a month's time was only $25.6 billion. In other words, the governor's ill-advised pension holiday is going to cost Illinois taxpayers the equivalent of this year's entire budget.
Moreover, if he signs the bill when it lands on his desk--which he has promised to do--it will only prove that Blagojevich is a liar and a cheat who cannot be trusted. As I pointed out last Friday, it was only this February, when the governor was giving his budget message to the General Assembly, that he likened the practice of pension "holidays" to using a credit card without paying the balance owed, and occasionally skipping payments--all the while continuing to use the card to buy stuff--for 35 years. As the governor himself noted:
For the average family, that's a surefire recipe for personal bankruptcy. But unfortunately, it's exactly what the State of Illinois has been doing, year in and year out.
In 1995, the legislature tried to solve the problem by passing legislation to strengthen pension funding. But it didn't work. [...]
In fact, it got a lot worse.
And what you're about to do, governor, will only make the problem worse yet. You may get by with it in the short term, but I guarantee you that 25 years from now, even more people will be cursing every time they hear your name mentioned.
OK, so I've ripped the gov and the lege new ones for behaving in a grossly irresponsible manner when it comes to the state finances. It's only right that I suggest some alternative means for solving the problem, right? Let's crunch some numbers.
The Office of Management and Budget estimates (see PDF link above, page 79) that Illinois will take in just about $9 billion in FY 2006 in personal income taxes. Given that Illinois' personal income tax rate is a flat 3 percent, that translates into roughly $300 billion in taxable income generated by Illinois citizens. Turning to page 80 of the budget book, OMB estimates the state will take in around $1.45 billion in corporate taxes this fiscal year, on a rate of 4.8 percent of federal taxable income. That translates, using the simplest possible assumption of a flat rate, into around $30.2 billion in corporate profits taxable by the state.
Let's see, if we upped the corporate tax rate two-tenths of a percent to an even five, that should bring in around $60 million extra, or about five percent of the estimated shortfall of $1.2 billion. Jacking up the personal income tax rate a half a percentage point would cover the entire projected FY06 deficit, plus about $300 million. For me personally, that would add up to about $140 more in state taxes each year. Any viable tax-increase plan would spread the increases more or less evenly over all the state's sources of tax income, so the bite on the individual taxpayer would probably be even less than half a percent. But I'd gladly take the full hit, if it meant we were going to finally do something substantive about the state's perennial budget "crises," instead of flailing madly about at the end of each legislative session in search of yet another stopgap measure that will likely only make the problem faced by next year's General Assembly even worse.
Rod Blagojevich rode into office promising to be the knight in shining armor who would do away with politics as usual and clean up the mess in Springfield. Instead, he's proven to be just another political hack, more interested in keeping his image shiny-bright than he is in doing the job he was elected to do, which was to take care of the citizens of Illinois in a fiscally responsible, ethical manner. He has not done that job. And therefore he must go: preferably falling to a better Democratic candidate in a primary fight, but if that's not an option, then he must lose to a fiscally responsible moderate Republican in the general election next November. I guarantee he won't be getting my vote.
Cross-posted from Musing's musings, now in its new home at Typepad. (If you've linked to or read it at the Blogspot address, you'll want to update your links and/or bookmarks.)