Illinois' Democratic Party is amazing in its ability to give both great hope and terror in the same moment. As one of the few states to see large Dem gains since the beginning of the Bush Era, Illinois has been a consistent ray of hope. Gov. Blagojevich has also taken a pretty bold position on healthcare, creating new programs that (theoretically) cover millions of people through the state. But the corruption, infighting, and poor budget management of the Dems is cause for serious alarm. IL GOP's sadly smart decision to select moderate Judy Barr Topinka as their candidate has thrown new wrinkles into the situation as well. Recent developments in this race leave me scratching my head -- but I'll elaborate over the fold.
To be blunt, Illinois' budget is sinking. There is just not enough money to cover vital programs, let alone the Governor's ambitious new initiatives. Illinois residents have seen this manifested in a continuous shell game, where vital programs come perilously close to being canceled before finally being bailed out by some tricky financial compromise. One particularly bizarre example of this was the Chicago Transit Authority (which runs all the city's trains and buses). Despite record revenue last year, the CTA came perilously close to losing its transit funding and instituting massive cuts in service.
Now you'd think that a state in which all branches of
government were controlled by Democrats could balance the budget fairly easily, right? A modest tax hike on the top 1%, etc... But Blago has Presidential ambitions, and he made an early "no new taxes" promise. As a result, the budget has largely been balanced in unsustainable ways, like tapping into the state's pension fund. Using those funds has proven politically controversial, however, and Blago seems to have backed off. Lately, the Governor has hit on a new idea to generate revenue: massive privatization.
The Illinois Democratic party is suddenly enamored in handing off public resources to primary investors. Perhaps inspired by Mayor Daley's 2004 $1.8 million "lease" of the Chicago Skyway (I put it in quotes because a 99 year lease sounds a lot like a sale to me), the state is now considering selling off the lottery, the tollway system, and Midway Airport.
Meanwhile, ComEd, the state's electric company, recently cleared regulatory hurdles that would allow it to adopt Enron-style energy trading. There are so many things wrong with this proposal, not least the terrible experience of California and New York with such energy auctions. Amazingly, everyone says this move will raise consumer prices, even ComEd itself. The only debate is around how high they'll go. ComEd estimates rates will rise 25%, while the Illinois Commerce Commission (the agency that approved the change) says they'll "only" go up by 33%. However, that's mostly ignoring the disruption of Gulf Oil caused by hurricanes, which are supposed to be more numerous this year than last. Factoring in storm-related price fluctuation, even conservative analysts say rates could go up by 50% at least. The real impacts of this change are pretty significant:
Both the governor and Mr. Jones will have to decide whether they can withstand the political fallout if voters blame them for allowing a rate hike likely to raise the average consumer's bill about $16 a month, to around $76. ComEd has agreed to phase in the increase over three years.
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What's bad news for households and small businesses, which would pay higher rates, is good news for Exelon, which owns the power plants that supply ComEd with electricity. The Illinois rate hike would boost Chicago-based Exelon's profits 22% to 32% in 2007, as the profit margin on power produced in its plants expands to an estimated 134% from 108%.
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Exelon executives say they think the markup in Illinois will be closer to 40%. The average bill under that scenario would rise $10 to $70 per month.
The Governor, to his credit, has opposed the plan. But his position is undercut by the fact that he's willingly lent his support to tons of other deregulation/privatization schemes. Amazingly, proving what a Bizarro-world this campaign has tripped into, the only person that's really framed a good critique of privatization is ... the Republican. This is Judy Baar-Topinka on privatization:
First, selling assets to pay for ongoing programs is just wrong. Second, selling an asset to a private vendor will lead to higher tolls.
Though it wasn't quoted in this press release, Chicago Public Radio also ran an extended statement in which she went on to say the privatization of the toll road would cause huge price increases, poor maintenance, and probable corruption.
Now I'm under no illusions here. Topinka is only mad about this because it will raise prices on the suburban communities she needs to win. But it's still an incredible statement coming from a Republican. Her critique sounds remarkably like those coming from liberal anti-privatization activists for years. Indeed, you could make the same argument about ComEd, Midway, and the lottery. The fact is that privatization may raise money for the state, but in the long term it's bad for consumers. It's truly sad that Republican Topinka gets this when our Democratic governor doesn't.
I strongly believe that IL Dems have to get rid of this idea of auctioning off the government. We have to face the fact that we're either going to have to cut expenses or resort to the only reliable source of revenue government has: tax increases. If we don't, I'm confident that Topinka is in a position to use this issue to her massive advantage (especially given the corruption issues) -- and return the state to its Ryan-era suburb fetish.