Posted by: elambend | November 12, 2009

Illinois Makes It To Second Place

Mish points us to a CNN Money article highlighting the many states in serious financial trouble.  The current state of residency for the family, Illinois, makes it to #2; just below California!States in Peril

 

What is particularly troubling about Illinois is the size of the its budget gap, 47.3%.  If you notice, most of the states in the ‘top’ 10 have had revenue drops over 10% with many as high as 15%.  Yet, Illinois, with a revenue drop of 10.9% the second lowest revenue fall on the list has the second highest budget gap of the group.  What is going to happen when the trend continues and revenues continue to fall in Illinois?

What this really indicates is that Illinois has a structural budget problem, based upon overly generous pension programs, public worker contracts and of course, this being Illinois, patronage.

Unfortunately, the suggested proposals for the problem are the same that California tried and failed at.  Governor Quinn has proposed creating new taxes at the higher end of the tax bracket much like California.  However, California has found that this kind of extremely progressive taxation leaves the state subject to the good fortunes of just a few and is extremely vulnerable to bad years and money flight. He has also proposed raising the corporate tax.  When he first made these proposals in the spring the political pressure was against them.  However, he has said that he wants to readdress them.

 

No one has made a serious stab at the real problem in the state, overspending.  Until the costs of the system due to over-promised benefits is addressed.  In fact, the Governor wants to spend MORE money, proposing to borrow $900 Million to fund tuition grants.  This is on top of $2 billion the state already borrowed to make it through this fiscal year.

I’m not sure how this addressed the states budget problem.

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