Jane the Actuary General Interest

The State of the State is Not So Great (An Illinois Rant)

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https://commons.wikimedia.org/wiki/File:U-Haul_moving_van_Elm_Street_Montpelier_VT_August_2017.jpg; Artaxerxes [CC BY-SA 4.0 (https://creativecommons.org/licenses/by-sa/4.0)]
Yes, Illinois Gov. JB Pritzker gave his “state of the state” speech today, and, a year into his term, it’s no surprise that he’s celebrating — and it’s no surprise that I’m skeptical.

What does he say?  Let’s take a look.

Today the Illinois economy supports 6.2 million jobs. This is the most jobs on record for our state, and we now have the lowest unemployment rate in history. . . . Over the past year, Illinois has reduced its unemployment rate more than ALL of the top twenty most populated states in the nation — and more than our Midwestern peers.

Note that phrasing — “reduced . . . more.”  Illinois’s current unemployment rate is 3.7%.  That’s above-average, in a 5-way tie for 31st.  Michigan’s is higher, yes, at 3.9, and Ohio at 4.2.  But Wisconsin is at 3.4, Missouri 3.3, Indiana 3.2, and Iowa 2.7.

237 Illinois businesses from all over the state made Inc Magazine’s List of Fastest Growing Businesses in the Nation.

That’s not all that spectacular in a ranking of 5000 companies; Illinois’s population works out to 3.9% of the total population of the US, and we have 4.7% of the fastest-growing businesses.  Yay, I guess?

Illinois is the second-largest producer of computer science degrees in the nation, accounting for nearly 10 percent of all computer science degrees awarded in the entire United States.

Yes, the University of Illinois is highly ranked in this field, and has actively recruited international (Chinese) students to pay full-price tuition.

Pritzker trumpets the “balanced” budget (however precarious that balance is, relying as it does on one time gambling and pot license fees) and the infrastructure bill (laden with the inevitable pork for Democratic legislators to “give” to their constituents).

He touts apprenticeships — though not as a general program but insofar as public works projects will be required to include, ahem, “diverse employees” (that is, code for underrepresented minorities).

He boasts that pot legalization will “result in 63,000 new jobs” (ugh, again – if these are new jobs rather than newly-legal jobs, then does that mean the state is banking on more people taking up using pot, rather than merely coming out from the black market?), and new “tax revenue from the residents of Wisconsin, Missouri, Iowa and Indiana” (more ugh – it’s in bad taste to plan on enticing out-of-staters to come here to buy produces illegal in their home state).

Pritzker praises the restoration of driver’s licenses for those with unpaid parking tickets and fines, which is worthy enough.  He makes the same claim of having gotten a start on fixing pensions based on two small changes which promise “free money” rather than tough sacrifices.

He praises himself for more changes:

We raised the minimum wage, advanced equal pay for women and minorities, provided millions of Illinoisans relief from high interest on consumer debt, and expanded health care to tens of thousands more people across the state.

Of these, it remains to be seen how rural areas will cope with a high minimum wage. I don’t recall offhand what Pritzker did in furtherance of equal pay (maybe one of those laws that prospective employers can’t ask for past salary history?), I am guessing that the interest relief was an under-the-radar interest rate cap, and I’m puzzled by the healthcare expansion since Medicaid was expanded some years ago with Obamacare.

Working with Senator Andy Manar, we capped out-of-pocket insulin costs at $100 for a 30-day supply so that no one in Illinois has to decide between buying food and paying for the medicine they need to stay alive.

Er, make that, “no one with a diagnosis of diabetes” . . .

We expanded insurance coverage for mammograms and reproductive health.

This is Pritzker’s only reference to his abortion expansion law, in which insurance companies are required to cover abortion.  “Reproductive health,” my a**.  The mammograms bit is, from memory, a matter of requring that insurance companies cover follow-up testing for mammograms without cost-sharing.  Which is fine enough but every insurance coverage mandate boosts premiums, and it’s really not right for legislators to pat themselves on the back as if they’ve made a real difference when they’re just shifting costs in a politically popular way for certain favored ailments.

We stopped bad-mouthing the state and started passing laws that make Illinois more attractive for businesses and jobs. Working across the aisle, we brought tax relief for 300,000 small businesses through the phase out of the corporate franchise tax. And we laid the groundwork for new high-paying tech jobs by opening new business incubators, by incentivizing the building of new data centers, and by investing $100 million in a University of Illinois and University of Chicago partnership that will make Illinois the quantum computing capital of the world.

This is what bugs me:  Pritzker repeatedly makes the claim that what was wrong with Illinois in the past, and what prevented businesses from investing here, was that we were “bad-mouthing the state.”   And then it’s back to the same-old same-old: special tax treatment (“phase out of the corporate franchise tax” . . . “incentivizing the building of new data centers”) and more government spending (“clean energy legislation” which, to my knowledge, consists of some combination of state subsidies and mandates for solar and wind generation, and $100 million based on Pritzker’s say-so).

But at the same time, it is commendable that he spent a significant amount of time addressing corruption, in light of the guilty plea yesterday of former state Senator Martin Sandoval.

And now we have to work together to confront a scourge that has been plaguing our political system for far too long. We must root out the purveyors of greed and corruption — in both parties — whose presence infects the bloodstream of government. It’s no longer enough to sit idle while under-the-table deals, extortion, or bribery persist. Protecting that culture or tolerating it is no longer acceptable. We must take urgent action to restore the public’s trust in our government.

But then he says,

That’s why we need to pass real, lasting ethics reform this legislative session.

But Sandoval and all the other crooks were not engaged in shady, unethical-but-not-illegal actions.  They were actual crooks.  And he addresses that —

Change needs to happen. And much of this change needs to happen outside of the scope of legislation. It’s about how we, as public officials, conduct ourselves in private that also matters.

But this is after a long digression into his commitment to diversity, which leaves me quite skeptical as to whether he really “gets” it or whether he thinks it’s simply time for other groups to have a turn helping themselves to the spoils.

The bottom line for me — and admittedly my opinion counts for squat — is that, because of years upon years of literal corruption as well as indifference to fiscal prudence, Pritzker, as well as, really, any Illinois politician, has a very high threshold to cross to prove that they are working to further the well-being of the people of Illinois, rather than enriching their own pocketbook or making happy the interest groups who have enabled their election, and that they are adequately evaluating the consequences of their plans rather than convincing themselves that liberally spending money is the path to prosperity.

I don’t see anything yet that shows he has earned that trust.  Not the “found money” gimmicks of pot and gambling expansion.  Not the so-called “fair tax” in which, rather than calling for everyone to shoulder increased taxes, he promises that “the rich” will pay for everything, including a (trivial) tax cut for the rest of us.  And certainly not the “infrastructure” giveaways.

So there you have it.  Do you trust Pritzker, or, really, anyone in Illinois government?

Jane the Actuary General Interest

What’s your #IllinoisExodus Plan?

moving van

Readers, I have been frustrated by the Illinois end-of-session legislative frenzy since it became clear that this frenzy was indeed underway.  In the first paragraph of a recent Forbes article, I wrote:

Illinois readers will already be aware of the flurry of activity due to a May 31 deadline for the regular legislative session in Illinois: legalizing pot, passing a budget, and funding a massive infrastructure construction plan with tax boosts and a near-doubling of gambling positions in the state, along with some 300 other bills that sailed under the radar in the last days of the session.  And — sadly, but not surprisingly — the details of these bills were largely hammered out in backroom deals, without any transparency.  It’s a discouraging story, and readers elsewhere can choose whether to take this as a cautionary tale or revel in schadenfreude.

Now, part of my initial frustration was due to the funding side of things:  the fact that there was no reporting, that I could tell, on how revenues from pot and gambling increases were being calculated, and there appears to be a dearth of analysis on the impact of pot and gambling on those Illinoisans who are already living paycheck-to-paycheck, other than a repeated assertion that people are already going to Indiana to gamble so we might as well keep the revenue in-state.

But it was proving difficult to comment on the state’s actual spending plans for the $45 billion in “capital” spending.  Is it legitimate infrastructure spending, with allocations made by experts to get the most bang for the buck in terms of long-term benefit to the state commensurate with the long-term borrowing to fund it?  Or is it pork?

Turns out, it’s pork.

Here are some excerpts from the Chicago Tribune‘s reporting:

How much each rank-and-file lawmaker gets to claim for his or her district is a bit of a moving target, but several Senate Democrats said they were allotted about $6 million each for what’s euphemistically called “member initiatives.” Several House Democrats said they received about $3 million each from a program their party’s rookie governor had pushed for months. . . .

Speaker Madigan played a big role in carving up the pork-barrel spending. Included in the bill is $50 million for grants to be doled out by the Illinois Arts Council, which is chaired by Shirley Madigan, the speaker’s wife.

Steve Brown, a spokesman for the speaker, said many lawmakers have long shown support for the art group’s initiatives.

Madigan’s 13th Ward in Chicago also will benefit. There’s $9 million for upgrades to Hancock College Preparatory High School, where city Public Building Commission records show a replacement school with a capacity of 1,080 students is moving forward just south of Midway Airport. Brown noted there’s a “lot of overcrowding” in area schools.

Also falling within Madigan’s sphere of influence on the Southwest Side is a $31 million grant for a new building for the Academy for Global Citizenship, an independently operated charter school in the Chicago Public Schools system. It’s slated for construction at 44th Street and Laporte Avenue, which is represented in the House by freshman Democratic Rep. Aaron Ortiz of Chicago, who did not return messages seeking comment. . . .

The capital spending plan lists millions of dollars for baseball, football and soccer fields, basketball and tennis courts, playgrounds, bike paths and other recreational venues throughout the state. In Springfield, that’s known as “spork” — sports-related pork.

Standing to benefit is pickleball, a fledgling sport that’s part tennis, part badminton and part pingpong. Democratic Sen. Terry Link of Vernon Hills tucked in $100,000 for the Buffalo Grove Park District for pickleball courts and other renovations.

The Park District plans to seal coat eight new courts at Mike Rylko Community Park because the paddle sport has “really taken off,” said Ryan Risinger, the district’s executive director. The new courts would replace rarely used sand volleyball courts, he said. . . .

The spending plan also includes plenty of money to make sure the family dog is well-exercised — $400,000 is set aside for dog parks. . . .

South Side Democratic Sen. Jacqueline Collins said she secured $370,000 for the Inner City Muslim Action Network to help with renovations of a building at 63rd and Racine Avenue to provide a grocery store for healthy food. . . .

North Side lawmakers are influential in the legislature, and the capital spending bill reflects that.

The plan includes nearly $1.5 million for an AIDS Garden to memorialize Chicago’s fight against HIV and AIDS. . . .

Rep. Mary Flowers said fellow House Democrats each were allotted $3 million to $4 million to spread around their districts to fill requests for schools, roads, bridges and other projects. . . .

“Everybody was kind of happy about being able to bring something home,” she said.

And, remember, this is not “free money”; Illinois is not so prosperous that it can merrily dole out extras just for fun.  As of today, the state has an unpaid bills backlog of $6.8 billion; this is money owed to contractors/vendors who will get paid when the state is good and ready to pay them.  (Who are these vendors?  Lots of human service providers.)  Money that’s being spent on parks or other amenities in politically-favored legislators’ districts could have gone to pay down this backlog.   And, incidentally, Buffalo Grove is not a suburb that’s struggling financially.

And the GOP?  They played the “if you can’t beat them, join them” game.  While they don’t appear to have been sharing in the pork largesse, they are touting their success at getting tax breaks.  Not at producing structural reform.  Not at negotiating a pairing of the upcoming graduated income tax amendment on the 2020 ballot with an amendment to enable pension reform.  Just tax breaks, mostly for their favored business-constituents.

Back in the fall, I wrote a series of articles at Forbes about multi-employer pensions.  It’s a topic that I’m overdue in revisiting, because, for the “red zone” plans, the longer Congress delays in providing its fix, the worse it’ll be.  But here’s something that I haven’t shared with readers before:  I made some connections to folks trying to come up with solutions in that space.  I even experienced what seemed like a small success when an expert group, testifying before Congress in the winter, used some of my ideas.  (OK, fine, that may have been coincidence, but I’m still chalking that up as a win.)

Separately, there are serious conversations around Social Security and retirement.

But in Illinois?  My efforts at writing about the pension funding crisis at the state and city (Chicago) level leave me more discouraged than ever — there is no serious effort to solve this; instead we’ve got Pritzker’s “let’s sell assets” proposal and Lightfoot’s apparent expectation that gambling and pot will pay for pensions.  And it’s not just pensions, but the fact that those in power in city and state like to talk about “sacrifice” but still promise that their constituents will be happy recipients of tax cuts and government money, thanks to either a magic money tree and/or Bad People paying more.

Is there a path forward, a way in which concerned Illinoisans can say, “it’s time to fix this”?  Here in my suburb, voters, by a narrow margin, chose a Democratic State Senator over the Republican incumbent in a pitched battle with multiple daily mailers and robocalls; on her website, she applauds herself for voting for the budget and for pot legalization but says nothing about the capital bill.  Likewise, the Democratic State Representative in the district a half-mile over also is a first-time legislator who won in an open district formerly occupied by a Republican; he promotes his votes for the so-called “Fair Tax” as well as his vote for the budget on his webpage.  (My own district is Republican-held after, again, a close vote and endless mailers.)  Yes, former governor Rauner’s unpopularity, as well as the Trump-caused dislike of the GOP in general meant that their candidates were seriously disadvantaged, but the Democrats now hold such a majority that the Democratic leadership — Madigan, Cullerton, Pritzker — have, near as I can tell, unchecked power, and every intention to use that power to implement policies coming from a conviction that what ails Illinois is a failure to spend enough state money, paired with what appear to be declarations of prosperity, in the form of a massive statewide minimum wage hike and a new law fixing the minimum salary for a teacher at $40,000 statewide, with no apparent aid for the small-town and rural school districts whose starting salary begins below this threshold (except insofar as teacher salaries are an input into existing state aid).  And this even as the state, year after year, loses residents.

I know it seems unwarranted to say, “we can’t do anything about this,” given that we do have free and fair elections in Illinois, but the groundswell of opposition that it would require to get Republicans elected in contested districts, when the Democrats’ war chest is so large, or to get an anti-Madigan Democrat on the ballot at the primary stage, would be so massive that it simply does not seem like a feasible endeavor, relative to the alternate approach of identifying a state to which to relocate, in our case, after the youngest is out of school.

So, readers, which state do you recommend?

Image:  https://commons.wikimedia.org/wiki/File:U-Haul_moving_van_Elm_Street_Montpelier_VT_August_2017.jpg; Artaxerxes [CC BY-SA 4.0 (https://creativecommons.org/licenses/by-sa/4.0)]