Illinois Politicians Banking On Federal Bailout To Avoid Bankruptcy

The biggest sin in Illinois politics is telling the truth. Illinois Senate President Don Harmon is a sinner. He wrote a letter to Illinois’ congressional delegation requesting a $44 billion bailout from the federal government. That letter leaked. And he was roundly rebuked by pundits and politicians for saying the quiet part loud. He was telling the truth. Gov. J.B. Pritzker, House Speaker Mike Madigan, and other Illinois leaders were banking on a federal bailout long before COVID-19. Illinois has not balanced a state budget in 20 years. Leaders refuse pension reform to reduce the debts driving those deficits. To buy time and keep political backlash to a minimum, they have borrowed money with bookie-like abandon and slashed social services that lack sufficient political clout to keep their doors open. That borrowed money funded the most corrupt government in the nation, with nearly 900 public corruption convictions in Illinois since 2000, close to one per week. Illinoisans now shoulder one of the highest state and local tax burdens in the nation. But paying off the state’s debts would require another 50% hike in the income tax. Many local governments, crushed under the weight of pension obligations, were on the brink of insolvency prior to the pandemic. The state itself was teetering one notch above a junk credit rating. If it tips over, it could be frozen out of the credit market altogether and become functionally insolvent. Illinois’ pre-coronavirus rainy day fund was enough to fund mere minutes of state spending. And its $7 billion unpaid bill backlog was climbing despite record tax receipts.

Governor J.B. Pritzker is clueless about fixing the financial crisis in Illinois. The only solution Pritzker has is raising taxes and proposing new taxes. Pritzker does not seem to be concerned with the mass exodus of Illinoisans to other states. Most companies do not have an interest in moving to Illinois due to the massive taxes of the state. Besides raising taxes, Pritzker is making very little effort in reducing spending. He has given pay raises to Illinois lawmakers. He has also given a $261 million raise to high-level state workers.

Highest Taxed State In The Nation

Raising taxes is one thing. Raising and creating new taxes may create increased revenues. However, in order to get ahead, you need to decreased spending. Pritzker is increasing spending including wage increases to lawmakers and state employees during times of financial crisis. Illinois is one of the highest taxed states in the nation. Illinois politicians keep on increasing property taxes. High property taxes means lower property values. High taxes are forcing many Illinoisans to flee the state to other lower-taxed states. States will billions of surplus are lower-taxed states. Lower taxed states are attracting individuals and businesses to their states. Pritzker is not realizing how the state’s high taxes are a major problem in the out-migration of individual taxpayers and businesses. To add fuel to the fire, Pritzker is proposing changing the state’s flat tax to a progressive tax system that voters will decide upon in November 2020.

Dale Elenteny of Gustan Cho Associates said the following:

Prior to the virus, his administration floated hare-brained schemes like shorting the pension funds, moving state assets on paper into the pension funds to make them appear better funded, and issuing more debt.

Illinois Politicians Banking On Federal Bailout To Fix Their Nearly Bankrupt Pension System

Illinois Democrat State Senate President Harmon requested $44 billion dollars from the federal government for Illinois due to the coronavirus economic impact. Out of the $44 billion, $10 billion was allocated to bail Illinois from its financially mismanaged pension system. The pension shortfall was created by state lawmakers. $9.6 billion would go to local governments. Just $1 billion would go to aid for the poor. Nikki Haley, Mitch McConnell, Donald Trump, and others made statements that it is ridiculous for the federal government to bail a few states like Illinois that has been mismanaging finances. They added it is not fair for American taxpayers and financially responsible states to bail financially irresponsible states managed by incompetent governors and lawmakers. Governor Pritzker demanded “unencumbered” federal dollars. What this means is federal dollars with no strings attached. Pritzker and Illinois Democrats want to please the powerful labor unions of Illinois by keeping the broken pension system intact and are not open to pension reform.

Gustan Cho Associates said the following:

Our elected officials are trying to use this crisis to bail out their bad decisions. And we don’t need a bailout of the politicians. We need reform for the people of Illinois. We’re financially bankrupt, we’re morally bankrupt, we’re ethically bankrupt … I hope Washington, D.C. decides that if they’re going to send us money, they’re going to send us reform as well. Because the average Illinoisan is struggling. A bailout will ensure more pain in Illinois. Leaders won’t learn their lesson. If the federal government does dump money into state and local governments, it must ensure consumer protections like sound pension accounting, real balanced budget requirements, and a healthy rainy day fund.

Whether the federal government bails out the state of Illinois, pension reform is necessary. Say the federal government will bail out Illinois’s financial mismanagement. You need to clean house. Incompetent politicians from the governor, Speaker Madigan, and countless incompetent politicians need to go. Public corruption in Illinois is costing taxpayers over $500 million per year. Many politicians are running for office for selfish reasons to benefit themselves, families, and friends. Not because they want to help the citizens of the state of Illinois.

This is a developing story. Gustan Cho Associates will keep our viewers updated on developments in the coming days and weeks.