August 24, 2011
QUINN GRAPPLES WITH FIVE "STAGES OF SLOTH"
ANALYSIS & OPINION BY RUSS STEWART
In politics, the cardinal sin is not to be judgmentally wrong. Instead, it's to vacillate, prevaricate, procrastinate and obfuscate -- in short, to flip-flop on issues, demonstrating weak resolve and flawed character.
That aptly describes Pat Quinn, Illinois' pathetically weak and indecisive accidental governor. In a period of economic travail, where innovation and leadership are required, Quinn is missing in action.
Which brings us to the four stages of grief posited by Dr. Elisabeth Kubler-Ross: denial, anger, bargaining and acceptance. America's liberal governors, who are not very numerous, are grieving the death of a dream, namely, that taxpayer dollars constitute an endless reservoir of funding for infrastructure projects, social services and public employee pensions. A few, like Andrew Cuomo of New York and Jerry Brown of California, have progressed beyond denial, approaching begrudging acceptance. Not Quinn.
Instead, Quinn is battling through the five stages of sloth: confusion, denial, procrastination, desperation and acceptance. Quinn is still wallowing between denial and procrastination.
Unlike other governors -- notably Republicans in New Jersey, Virginia, Indiana, Ohio, Pennsylvania, Michigan, Florida and Wisconsin -- who have slashed their budgets and refused to increase taxes or borrowing, Quinn is psychologically incapable of making a tough decision.
The 2012 Illinois budget is $52.7 billion, and, according to the Truth in Accounting Institute, the state has $120.6 billion in structural debt, including $62.4 billion in pension obligations, $27.1 billion in projected health-care payments for retirees, $21.9 billion in funds owed to nursing homes and other medical vendors, and $29.1 billion in state bonds. To "solve" the state's $15 billion revenue shortfall for fiscal year 2011, Quinn proposed borrowing another $15 billion.
The state's unemployment rate is 9.5 percent, and the state spends $3 for every $2 in revenue generated, which, even with the new income tax hike, which will generate $6 billion yearly, still translates into an annual revenue shortfall of $6 billion. That will increase to nearly $20 billion when the income tax hike partially expires in 2014.
At present, roughly 36,000 state vendors and social service providers are owed $5 billion. Approximately 25 percent of the budget is allocated to Medicaid and public aid, another 25 percent to school districts and local government, 8 percent to highways and public transportation subsidies, 10 percent to debt and pensions, and 4 percent to state colleges and scholarships. That leaves 28 percent for discretionary spending.
Quinn's modus operandi is predictable: borrow money to pay past and current bills and pensions, raise taxes, sell state assets (such as the $1.5 billion tobacco settlement), refuse to cut the state work force, and refuse to alter his philosophy that government expansion is helpful, nor hurtful, to the economy. For Quinn, "leadership" means kicking the proverbial can down the road -- after 2015, when he leaves office. Even after the General Assembly passed the gambling expansion, which allegedly will generate up to $1 billion in tax revenue, Quinn equivocates, mumbling that the bill is somehow "excessive" and overly indulgent to gamblers.
Yet other governors are demonstrating intestinal fortitude and resisting sloth.
New Jersey: When he was elected in 2009, Republican Chris Christie confronted an $11 billion deficit. Over the previous decade the state had raised or imposed 115 different taxes, and it had the nation's highest property taxes, was in a major recession, and was suffering from a flight of capital. New Jersey was not a good place to do business. The previous Democratic governor, Jon Corzine, closed a $7 billion 2009 deficit by hiking taxes, raising state borrowing to $52 billion, deferring pension payments, furloughing state employees and seizing every available federal dollar. After Christie took office, the Democratic legislature passed a "millionaire's tax," which Christie promptly vetoed.
Christie had promised to not raise taxes. So, to close the $11 billion budget hole, he implemented a policy of no pay hikes, no overtime, no tax hikes, no borrowing, privatization of every feasible state service, and drastic reductions in funding for education and local government aid. He also impounded $2.2 billion in unspent funds, and, in a stunning development, got his bill to require state workers to pay more toward their pensions and health care through the Democratic legislature, over intense public sector union opposition. In 2 years Christie has balanced the state budget. Interestingly, Christie was backed by the private sector unions, who resent the automatic pay and benefit hikes of state employees. Christie also put a 2 percent annual cap on property tax increases.
California: Under the departed and unlamented Governor Arnold Schwarzenegger, the state's 2010 budget was $109 billion, with a revenue deficit of $19.9 billion. Schwarzennegger and the Democratic legislature made a deal to cut education and public safety expenditures by $7.5 billion, increase business taxes by $2.4 billion, cut pension benefits for new state employees and medical care for prisoners, and finagle $5.4 billion in federal aid. Brown, a durable Democrat who was the state's governor from 1974 to 1982, had significant union support in 2010, and he promised more of the same.
Yet reality intruded. California is suffering an exodus of people and businesses to Nevada, Arizona and other states. The deficit in Brown's 2011 $93 billion budget was $25.4 billion. Spending was cut by $12.5 billion, every state employee got a 10 percent salary reduction, and many state functions and services were foisted onto counties and municipalities. Yet the structural gap of expenditures over revenues was $20 billion annually, and the state's debt is $91 billion.
The state needs $5.25 billion monthly to pay its bills, and as of July it was generating only $4.71 billion. Under past statewide propositions, property taxes have been capped, and revenues are actually declining as property values diminish. To pass any state tax hike, the legislature needs a two-thirds majority, and Republicans are numerous enough to block those hikes. So Jerry Brown, a onetime liberal superstar, confronts a state on the verge of bankruptcy.
New York: Cuomo, the son of the iconic liberal Mario Cuomo, who was governor from 1982 to 1994, has stunned his brethren by governing as a hard-headed fiscal conservative. Elected in 2010, Cuomo confronted an $8 billion deficit. As governor he pledged "no new taxes," laid off 10,000 state employees, and opposed extending the state income tax "surcharge" on those with incomes of more than $200,000.
Wisconsin: Like Christie, Republican Scott Walker, who was elected in 2010, succeeded in cutting the pay, benefits and pensions of 5,500 state workers, unleashing a torrent of union-inspired opposition that resulted in the recall of several Republican state senators. President Barack Obama called his plan an "assault on the unions." When Walker took office, Wisconsin had a $3.6 billion deficit, and in 2009 the legislature lifted the ceiling on teacher pay, which meant higher pensions. Under Walker's plan, state employees would pay 6 percent of their salary for pensions (as opposed to zero) and 12 percent of their salary for health care (as opposed to 6 percent), collective bargaining agreements would not decree work rules, and union dues would be voluntary. Walker anticipates a $300 million state surplus by 2012.
Other states had huge deficits in 2009-10: Ohio's was $8 billion, Virginia's $6 billion, Pennsylvania's $4.2 billion, Michigan's $9 billion and Minnesota's $5 billion. Only Governor Mark Dayton of Minnesota responded with proposed tax hikes, but he was blocked by the Republican legislature. Governors John Kasich of Ohio, Rick Snyder of Michigan, Tom Corbett of Pennsylvania and Bob McDonnell of Virginia all cut spending, froze hiring and refused to hike taxes.
According to federal sources, state tax revenues will amount to $1.29 trillion in 2010, roughly the same as the $1.32 trillion in 2008. That results from an economic rebound coupled with tax hikes in some states. But property taxes have declined, putting pressure on local governments and escalating demands for more state aid.
As for Quinn, he is universally perceived as a one-full-term governor. His credibility is nonexistent. In the 2010 campaign he promised not to raise personal income taxes by more than 1 percent; in 2011, due to the fact, he said, that Illinois' "fiscal house was burning," the tax hike was 2 percent. In 2010 Quinn took $3.6 million in union donations and pledged to protect state employee raises of 11.25 percent over the 2010-12 period, but then, to save $75 million, Quinn proposed eliminating the 2 percent raise due on July 1. The issue is not before the courts, and the unions are livid. He favored but then opposed eliminated free mass transit subsidies for seniors. He advocated cutting social services by $100 million, but then recanted under pressure. His 2012 budget added 945 jobs.
Two tough decisions loom for Quinn: Whether to extend the state income tax, which expires in 2015, and whether to run for reelection in 2014. If he does, he will face Attorney General Lisa Madigan in the primary.
My prediction: Expect Quinn to flip-flop a dozen times between now and then.