The State of the State In Illinois

Posted by Jeff Carter
on February 7th, 2013

Went on the Chicago Tribune website this morning and searched for an analysis of Illinois Gov. Pat Quinn’s State of the State message. It’s no where to be found. The headline on the News website was about an argument over which weekend to stage the Gay Pride Parade.

Photo credit: Wikipedia)

Really? This is hard news?

At the SunTimes, they have a photo of Jesse Jackson, Jr. and his plea bargain to get less jail time. That’s at least hard news, but what about the money?

I googled it, and a Trib article came up. I think they call this “burying the lead.” I guess telling Illinois taxpayers that government is bumbling its way doesn’t sell newspapers. The Trib was highly critical of the speech at least-but yesterday was a golden moment for a Democratic governor to outline his plans on how to deal with $200 billion in unfunded pension liabilities.

He didn’t. Illinois is boned. It’s the taxpayers (subjects) that are boned-not the government workers and elected officials.

The centerpiece of his speech was a hike in the minimum wage to $10-which will only increase unemployment in Illinois and affect teens/minorities disproportionally than any other group.

The governor also highlighted those crucial economic issues of our time; gay marriage and gun control.

Political pablum.

A couple of years ago, I was at an Economic Club lunch and listened to two former CEO’s lay out the finances of the state of Illinois. It was horrible then, and it hasn’t gotten any better. Over time, I have watched the whole macabre play unfold.

Once I was able to speak to a person that serves on a pension board. I asked them what rate of return they are implying on the growth of their funds. Still 8%, when a 4% return on investment is realistic. There is no way in hell any pension fund is going to get an 8% rate of return on invested capital with all the restrictions on that capital. Much of it has to be invested in safe securities like T Bills-which return 2% or less. That means the 2% allocated to alternative investments need to hit a grand slam home run to keep pace. Sort of like investing in Facebook ($FB) in the first round and watching it IPO. Except FB only has a market cap of $63B, so you’d have to actually score on more than one investment like that.

The Republicans in Illinois aren’t offering up solutions either. They are afraid of their own political sacred cows. But, the Democrats have a super majority and it’s up to the chief executive officer to lead. The onus is on the Dems.

The media can sweep it under the rug all they want. Politicians can pull the wool over taxpayer’s eyes for a little bit longer. However, math and markets are some of those unyielding things. As Illinois bond rating continues to plummet, it will have to pay more and more to finance/roll over its unfunded debt.

The people on the hook for it are the citizens of the state. Good luck with that.

UPDATE

In a Reuters article, here is a quote from Judy Baar Topinka.

“This fiscal calamity hovers like a storm cloud over the state of Illinois,” said Comptroller Judy Baar Topinka, a Republican. “We cannot afford tangents or distractions — we have to address our finances, and time is of the essence.”

My response-Hey Judy. Be a leader. Offer up a solution. It’s easy to criticize.

Another quote

Asked when the legislature might vote on pension reform, Republican House Leader Tom Cross, said: “No one knows what the speaker wants to do and until we all do, it’s going to be difficult to figure out where we’re going with pension reform.”

My response-Tom, you were elected to get something done. Offer up a solution. Problems were identified a few years ago.

Oh, I get it. Because Illinois Dems have a supermajority, they are waiting on Democrats to lead.

Many analysts view Illinois House Speaker Michael Madigan, who has held that office for 28 of the last 30 years, as the most powerful politician in the state and look to him for leadership on pension reform. Madigan, who seldom speaks publicly, rushed out of the chamber after the speech on Wednesday and was not immediately available for comment.

How can a guy that has lead for 28/30 years “seldom speak publicly”. Because the press gives him a pass.

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