Friday, March 20, 2015

Several recent stories have appeared in our local paper about the effects of budget cuts proposed by Gov. Bruce Rauner - for instance, "Bad run for park projects, frozen state grants mean suburban districts must rethink plans".

All is proceeding as I have foreseen. The sad, simple truth that few want to admit is that the Illinois government has been borrowing against the future to provide unrealistic benefits in the present. And this has been happening for years now, and the bills are coming due. And the Illinois government, and its public union friends, want the people of Illinois to make up this difference, by paying higher taxes to fund public pension programs that are still going to be insolvent no matter what.

When a state is insolvent by $100B or more - that's $100,000,000,000, folks, and Illinois only has about 13 million residents, so do the math on that if you need to, but it's around $20,000 per person - the first step to solvency is admitting you have a spending problem. It's like Alcoholics Anonymous: "My name is Springfield, and I have a spending problem".

Instead we get lawyers for the public employee unions arguing in the Illinois Supreme Court that it is unconstitutional to cut any benefits at all, and against all likelihood, they do have a point, because the Illinois Constitution was re-written 40+ years ago to -- as we learn recently -- grant free license to politicians to spend like drunken sailors in order to solicit votes and consolidate power. Then, when the debt reaches crisis level, they can suddenly demand payment from the taxpayers who were not party to any of this fiscal irresponsibility. What are you gonna do, we can't cut the payouts to government employees because it's illegal, and it's right there in the State Constitution, so open your wallets, taxpayers. Math be damned!

But this is boring, I know. These kinds of discussions bore people, because they seem so disconnected from reality. Who cares? So a bunch of politicians and unions are arguing about money, I'll never see any of it anyway. How does that impact me?

Here's how. We rely on government in many and varied ways, directly and indirectly. Prepare for every single expense you incur through any government body to become more expensive. Prepare for service levels to decline: garbage pickup once a week? Let's try every other week. That will be fun in July, when it's 95 degrees out and you cooked chicken last week.

Prepare for schools to start cutting programs: band, sports, various clubs and activities, gone. Prepare for property tax bill to fund local schools and the escalating costs of the education unions? Going up, probably way up. My taxes are already close to $12,000 a year, so even if I owned the house free and clear, it would cost me nearly $1000 a month just to live in my own house. This is a trade I cannot really justify while I have kids in the local schools, which are pretty good, but after that? Why on earth would I willingly do that? To fund lavish retirements for superintendents, and teachers who, increasingly, are pretty well paid when you factor in the job protections they have, and the fact they can get automatic raises just by getting progress towards advanced degrees (this is featherbedding, and it needs to go away). And summers off. And a guaranteed pension. And a job for life. And free, or very highly subsidized, health care, for life. This is a pretty sweet package, and ALL of it is funded by taxpayers. I find it more than a little bit disconcerting that teachers and education professionals feel no sense of guilt for demanding to have their cake and eat it too, in the form of benefits both now and into the future, and let others worry about paying for it. But unions do that to people.

Water and sewer bill? Going up. Highway tolls? Up. Garbage collection? Up. Property taxes? Up. Sales tax? Up, probably several times over the next 10 years. Income tax? Hmmm, what do you think?

Car licensing and registration fees? Trains, buses, and other public transportation? Up, up, up.

Parks, libraries, police and fire departments, city and county services like plowing in the winter and storm water management and everything in between, maintenance of highways and roads, county jails and prisons, free medical care at publicly funded hospitals: more expensive and less available.

AND, people who work at these places are either going to lose jobs, or find their hours cut, sometimes drastically. Which means both fewer employed people, and poor service for the taxpayer. Lose/lose.

The world is changing before our eyes, but many people lack the imagination to see what it all means.

All of this has to happen, to some degree or another. Has to. Somebody has to pay for all of that. Services will have to be cut. Real people will stop getting state benefits that they need, like health care. When that cash flow stops, it's going to hurt.

And this is just the things we already pay for in some way - and as we all know, politicians are always looking for ways to raise revenue by implementing fees and taxes on other things, to fund their spending habit. Even local governments rely increasingly on revenue from enforcement of minor administrative laws - this will only get worse. Those red light cameras are revenue enhancement schemes, not public safety projects to make you and I safer.

In the business world, when a company builds up too much debt, this may trigger bankruptcy, where creditors - those who are owed money by the bankrupt entity - line up for the crumbs that are left, in an order that is proscribed by law and interpreted by a bankruptcy court judge. Most of those creditors receive pennies on the dollar, although some will get close to what they are owed, and there is a definite pecking order. Being forced to take a settlement of pennies on the dollar is known as "taking a haircut".This is where the risk comes in - the creditors who get all that is owed them, or nearly all, escape with little harm, and nearly all of the risk falls to the others. 

But states do not declare bankruptcy, or they haven't yet. Cities have, and do, and that process is better understood by all involved.

So place your bets. When the math can't work, it doesn't matter what the law says. People don't like being treated like piggy banks by corrupt liars in Springfield.