In January 2011, newly elected Illinois governor Pat Quinn imposed a 67% income tax increase on citizens and a sharp increase in the corporate tax rate to satisfy missed and unpaid bills. A month later, the state issued $3.7 billion in bonds just to make payments to unfunded state pensions. Unfortunately, these measures do not seem to have inspired Moody’s confidence. The agency rated Illinois as the worst credit risk of any state in the union in August.
Senator Mark Kirk (R-Ill) produced a report on Tuesday that makes some startling claims about the severity of the fiscal problems in his home state. Some highlights:
– According to a Standard and Poor’s study, Illinois’ per capita debt and unfunded liabilities amount to more than three times Wisconsin’s or Michigan’s and more than twice those of Missouri, Indiana or Iowa.
-Illinois owes $8.3 billion in unpaid bills. That’s 10 times higher than the level in 2002.
– Illinois debt service (interest) is approaching $3 billion a year. That’s four times the amount needed to plug the $712 million budget deficit at the Chicago Public Schools. (Note: CPS itself pays more than $470 million in debt service.)
Credit ratings agencies aren’t the only organizations dissatisfied by the tax and spend approach. Following the tax hikes, a billboard campaign asked Illinois businesses if they were “Illinoyed by Higher Taxes?” and pointed out the fact that AAA-rated Indiana was the best in the Midwest in the Tax Foundation’s 2011 Business Tax Climate Index. Even the iconic CME Group, which owns the Merc and the Chicago Board of Trade, may be leaving to escape higher taxes.
Senator Kirk hopes that shining some light on the depth of the issues may help garner support for pro-growth reforms. However, if his state continues to spend more and raise taxes the Chicago way, preferred by (former Illinois Senator) President Obama (see: Buffett Rule and the millionaire tax), the state will continue down its dead-end path.
Jay Lucas is a member of the Young Leaders Program at the Heritage Foundation. Click here for more information on interning at Heritage.