Last week I noted that the failure of the Illinois state legislature to enact meaningful pension reform carried a steep cost for its citizens: the big boost in income taxes enacted by the state earlier this year is going largely to pay for rising pension costs even as the state's budget deficit grows. The Chicago Tribune notes that the income tax increase, fondly referred to in the state as the 'Quinncome' tax after Gov. Quinn, is costing the average worker an additional 2 percent of his pay. That's essentially one week of additional earnings going to the state. As the paper notes, "Virtually everyone who has a job in Illinois is working this week just to pay
state government's pension obligations."
The problem isn't just that pension costs have soared and now consume 17.4 percent of the state's general fund. It's that costs will keep going up even as the state struggles to dig itself out of an accumulated deficit hole that has reached $5 billion. Without reform the state's pension costs will rise by 9 percent, or $500 million next year, and by nearly $2 billion, or one-third, in five years. Even worst, the state's past efforts to deal with its pension crisis by simply borrowing money to put into the system have helped wreck its long-term debt outlook. The state's indebtedness has risen to $30 billion from $9.4 billion in 2003, and $16 billion of that increase is from borrowings or the pension system.
The Tribune rightly observes that the pension system is perhaps the biggest threat to the state's economic future: "Note that this editorial focuses only on state finances," the paper writes. "Add your debt and pension obligations to local governments and you understand why so many businesses will not bring jobs to Illinois. Who wants to be paying taxes here when all of these public costs come even more due than they are today?"
The Tribune rightly observes that the pension system is perhaps the biggest threat to the state's economic future: "Note that this editorial focuses only on state finances," the paper writes. "Add your debt and pension obligations to local governments and you understand why so many businesses will not bring jobs to Illinois. Who wants to be paying taxes here when all of these public costs come even more due than they are today?"
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