Fiscal examination shows Illinois in need of intensive care
Illinois is sick financially, and depending on whom you ask, it's either on its deathbed or next to it.
George Mason University’s Mercatus Center has ranked Illinois as the second-worst state in the nation in terms of fiscal health, but Eileen Norcross, director of the center’s State and Local Policy Project, said it might in actuality be worse even than the dead-last than New Jersey.
“We’re only evaluating them on a few metrics in one year," Norcross said on a recent edition of "Illinois Rising. "I think you have to put these metrics in the context of what’s going on in the state, the budget, the political institutions, and when you start doing that, you see that Illinois is in fact in worse shape. You have those constitutional protections on pension liabilities, which makes it almost impossible to reform those growing liabilities, whereas New Jersey has taken some steps there. Going forward, I think New Jersey is going to be on better footing than Illinois.”
Norcross contended that New Jersey is more stringent than Illinois in its reporting of pension liability.
Other states at the bottom of the list were Massachusetts, Kentucky and Maryland, while those with relatively robust health were Florida, North Dakota, South Dakota, Utah and Wyoming. Norcross said the healthiest states are those that have reined in their spending and enacted true reforms.
“States that are well managed … these are states that have tackled spending,” she said. “If they have undertaken tax reform, it's done in a way that encourages growth in the state. These are states that do not habitually issue debt to take care of their short-term problems. They don’t have the same legacy costs, the same underfunded pension liability and the same growing debt the poorly managed states have.”
Illinois has a history of financial irresponsibility, and Norcross contended serious structural changes are the only way to save it.
“In the long run: structural pension reform, stop using debt to cover short term bills, stop using the gimmicks and these one-shot measures,” Norcross said. “I think even the credit rating agencies agree that what Illinois accomplished [when it passed the budget] is not going to be enough. You’re putting a Band-Aid on a hemorrhage.”
Norcross asserted that Illinois would also needs tax, pension and regulatory reform “that attracts people to the state, and must control its spending and bills.
While neither Norcross nor the report drew correlations between a state’s health and its governing party –whether Democrats or Republicans are in control – she did maintain that fiscal indicators come from long-term political doings.
“Politics play a role, and you also see that in the top-performing states,” Norcross said. “I think there are many hands going into making these fiscal houses, and it happens over decades.”
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