Illinois' Financial Problems are Deep and Systemic

By Steve Rensberry

   (RPC) - 7/13/2010 - The Institute of Government and Public Affairs at the University of Illinois published a report in February of this year drawing attention to the underlying causes behind the state's economic woes. Entitled "The Illinois Report 2010," the opening article, "The Regional Economies of Illinois: Will the jobs return? When?" by Geoffrey J.D. Hewings and Rafael Angel Vera states: "Illinois is not a homogeneous economic unit, but is comprised of many regional economies. Understanding these economies individually is vital for understanding Illinois as a whole."
   To that end the pivotal study breaks down the group’s analysis into several categories: the Illinois budget crisis, climate change, waste and recycling, regional economies, governmental reforms, higher education, health care reform, and race and recession.
   The picture it paints isn't a rosy one.
   "Illinois shares a similar economic structure to the nation, yet job growth has lagged the rest of the country across all major sectors since 1990. Understanding why this has happened will require some intensive research into the make-up and functioning of Illinois’ regional economies. Without this understanding, economic development progress could be limited," Hewings and Vera write.
  According to the report and information collected through the Illinois Department of Employment Security, the percentage breakdown of workers in the state is as follows:  Construction, 3.9 percent; manufacturing, 10.2 percent; trade, transportation and utilities, 20.3 percent; information, 1.9 percent; financial activities, 6.5 percent; professional and business services, 13.9 percent; education and health, 14.2 percent; leisure and hospitality, 9.2 percent; government, 15.2 percent; and other services, 4.6 percent. Figures are from October, 2009.
   The 104-page report points to what it says are a number of systemic problems and a divided leadership which has worked to keep any remedy at bay.
   Speaking of the state's multi-billion-dollar deficit, analysts Richard Dye, Nancy Hudspeth, and Daniel McMillen cite in a contributing article entitled "Fiscal Condition Critical: the Budget Crisis in Illinois," several factors aiding and abetting the state's structural deficit problem (which is not isolated to Illinois). These include:
  • A lack of fiscal discipline in balancing the state budget. 
  • A tendency to defer bills or borrow money to pay them.
  • A shift away from the production of goods to services.
  • Outdated sales tax systems.
  • A state corporate taxes base which has gradually eroded.
  • An increase in interstate commerce and competition. 
  • An aging population, leading to more retirees and fewer workers.
   "Dealing with structural deficits requires fundamental reforms of both state revenue systems and spending obligations – with health care costs being the overarching consideration in every budget examination," the author's write.
   In the final analysis, the report reiterates a familiar refrain. The only solution is to make significant cuts and reduce spending.
   "It is inescapable that Illinois faces very, very tough choices. There almost certainly will have to be major cuts in spending programs and major increase in revenue," Dye, Hudspeth and McMillen write.
   But what the report doesn't address is the entire range of ramifications on the consumer end of the equation. If people are taxed more and pay higher fees, if they get less in the way of government benefits and services, will they alter their spending patterns? Will they react socially and emotionally and take it out on everyone and anyone come election day? Most certainly. Will employers race to expand their workforces if they’re slapped with higher taxes and an ever-increasing amount of red tape? Not likely.
   An online summary and a link to download the report can be found here: The Illinois Report 2010.