Illinois’ Manufactured Budget Crisis

Much nonsense has been spewed by local media in Illinois about Republican Governor Bruce Rauner’s “Turnaround Agenda” and his alleged efforts to save the state from runaway spending and taxes. Most of this vomit is from the Chicago Tribune’s editorial page, which makes no bones about the paper’s love affair with Rauner since he rose to prominence in 2014. A closer look at Illinois’ budget and finances, however, demonstrates that, contrary to Rauner’s claims, the ongoing inability of state Democrats and Republicans to pass a budget has little to do with whether it can “afford” previous spending on social programs.

Illinois has been without a budget for more than half a year now, as Rauner, Democratic Speaker of the House Mike Madigan, and Democratic Senate President John Cullerton are at loggerheads over issues such as spending levels, taxes, and state labor laws. Illinois Democrats have traditionally relied heavily on organized labor for campaign contributions and votes, but the party itself has a horrid record of representing working class interests. Current Chicago Mayor Rahm Emanuel has an atrocious history when it comes to worker’s interests, particularly related to his education policy. Under Emanuel, the city continued the trend started by the previous mayor Richard Daley in shutting down public schools in favor of privately run, publicly subsidized charter schools. Academic studies suggest these charter schools function no better academically than public schools do, but this hasn’t stopped Illinois Democrats from pursuing their fantasy of a privatized education system. Emanuel has shut down more than 50 public schools since he took office, and has called for shutting down another 80 moving forward. Twenty percent of the city’s schools are now privately run charter schools. Mass public school closures provided much of the impetus for the Chicago teacher’s union strike of 2012. Since charter schools are non-union, their growth provides a clear material motivation for public school teachers to resist Emanuel’s privatization effort. Aside from charter schools, Emanuel’s other education policies are also anti-labor – including the introduction of “merit pay” for teachers (it already exists for city principals), which ties teacher pay to student grades, the destruction of tenure, cuts in teacher salaries, and high-stakes performance-based funding (which was shown to be a spectacular failure under “No Child Left Behind”). These policies prompted the teachers union to vote in December 2015 to authorize Chicago Teachers Union (CTU) leaders to consider going on strike, which would mark the second strike in the last four years. Support was overwhelming, with 88 percent of CTU membership voting in favor of strike powers, and against Emanuel’s reactionary education policies.

Former Democratic Governor Pat Quinn and current Democratic legislative leaders John Cullerton and Mike Madigan also notoriously rammed through an anti-worker pension reform in late 2013. The reform, if it had not been struck down by the Illinois Supreme Court, would have imposed mandatory cuts on cost-of-living increases for retired government workers, increased the retirement age for pension beneficiaries, and sought to push more workers into 401k style retirement accounts. That Quinn and other Democrats thought the measure would pass muster with the public and with the courts demonstrates how out of touch they were with the average worker and with state law. As the Illinois Constitution plainly states, and as the Supreme Court reminded the state legislature and the governor: “Membership in any pension or retirement system of the State [or sub-unit of the state] shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired.”

The effort to gut public sector pension benefits was part of a broader campaign from Illinois Democrats to systematically underfund the state retirement system, which it has done quite effectively for decades, to the tune of $100 billion in unfunded liabilities. The state has routinely took taxpayer funds that were supposed to be earmarked for the pension to pay for other state programs and spending items, and deliberately under-taxed citizens, thereby ensuring insufficient revenues to cover Illinois’ government’s constitutional obligation to guarantee a fully funded pension system. The “starve the beast” approach pursued by Dems has created a national scandal and a model for how not to govern, as is now widely recognized across the 50 states.

It was within this context, and in light of the state’s systematic attack on organized labor, that Republican Gubernatorial candidate Rauner capitalized on (former) Governor Quinn’s political weaknesses in the 2014 election. Working class interests showed little interest in turning out to vote for Quinn after he threw them under the bus via pension “reform.” Although largely a political unknown, Rauner won a narrow election against Quinn, outspending the former governor by tens of millions of dollars (and by a margin of two-to-one), essentially buying the election outcome via greater public exposure. He managed to secure a bare majority of voter support by rallying citizens around his vaguely defined campaign to “shake up Springfield” and “bring back Illinois.”

Enter the 2015 budget crisis, which was largely manufactured by the Rauner administration. The governor claims that massive spending cuts are needed across the board, since Illinois simply cannot “afford” its current levels of spending. When he unveiled a “budget Illinois can afford” in February of 2015, the governor proposed draconian cuts across the board in social programs, including $1.5 billion in Medicaid funding cuts, $82 million in mental-health services and program cuts, and a reduction in funding for other programs such as those benefitting autistic children. Channeling his best impression of Dr. Evil from the Austin Powers films, Rauner announced the mental-health cuts on World Autism day, knowing full well that the vast majority of the beneficiaries of Illinois autism spending were children. This move had little practical value for a state with a multi-billion dollar yearly budget deficit, considering that autism spending amounted to a mere $1 million a year. The announcement, however, served as a symbol for just how sadistic this governor is in his efforts to leave no stone left unturned in the war against the needy. Rauner was immediately demonized in the press and by public advocacy and education groups, prompting a quick reversal and return of lost state funds. Despite this initial setback, the governor refused to withdraw his other budgetary attacks on government social programs.

Rauner’s “Turnaround Agenda” promised to set Illinois’ finances straight and “be honest” with the people about what they could afford and expect from government. Included in the “Turnaround Agenda” were: a more than 30 percent cut to public university and college funding, and $2 billion in cuts to Illinois pension benefits. Other items included the elimination of collective bargaining rights for public sector workers, significant cuts in workman’s compensation benefits for government employees, the elimination of “fair share” labor protections that require all employees in a workplace to pay union dues if they benefit from collective bargaining agreements, and the empowerment of local governments to declare bankruptcy so as to greatly reduce or wipe away pension obligations. These proposals, coupled with Rauner’s massive proposed cuts to social spending, have made him a great many enemies over the last year. While he began office in early 2015 with a bare majority support in public opinion polls, that number fell to just a 33 percent approval rating by early 2016.

It’s not difficult to see why so many have turned against a governor who had the nerve during his campaign to propose reducing the state’s minimum wage if elected. At a time when many Americans struggle to pay for basic needs, Rauner’s pro-business, anti-worker agenda is unpopular among the majority of citizens, which support unions and collective bargaining rights. His budget proposal is the worst kind of insulting, when one considers the duplicity of his campaign to gut state revenues via the use of fuzzy math. For example, Rauner vetoed the Democrats’ own FY 2016 budget proposal (made in mid-2015) under the justification that it included an unacceptable $4.1 billion deficit beyond the tax revenues available for the state. Rauner neglected to mention that his own budget was more than $2.2 billion short, since it relied on a promised reduction in pension benefits that was certain to be declared unconstitutional by the Illinois Supreme Court.

Accompanying Rauner’s pension-gutting budget was 1. his strident opposition to any effort to collect new tax revenues to pay for government programs, and 2. his support for gutting previous tax initiatives. More specifically, one can look to Governor Quinn’s 2011 tax hike, which increased the state income tax from 3 to 5 percent, and the corporate income tax from 4.8 to 7 percent. The tax increases were scheduled to expire in early 2016, although Quinn lobbied (unsuccessfully) for the Democrat-controlled state legislature to extend them before Quinn left office. Rauner, who ardently opposed the tax increases and actively campaigned against them, was happy to see them eliminated when he took office in early 2015. But beneath the tax hike expiration lies an inconvenient truth for the right-wingers obsessed with gutting the state: the lost revenues from the Quinn tax hike were sufficient to cover the deficit in the next yearly budget (for fiscal year 2016) that was proposed by the Democrats, but rejected by Rauner (due to his alleged deficit concerns). According to a report by the Fiscal Policy Center, the Quinn tax expiration would result in $4.1 billion in state revenues being lost for fiscal year 2016, and another $4.5 billion for fiscal year 2017. Recall that Rauner vetoed the Democratic FY 2016 state budget because it included a $4.1 billion deficit. It doesn’t take a PhD in mathematics to figure out that this was a manufactured crisis. The revenues that the state needed to fund its programs were there all along; the governor’s own ideological obsession with gutting the state of previously existing revenues was the real driving force behind his budget proposal.

Of course, the lost revenues from the Quinn tax hike were not the only way to help balance Illinois’ budget and begin to cover its unfunded pension liabilities. In the 2014 gubernatorial election, Illinois voters were provided with an opportunity to vote on a special referendum question that asked residents if they would prefer an increased tax on individuals earning more than $1 million a year, in order to raise additional revenues to cover government spending obligations. The proposal would have raised taxes on Illinois millionaires by three percent, and raised an estimated $1 billion in additional revenues a year. The millionaire’s tax was overwhelmingly popular with voters, as its supporters outnumbered its opponents by a ratio of about two-to-one. Coupled with retaining Quinn’s previous income tax hike, the state’s total revenues would have been enough to cover the Democrat’s FY 2016 budget proposal, in addition to allocating funds toward unfunded pension benefits.

The millionaire’s tax would require that Illinois amend its Constitution, as the document currently mandates a flat income tax rate across all income earners. There appears to be little chance of a backlash from the voting public against this proposal, in light of strong voter support for raising taxes on the rich. But Rauner’s opposition to the millionaire’s tax stems from the fact that he himself is a millionaire, and he and his friends would be forced to pay the unwanted tax in order to provide additional revenues for government programs that they vehemently oppose.

Illinois’ has a revenue crisis, rather than a tax-and-spend crisis. The previous tax code instituted under Governor Quinn raised enough revenues to fully cover the Democrat’s proposed FY 2016 budget. But Governor Rauner is ideologically committed to gutting state spending and programs, and in record time, making the raising of additional revenues for the budget all but impossible. Illinois’ main problem over the last few decades has been that it is run by a largely corrupt, Democratic majority that demonstrates a tireless commitment to killing government services like public education and pensions through a “death of a thousand cuts approach.” Government is systematically underfunded for decades, while taxes remain artificially low. Pensions are slowly starved, while public schools are closed, slowly but surely, as part of a long-term, neoliberal war on the population.

What makes Rauner different from Illinois Democrats is the degree to which he seeks to intensify the Democratic neoliberal agenda. What Democrats have sought to do to public education and pensions over a period of ten to twenty years, Rauner wants to accomplish in one to two years. This puts the Democratic Party, and party bosses like Rahm Emanuel and Mike Madigan in a difficult position, considering that labor unions have long funded Democratic campaign efforts, and represent a large proportion of their votes come election day. Spitting in the face of organized labor is something the Democrats have long been comfortable with, but Rauner’s assault amounts to a hatchet-to-the-skull approach to dealing with public-sector workers and social spending.

Illinois has long been an economic basket case due to its failure to fund pensions and its systematic deficit between taxing and spending. These problems could be easily fixed by introducing a progressive income tax and returning to pre-2015 income tax levels for the masses of state residents. This is unlikely to occur, however, under a sociopathic governor who will accept nothing less than the complete destruction of Illinois’ labor protections, social programs, and pension-system within the next years’ time.

Anthony DiMaggio is Associate Professor of Political Science at Lehigh University. He is the author of Rising Fascism in America: It Can Happen Here (Routledge, 2022), in addition to Rebellion in America (Routledge, 2020), and Unequal America (Routledge, 2021). He can be reached at: A digital copy of Rebellion in America can be read for free here.