 Moody’s Investors Service warned Illinois politicians on March 30 that the state
has reached an “inflection point.” Previously, the credit rating agency’s
analysis indicated that Illinois’ economic deterioration is pushing the state
toward an economic death spiral.
The message to Illinois politicians should be clear: The state needs structural
spending reforms.
Moody’s said in its March 30 announcement that the state has to choose between
“further credit deterioration and drift without compromise” and the “potential
for stabilization.” That’s Moody’s way of saying Illinois needs a balanced
budget.
But Moody’s commentary on Illinois’ precarious economic health says that not
just any budget will do. The credit rating agency has warned Illinois may be
entering a vicious cycle in which increasing population losses lead to an
intractable economic crisis. That means the state’s weak economic growth and
fleeing population – sparked by higher taxes – could reinforce each other and
lead to a collapse of the economy and the state’s finances:
“[P]opulation loss can be a cause, as well as an effect, of economic
deterioration. A self-reinforcing cycle of population loss and economic
stagnation could greatly complicate Illinois’ efforts to stabilize its
finances.”
Illinois lost a record 114,000 residents due to domestic out-migration from July
2015 to July 2016. All those fleeing residents resulted in a contraction of the
state’s population by 37,500 – making Illinois the only state in the region with
a shrinking population for the third year in a row.
Why are so many are leaving? Taxes. A Paul Simon Public Policy Institute poll
released in October 2016 found that nearly half of Illinoisans polled said they
wanted to leave Illinois, and taxes were the No. 1 reason.
[to top of second column] |
 And a 2017 poll of Illinois voters conducted by Fabrizio, Lee &
Associates and commissioned by the Illinois Policy Institute found
that 60 percent of respondents said state taxes are too high. A full
70 percent said their property taxes in particular were too high.
And nearly 80 percent of those polled agreed that “Illinois state
lawmakers should pass major structural reforms before passing any
tax increase.”
The above facts indicate a simple point: Illinoisans are fed up with
the state’s high-tax environment. They’ll leave if politicians
attempt to hike taxes on them again instead of enacting the reform
Illinois needs.
Any compromise budget – such as the Illinois Senate’s “grand
bargain” – that increases the burden on Illinoisans or perpetuates
the state’s broken pension system will only hasten the state along
the path of Moody’s forewarned downward economic spiral.
That’s why the Illinois Policy Institute has provided the road map
for a balanced budget that’s based on structural spending reforms,
not tax hikes.
The plan fills Illinois’ budget hole, provides tax relief to
struggling homeowners through a comprehensive property tax reform
package, implements pension reforms that begin an end to the state’s
pension crisis, and enacts major reforms to state spending on
Medicaid and state worker compensation.
Click here to respond to the editor about this article
|
