Jane the Actuary General Interest

The State of the State is Not So Great (An Illinois Rant)

moving van
https://commons.wikimedia.org/wiki/File:U-Haul_moving_van_Elm_Street_Montpelier_VT_August_2017.jpg; Artaxerxes [CC BY-SA 4.0 (https://creativecommons.org/licenses/by-sa/4.0)]
Yes, Illinois Gov. JB Pritzker gave his “state of the state” speech today, and, a year into his term, it’s no surprise that he’s celebrating — and it’s no surprise that I’m skeptical.

What does he say?  Let’s take a look.

Today the Illinois economy supports 6.2 million jobs. This is the most jobs on record for our state, and we now have the lowest unemployment rate in history. . . . Over the past year, Illinois has reduced its unemployment rate more than ALL of the top twenty most populated states in the nation — and more than our Midwestern peers.

Note that phrasing — “reduced . . . more.”  Illinois’s current unemployment rate is 3.7%.  That’s above-average, in a 5-way tie for 31st.  Michigan’s is higher, yes, at 3.9, and Ohio at 4.2.  But Wisconsin is at 3.4, Missouri 3.3, Indiana 3.2, and Iowa 2.7.

237 Illinois businesses from all over the state made Inc Magazine’s List of Fastest Growing Businesses in the Nation.

That’s not all that spectacular in a ranking of 5000 companies; Illinois’s population works out to 3.9% of the total population of the US, and we have 4.7% of the fastest-growing businesses.  Yay, I guess?

Illinois is the second-largest producer of computer science degrees in the nation, accounting for nearly 10 percent of all computer science degrees awarded in the entire United States.

Yes, the University of Illinois is highly ranked in this field, and has actively recruited international (Chinese) students to pay full-price tuition.

Pritzker trumpets the “balanced” budget (however precarious that balance is, relying as it does on one time gambling and pot license fees) and the infrastructure bill (laden with the inevitable pork for Democratic legislators to “give” to their constituents).

He touts apprenticeships — though not as a general program but insofar as public works projects will be required to include, ahem, “diverse employees” (that is, code for underrepresented minorities).

He boasts that pot legalization will “result in 63,000 new jobs” (ugh, again – if these are new jobs rather than newly-legal jobs, then does that mean the state is banking on more people taking up using pot, rather than merely coming out from the black market?), and new “tax revenue from the residents of Wisconsin, Missouri, Iowa and Indiana” (more ugh – it’s in bad taste to plan on enticing out-of-staters to come here to buy produces illegal in their home state).

Pritzker praises the restoration of driver’s licenses for those with unpaid parking tickets and fines, which is worthy enough.  He makes the same claim of having gotten a start on fixing pensions based on two small changes which promise “free money” rather than tough sacrifices.

He praises himself for more changes:

We raised the minimum wage, advanced equal pay for women and minorities, provided millions of Illinoisans relief from high interest on consumer debt, and expanded health care to tens of thousands more people across the state.

Of these, it remains to be seen how rural areas will cope with a high minimum wage. I don’t recall offhand what Pritzker did in furtherance of equal pay (maybe one of those laws that prospective employers can’t ask for past salary history?), I am guessing that the interest relief was an under-the-radar interest rate cap, and I’m puzzled by the healthcare expansion since Medicaid was expanded some years ago with Obamacare.

Working with Senator Andy Manar, we capped out-of-pocket insulin costs at $100 for a 30-day supply so that no one in Illinois has to decide between buying food and paying for the medicine they need to stay alive.

Er, make that, “no one with a diagnosis of diabetes” . . .

We expanded insurance coverage for mammograms and reproductive health.

This is Pritzker’s only reference to his abortion expansion law, in which insurance companies are required to cover abortion.  “Reproductive health,” my a**.  The mammograms bit is, from memory, a matter of requring that insurance companies cover follow-up testing for mammograms without cost-sharing.  Which is fine enough but every insurance coverage mandate boosts premiums, and it’s really not right for legislators to pat themselves on the back as if they’ve made a real difference when they’re just shifting costs in a politically popular way for certain favored ailments.

We stopped bad-mouthing the state and started passing laws that make Illinois more attractive for businesses and jobs. Working across the aisle, we brought tax relief for 300,000 small businesses through the phase out of the corporate franchise tax. And we laid the groundwork for new high-paying tech jobs by opening new business incubators, by incentivizing the building of new data centers, and by investing $100 million in a University of Illinois and University of Chicago partnership that will make Illinois the quantum computing capital of the world.

This is what bugs me:  Pritzker repeatedly makes the claim that what was wrong with Illinois in the past, and what prevented businesses from investing here, was that we were “bad-mouthing the state.”   And then it’s back to the same-old same-old: special tax treatment (“phase out of the corporate franchise tax” . . . “incentivizing the building of new data centers”) and more government spending (“clean energy legislation” which, to my knowledge, consists of some combination of state subsidies and mandates for solar and wind generation, and $100 million based on Pritzker’s say-so).

But at the same time, it is commendable that he spent a significant amount of time addressing corruption, in light of the guilty plea yesterday of former state Senator Martin Sandoval.

And now we have to work together to confront a scourge that has been plaguing our political system for far too long. We must root out the purveyors of greed and corruption — in both parties — whose presence infects the bloodstream of government. It’s no longer enough to sit idle while under-the-table deals, extortion, or bribery persist. Protecting that culture or tolerating it is no longer acceptable. We must take urgent action to restore the public’s trust in our government.

But then he says,

That’s why we need to pass real, lasting ethics reform this legislative session.

But Sandoval and all the other crooks were not engaged in shady, unethical-but-not-illegal actions.  They were actual crooks.  And he addresses that —

Change needs to happen. And much of this change needs to happen outside of the scope of legislation. It’s about how we, as public officials, conduct ourselves in private that also matters.

But this is after a long digression into his commitment to diversity, which leaves me quite skeptical as to whether he really “gets” it or whether he thinks it’s simply time for other groups to have a turn helping themselves to the spoils.

The bottom line for me — and admittedly my opinion counts for squat — is that, because of years upon years of literal corruption as well as indifference to fiscal prudence, Pritzker, as well as, really, any Illinois politician, has a very high threshold to cross to prove that they are working to further the well-being of the people of Illinois, rather than enriching their own pocketbook or making happy the interest groups who have enabled their election, and that they are adequately evaluating the consequences of their plans rather than convincing themselves that liberally spending money is the path to prosperity.

I don’t see anything yet that shows he has earned that trust.  Not the “found money” gimmicks of pot and gambling expansion.  Not the so-called “fair tax” in which, rather than calling for everyone to shoulder increased taxes, he promises that “the rich” will pay for everything, including a (trivial) tax cut for the rest of us.  And certainly not the “infrastructure” giveaways.

So there you have it.  Do you trust Pritzker, or, really, anyone in Illinois government?

Jane the Actuary General Interest

Another Infrastructure Bill? Lawmakers, Take A Pledge!

It is wasteful and irresponsible to fund infrastructure through grand capital bills.

Consider what happens in your local town, if yours is anything like mine.

City thoroughfares are evaluated from time to time and resurfaced, maybe with state or federal funds, maybe without.  Neighborhood street resurfacing happens each summer, and it’s not a particularly big deal, but just considered to be a routine part of city responsibilities.  Then again, there’s no ribbon-cutting, nothing to be named after a local politician.

Or here’s the example of my local park district.

My suburb had a period of rapid growth in the 1950s and ’60s and, rather than building a single massive community center as would be the case now, they kept their existing pool and rec center as-is and built 5 new sites throughout the village, each with a pool (in one case, indoor), classrooms (in some) and a half-size gym, ball diamonds and athletic fields, playgrounds, and so on. Subsequently, in the late 1990s, following the trend to add zero-depth and spray features to pools, one of the pools was rebuilt in this fashion, which proved to be immensely popular and led to voters approving a bond issue in 2000 for a reconstruction of the remaining pools in similar fashion.

Then the park district tried the same approach with the buildings itself, tearing down and wholly reconstructing one of the buildings with more classrooms, a full-size gym and a more modern design, then asking voters to approve a bond issue for a similar remodel of the remaining buildings, dangling even more goodies like an elevated walking track, a fitness center, and the like.  They used the usual pitches of how comparatively small the increase would be for a house of $X value.  They talked about how super-old all the buildings were.  And they said, “if you voters don’t approve the bond issue, we’ll only have enough funds from our regular tax revenue to rebuild one of these every 10 years.”  To which my reaction — and that presumably of all the other voters unwilling to approve the bonds — was, “good!”  That seems far more responsible, to have, in the long term, buildings that are a mix of ages, rather than leveling and rebuilding everything once every 50 years, then waiting a further 50 years for the next rebuild.  That also means that, whatever the next fashion in rec centers might be, the park district can accommodate that, at least in part, rather than saying, “hey, we just rebuilt everything, you’ll have to tough it out.”

This should be obvious, shouldn’t it?  Have a long-term plan in which you keep your infrastructure maintained over the long term and with adequate spacing and funding that’s appropriate for the long-term pacing?

And I acknowledge that that’s not the way infrastructure spending works at the state level, at least in Illinois.  Here in Illinois, infrastructure spending is accomplished through big spending bills, the total costs of which are inflated by the desire of each state legislator to have something to show his or her district, a ribbon-cutting to attend and, if they’re lucky, a building named after them.

This time around, Gov. Pritzker has proposed a massive $41.5 billion infrastructure plan he’s calling “Rebuild Illinois.”  According to the Chicago Tribune,

Pritzker’s outline includes doubling the state gas tax to 38 cents per gallon from 19 cents; tiered increases in vehicle registration fees based on the vehicle’s age; a $250 annual registration fee for electric vehicles; a $1-per-ride tax on ride sharing; and a 7% state tax on cable, satellite and streaming service.

Other taxes being discussed include a new 6% tax on daily and hourly garage parking, a 9% tax on monthly and annual garage parking, and an increase in taxes on manufacturers and importing distributors of beer, wine and spirits. . . .

Of the proposed $41.5 billion in spending, $28.6 billion would be devoted to transportation projects, including $23 billion for roads and bridges and $3.4 billion for mass transit. The plan also calls for spending $5.9 billion on repair and building projects at schools, universities and community colleges. Another $4.4 billion would go to state facilities.

The largest share of the program, $17.8 billion, would be funded through state bonds, while more than $7 billion would come from regular revenue. The plan counts on more than $10 billion in federal funding and $6.6 billion from local governments and private sources.

And, yes, it appears to be conventional wisdom that Pritzker will win the votes for his graduated-tax plan (see, for instance, this Daily Herald column) and marijuana-legalization plan from recalcitrant legislators by means of constituent-pleasing goodies in the infrastructure plan — political benefits that simply wouldn’t exist if the state had long-term infrastructure maintenance plans rather than periodic big spending bills.

And, what, by the way, happened to prior infrastructure plans?

In 2009, under Gov. Quinn, Illinois passed the “Illinois Jobs Now!” plan — yes, the exclamation point is part of the title.  This was a $31 billion spending plan, though much of the money came from federal matching funds, leaving $13 billion to be funded by 20-year bonds, which were themselves to be paid for by a variety of tax and fee increases as well as video game expansion.  (Fun fact:  among these tax hikes were the expansion of the sales tax to include “hygiene products” — in other words, the now-nefarious “tampon tax,” which was subsequently re-excluded in 2016.)  But this didn’t quite work out as planned, since the revenues from video poker fell far short of projections, requiring the state to use General Funds for debt service instead.

What’s more, the Civic Federation reports that this plan fell short in terms of planning:

IJN’s second flaw [in addition to failed revenue projections] was the lack of a comprehensive plan to prioritize projects and ensure that funds were being spent efficiently and with maximal impact on Illinois’ economy. While Governor Pat Quinn’s office released a list of projects to be included in the plan, it offered no explanation of how they were selected. The last ten years of capital budgets have similarly included project lists, as well as some emphasis on various priorities. But they have fallen far short of offering a comprehensive assessment of capital needs or a clear understanding of how each project fits into the whole plan.

Prior to this plan was Gov. Ryan’s “Illinois FIRST” infrastructure plan of 1999, which set records at the time at $12 billion and which contained provisions explicitly allocating “member initiative grants” totaling $1.5 billion out of that $12 billion and which were wholly controlled by the legislators, to be doled out within their districts so that they would benefit from plaudits from beneficiaries in their communities.  A subsequent scholarly analysis confirmed that exactly what you’d expect, occurred:

Among Illinois’s 118 House districts we show that member initiative monies distributed in the year and a half prior to the 2000 general election were disproportionately allocated to districts that were politically competitive, to districts represented by House legislative leaders, and to districts represented by relatively moderate legislators. We also find evidence that member initiative funds were channeled to quickly growing Illinois House districts.

All of which comes down to this:

if legislators are not willing to establish a long-term infrastructure-funding process to eliminate the need for periodic big-money bill such as these, then I call upon them to pledge that:

  • they will condition their support of the bill on a provision that no construction projects be named after themselves or any other politician,
  • they will ensure that all fund-allocation is based on outside experts’ evaluation of needs and assessment of the need for repair vs. new construction without regard for the political appeal of naming and credit-taking for new construction, or political power of individual lawmakers,
  • they will reject any provision that allows individual legislators any discretion in where money is spent, and
  • they will refuse any invitations to ribbon-cutting ceremonies or other thank-you’s honoring them for bacon they’ve brought home.

Yes, these are low expectations.  But better this than nothing!

 

Image: https://commons.wikimedia.org/wiki/File:Road_construction_in_progress.jpg; Jose Arukatty [CC BY-SA 4.0 (https://creativecommons.org/licenses/by-sa/4.0)]