Emulate Illinois high unemployment rate if you want jobs [Archive] - Debate Policy

Kathianne

04-26-2012, 04:00 PM

The state sucks. Wasn't always so, but corruption has hit home at the same time pensions are too:

http://www.csmonitor.com/USA/2011/0113/Illinois-tax-hike-Will-businesses-flee-to-Wisconsin

llinois tax hike: Will businesses flee to Wisconsin? The day the Illinois Legislature approved a 46 percent corporate tax hike, Wisconsin's governor released a statement to woo disgruntled businesses. But experts say Illinois' broader fiscal health – not its tax rate – will be the greatest concern for in-state firms.
By Mark Guarino (http://www.csmonitor.com/About/Staff/Mark-Guarino), Staff writer / January 13, 2011

On Wednesday, he unveiled Wisconsin (http://www.csmonitor.com/tags/topic/Wisconsin)'s pitch to Illinois-based businesses: “Years ago Wisconsin had a tourism advertising campaign targeted to Illinois with the motto, ‘Escape to Wisconsin.’ Today we renew that call to Illinois businesses … You are welcome here. Our talented workforce stands ready to help you grow and prosper,” Governor Walker said in a statement.

The statement came with a fact sheet that touted the efficiencies of its fiscal record: a balanced budget without an increase in taxes, proposals to cut taxes for businesses considering relocating to the state, and reduced spending.

But Walker was not the first Illinois neighbor to pile on the misery. Last week, with the impending tax hikes already apparent, Indiana Gov. Mitch Daniels (R) (http://www.csmonitor.com/tags/topic/Mitch+Daniels) told the Northwest Indiana Times (http://www.csmonitor.com/tags/topic/The+Times+of+Northwest+Indiana): “We already had an edge on Illinois in terms of the cost of doing business, and this is going to make it significantly wider. Folks in Illinois will eventually have to decide: Is this working well enough for us or do we want something different?”

The notion that low corporate tax rates lure business is antiquated, say most analysts. Taxes pay for improved education systems, transportation, and other services that are important to businesses. Rather, what is important is a full picture of a state’s financial health – and that is how both states are trying to sell Illinois businesses on a move.

In fact, both Wisconsin and Indiana (http://www.csmonitor.com/tags/topic/Indiana) have higher corporate income-tax rates than Illinois' – even after the new increase. But Illinois has a $15 billion budget deficit that analysts suggest is leading the state into insolvency. In addition, the state owes $8 billion to vendors and has $78 billion in underfunded pension liabilities.

This is a problem, says David Merriman (http://www.csmonitor.com/tags/topic/David+Merriman), a professor of public administration at the University of Illinois at Chicago (http://www.csmonitor.com/tags/topic/University+of+Illinois+at+Chicago) and coauthor of a 2011 study examining Illinois’ budget crisis.

He says Illinois is in a precarious situation because the current tax rates are not enough to lower its deficit in a significant way, and the package approved Wednesday does not include enough safeguards to ensure that spending caps have integrity...

and it's plain it's gotten worse on all fronts since January:

http://www.bloomberg.com/news/2012-04-24/illinois-taxpayers-penalized-by-unpaid-bill-backlog-muni-credit.html

Illinois Taxpayers Penalized by Unpaid-Bill Backlog: Muni Credit
<cite class="byline"> By Tim Jones and Brian Chappatta - Apr 23, 2012 11:01 PM CT

...</cite><noscript>With its pile of unpaid bills growing about 30 percent this year, the weakest pension-funding ratio among states and falling federal aid, Illinois and its municipalities are paying a penalty above AAA debt that’s twice their five-year average (http://www.bloomberg.com/quote/177M10Y:IND).</noscript>

With its pile of unpaid bills growing about 30 percent this year, the weakest pension-funding ratio among states and falling federal aid, Illinois and its municipalities are paying a penalty above AAA debt that’s twice their five-year average (http://www.bloomberg.com/quote/177M10Y:IND)...

...Illinois state- and local-government bonds yield about 3.72 percent on average for 10-year maturities, or 1.66 percentage points more than AAA debt, data (http://www.bloomberg.com/quote/177M10Y:IND) compiled by Bloomberg show. The gap is more than double the average since 2007. The extra yield for issuers from California, with a lower Standard & Poor’s (http://topics.bloomberg.com/standard-%26-poor%27s/) credit grade, is within 0.05 percentage point of the average. The two have the lowest credit marks among states.
12-Month Return The extra yield helped bonds from Illinois beat the $3.7 trillion muni market in the past six months, 6.5 percent to 5.6 percent, according to Barclays Capital indexes tracking interest and price changes.

S&P may cut Illinois’s rating from A+, fifth highest, by multiple levels “if there is no progress on structural budget solutions and if Illinois does not address the significant pension liabilities and associated cost pressure,” the company said last week. California (http://topics.bloomberg.com/california/) is graded A-, two steps lower, and S&P said in February the state may get a higher rating if revenue comes closer to Governor Jerry Brown (http://topics.bloomberg.com/jerry-brown/)’s projections.

While revenue from personal and corporate taxes grew last quarter, “Illinois’ financial position has not improved,” Comptroller Judy Baar Topinka said in a report yesterday. Unpaid bills rose by $1.3 billion to $5.6 billion since Dec. 31 and exceed $9 billion when including obligations such as Medicaid. ...

...

In fiscal 2010, Illinois had the lowest-funded state pension in the U.S., with assets equal to 45.4 percent of projected obligations, Bloomberg data show.

Investors aren’t convinced the state will act to shrink that deficit. ...