July 24, 2017
Chicago Tribune
Why Foxconn should invest in Illinois. And why it probably won’t.
If you had $10 billion to invest in a business, would you sink that money into Illinois? Or would you think twice about locating in a tax-happy state that can’t pay its bills on time and sits atop a mountain of unfunded pension obligations?
Granted, this is a hypothetical question for most people, but it’s real to Terry Gou. He’s chairman of Foxconn, the Taiwanese tech giant best known for assembling Apple iPhones. While the company does much of its work in China, Gou wants to produce LCD display panels and other gear in the U.S. in partnership with Sharp, which Foxconn owns. Gou has $10 billion to spend, and if he proceeds he will have as many as 10,000 jobs to fill … somewhere.
A handful of states are on his short list, including Illinois, according to several reports. That’s great news! We’d love to sell Mr. Gou on Illinois, high-tech capital of the Midwest. Unfortunately, southeast Wisconsin is said to be Foxconn’s top pick, and we can guess why: Wisconsin isn’t a disaster area for employers and other taxpayers. In fact, every other state on Foxconn’s list looks better than Illinois by the basic measures of financial stability and pro-growth economies. Whoops, let’s amend that: Just about every state in the Union appears better off than jobs-unfriendly Illinois.
Any business wanting to invest does an assessment of risk. Illinois, sadly, is a bad risk: It has the worst credit rating of any state owing to its massive debts and dysfunctional government. No one knows when Illinois might fix itself, or what such a plan will cost taxpayers, because the Democratic-led General Assembly and Republican governor don’t work together. The state passed a budget this month after a two-year standoff only when lawmakers rammed through a 32-percent income tax increase by overriding Gov. Bruce Rauner’s veto. But a budget doesn’t change the big ugly picture, featuring $130 billion in unfunded pension obligations.
Assuming Gou pits states against each other for incentives, Rauner indicated he’d play ball.
There could be a point at which Foxconn’s demands for tax benefits and other subsidies are too costly to justify, but Illinois is right to compete because the payoff would be enormous: Construction jobs to start, followed by thousands of permanent positions at Foxconn and an ecosystem of subcontractors and suppliers comprising thousands more jobs.
Honestly, though, we worry that Illinois won’t make Foxconn’s cut. Wisconsin could win simply because of its proximity to Illinois’ workforce, without the Illinois baggage. Sure, having Illinoisans commute north to work at Foxconn would be better than nothing, but it hardly compares to a future in which Illinois is as welcoming to businesses as it used to be. Achieving that requires politicians working together to make Illinois attractive to investment. The sooner that happens, the better.
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July 23, 2017
The (Champaign) News-Gazette
State still in critical condition
Disaster averted - for now.
The decision by Illinois legislators to raise personal and corporate taxes averted a downgrading of the state’s bonds to “junk” status but fell far short of addressing the state’s fiscal problems in any meaningful way.
That’s the conclusion of Moody’s Investor Services, which reported last week that the state’s Baa3 rating will not be reduced.
Here’s the good news in Moody’s report, one that will have legislators who voted for the tax increase slapping themselves on the back for their political bravery.
The report states that the $5 billion in tax increases “alleviates immediate liquidity pressures, moves the state closer to fiscal balance and should keep pension and other fixed costs at manageable levels at least in the near term.”
Here’s the bad news as Moody’s see it.
“The state’s outlook is negative,” it said.
In other words, the basic problems remain in place - roughly $15 billion in unpaid bills and another $131 billion in underfunded state pensions.
Other states may run budget surpluses, establish rainy-day funds and otherwise maintain their fiscal health by being frugal when it comes to spending public dollars. But it’s fair to say practices like that will happen in Illinois when turtles start competing in 100-yard dashes and pigs begin flying in V-formations.
It just ain’t gonna happen. That’s not to say it couldn’t happen because, at least theoretically, it’s very possible. But Illinois legislators have demonstrated over the years that if they find $1 they’ll spend at least $2 and maybe $20. Their appetite for increasing the size and cost of government is unlimited and their capacity for setting priorities and sticking to them is, unfortunately, quite limited.
There’s a solution for that kind of willful blindness when it comes to public spending, one Moody’s noted in its analysis of the state’s economy. Moody pointed out that Illinois has a “diverse economy with the capacity to generate additional revenue.”
By citing the prospect for “additional revenue,” Moody’s is not referring to more tax increases.
What it’s referring to is natural revenue growth generated by a growing economy that provides good jobs to people who use the income to support themselves and their families and pay taxes.
Illinois doesn’t just need a growing economy.
It must have one if it’s ever to pull itself out of the financial quicksand it’s in.
That’s why it’s borderline unfathomable that a majority of the General Assembly, led principally by House Speaker Michael Madigan, is so adamant about maintaining status quo.
After raising taxes, legislators simply called it quits, all but thumbing their noses at Gov. Bruce Rauner and his economic-growth package.
Somehow proposals to build a strong state economy have become hyper-partisan issues, one espoused by Rauner and rejected outright by majority House and Senate Democrats.
Meanwhile, the state’s economy staggers along in a slow-growth mode that could fall into recession, and more and more upper-income residents are moving elsewhere because Illinois’ future looks so hopeless.
Moody’s cited several factors that it said could lead to upgrades in the state’s debt rating.
They include implementing a realistic plan to provide long-term funding for pensions, permanently reducing the state’s unpaid bills backlog and enacting fiscal policies that ensure sustainable budget surpluses.
Does anyone seriously think those kinds of changes are in the state’s future?
In a state where fiscal policy has been the product of short-term thinking dominated by political considerations, Moody’s stated that “long term challenges remain” that can only be effectively addressed by sound policy proposals.
In other words, Illinois still stands on the edge of the fiscal cliff staring into the abyss.
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July 23, 2017
The (Carbondale) Southern Illinoisan
Don’t let politics block schools
Some things need to be above politics.
Educating our children should be at the top of the list.
Yesterday was the time to end the chess game between Gov. Bruce Rauner and the Illinois General Assembly. Illinois, at long last, has a budget in place, but that will be meaningless to the state’s schools if a new funding plan isn’t put in place.
Some Southern Illinois schools have said they can only operate a few days with the cash currently on hand.
There appears to be a ready solution . appears being the key word in that statement. The last remaining hurdle, while not insignificant, is not insurmountable. Time is running out. Let’s show the rest of the country we can actually be adults and get the bill signed and implemented.
Senate Bill 1, which has passed the House and Senate, will change the way Illinois schools are funded. Currently, schools operate largely on funds raised through property taxes, although the Illinois State Constitution provides that the state be the primary source of funds.
The property tax model created a well-chronicled system of haves and have-nots. The new plan calls for monies to be distributed on the basis of need - need being defined by the number of students living below the poverty level and the ability of a district to generate tax revenue.
Sounds simple enough. Sounds like a no-brainer - except for the fact this is Illinois.
Over the course of the past two weeks, Gov. Rauner has said he likes the bill, he wants to veto the bill, he wants to veto part of the bill, and then, he said he likes it again. The sticking point is the status of Chicago public schools.
Since the state does not currently contribute to pensions for teachers in Chicago Public Schools, an amount has been earmarked for that purpose. That is being labeled a “bailout” by opponents of the bill.
Conversely, Gov. Rauner pointed out that Chicago public schools also benefit from a $250 million block grant. His point being that if the purpose of the new funding program is to put schools on even footing, Chicago’s public schools shouldn’t receive the grants and the additional pension funds.
We believe the solution is to take the Chicago pension funding off the table to expedite the signing of the bill and deal with it as a separate issue. Amazingly, that seems to be acceptable to both the governor and the General Assembly.
In the meantime, it’s time for the two sides to quit bickering and put a plan in place.
Rauner complains SB1 was passed six weeks ago and hasn’t made its way to his desk. Manar said the bill hasn’t been presented because Rauner has continually moved the goalposts.
Schools are scheduled to open their doors in just a couple weeks.
Our children have a right to an education.
It is time for a pragmatic approach. Take out the Chicago pension funding provision and get the bill to the governor’s desk. And, the governor has to keep the goalposts in place and affix his signature.
Don’t let politics block the school door.
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