Governor Rauner’s crisscrossing the state rallying support for his agenda to turn Illinois around. He personally delivered that message to an audience invited by DeKalb Chamber of Commerce members at the Hopkins Park Community Center.
The audience was warm to Rauner’s enthusiasm for the state. He pointed out that Illinois has the best location, the best farmland and the best people. He promised to go to the states that were actively recruiting Illinois businesses and bring those businesses back and then some.
But first he has to balance the budget and bring the cost of providing government services under control.
Rauner railed against special interest groups and singled out government unions as obstacles in the way of turning the state around. Illinois and New Jersey are running neck and neck for highest taxes and for most businesses and people leaving their states, according to Rauner. Government has priced itself above the peoples’ means.
That part of the message got a lukewarm reception. Most of the jobs paying a middle class living wage in DeKalb County are in the government sector.
Cutting $6 billion to balance the budget is not welcomed news in the government sector. Many of the 200 or so in attendance were administrators who would need to make some tough adjustments should Rauner’s budget proposal remain intact.
Many of the near 7,000 local units of government in the state have healthy rainy day fund balances that they’re sipping from to make ends meet as it is. Building those reserves are an accomplishment the local units hang their hat on especially when taxpayers complain about high tax rates and government spending.
But state government has no rainy day fund. It’s got a crater-sized operating deficit with bordering on junk bond credit ratings and a total debt that’s worst in the nation.
Yet in contrast to the bleak picture Rauner paints for administrators of the next fiscal year budget for municipalities and Northern Illinois University he pledges a 100% commitment to increase funding for K-12 education.
Another part of Rauner’s message was for local voters to be in control of when property taxes are increased through referendum. Local taxpayers should decide the matter of collective bargaining with their employees and not by unfunded state mandates brought about by public sector union lobbyists. He pointed to the turnarounds in Indiana, Iowa and Michigan which all became right-to-work states.
Among full-time wage and salary workers, union members across the country earned a median of $970 a week in 2014, according to the Bureau of Labor Statistics, while non-unionized workers in those same occupations earned $763. On the surface that’s not exciting news for union members.
Because public sector union employees earn substantively more wages in Illinois than their counterparts in neighboring states Rauner’s push for right-to-work is even more unsettling.
Right-to-work laws forbid unions and employers to enter into agreements requiring employees to join a union and/or pay dues and fees to it in order to get or keep a job. In Illinois an employee can elect not to be a member of the union but they must pay dues regardless of membership.
Economists have long recognized that monopolies hurt consumers. Business monopolies charge their customers higher prices and put less effort into controlling costs. Unions do the same and compulsory dues create a monopoly in the workplace.
Unions deride right-to-work as the “right-to-work for less” because workers have lower wages in right-to-work states. Until very recently right-to-work states were mostly concentrated in the South which historically had lower costs of living than the North long before its states began passing right-to-work. When adjusted for such differences in cost of living studies find that workers in right-to-work states make no less, possibly more, than in states with compulsory dues.
The average union member pays $432 per year in right-to-work states, but $610 a year in states with compulsory dues. The average union member has a union president who makes $170,000 annually in states with compulsory dues, but only $132,000 in states with voluntary dues—a $38,000 difference.
Public-sector unions have remained much stronger over the years than their counterparts in the private sector — 35.3 percent of government employees were union members in 2013, compared to 6.7 percent of workers in private industry. In Illinois public sector union density is among the highest in the nation.
While public sector unions haven’t been immune from layoffs they’ve maintained relatively healthy salary and benefit packages with COLA and step raises at a time when wages have stagnated for their counterparts in the private sector whose retirements are far from secure. But as the burden of public sector pension and debt obligations ballooned raising taxes could not generate enough revenue to keep up thus Illinois has the highest taxes and the most debt.
So when Governor Rauner spoke of the exodus from Illinois he warned that raising taxes before balancing the budget would stand as a major obstacle in the state’s recovery.
That exodus is real. Illinois logged a record in people leaving this state in 2014, sustaining a net loss of 95,000 according to the U.S. Census Bureau. The state’s population shrank by 10,000 people from July 2013-July 2014 marking the first actual decrease since 1988.
Who is leaving? Food-stamp enrollment is hitting new record highs. Children living in poverty is sharply increasing. The overall poverty rate is on a steep incline. High property taxes and stifling regulations tends to chase businesses away. Job seekers follow jobs. It also chases away those who can afford the higher cost of living in Illinois but choose a lower cost of living state for a higher standard of living especially those on pensions.
But the Governor has a tall order for his vision of Illinois recovery to become reality. House Speaker Mike Madigan and Senate President John Cullerton command a large majority of the Illinois General Assembly. The Democratically controlled House and Senate will have a lot to say about that vision. Thus the Rauner Illinois Recovery tour. He needs pressure on House and Senate members to get his plans implemented and he is using his office as a bully pulpit.
That’s made more difficult when not all of the cards are on the table. How can he cut the state income tax and increase funding to K-12 education even with the proposed cuts and still balance the budget?
Rauner told the media circled around him that he personally didn’t like gambling. That’s not a confidence booster for playing high stakes poker with Madigan and Cullerton and he likely is.
To the gnashing of teeth among the conservative bloc of the Illinois Republican Party during the primaries Rauner was chastised for campaigning on a pledge to create a service tax. He said it would spread the burden and therefore help to lessen it for everyone.
That revenue stream is not included in the current proposal. It is substantial. But any tax increase, even creating a new one, in Illinois’ business climate will not lead to recovery. Rauner can go to the other states to recruit employers all he wants but no one will have success until that climate of oppressive government costs is addressed.
Rauner wants reforms in workman’s compensation, tort, and pension obligations to current employees before he’ll consider new revenue streams or tax increases. Those items are in desperate need of reform and Illinois’ economic recovery awaits appropriate action.
Trending is in Rauner’s favor.
Public-sector unions and special interest groups pulled out all the stops to defeat Rauner in the November elections but they failed in Illinois and four of the other five states where they waged a battle to defeat GOP gubernatorial candidates hostile to their cause.
In Wisconsin thousands of their counterparts in Illinois traveled to join protests against the then new Governor Scott Walker’s choice to essentially end collective bargaining for state employees. Walker won and a massive recall effort ensued. The voting public responded by voting Walker as their Governor again for the third time in four years. Public sector unions failed to defeat Michigan’s Governor Rick Snyder after he signed a right-to-work law.
In Illinois, Wisconsin, Michigan, Maine and Florida millions upon millions of dollars have been spent on TV ads and mailers, thousands of phone calls, months of door-knocking and a slew of rallies to convince voters that what’s bad for unions is bad for them too. It didn’t work.
The average voter, including many private sector union members, just doesn’t have what those working in government has.
That gap narrows in a bustling economy and that is what Rauner and Illinois should be focusing on.