It’s official: Illinois is the worst-governed state in the country.
Last week Standard & Poor’s downgraded Illinois’s credit rating to A-. Only California bears so low a rating, but S&P rates California’s future outlook as positive and Illinois’s as negative. The Moody’s (slightly different) rating system assesses Illinois at the same risk level it gives the African nation of Botswana.
It’s not easy to sum up all the aspects of the financial disaster that is Illinois: the fiasco has too many pieces, contributed by too many different politicians.
The state can’t pay its bills in the here and now: it started the 2013 fiscal year with almost $8 billion in unpaid bills, equal to almost one quarter of the state’s budget.
Illinois depends on federal aid to stagger through the year. In 2011 federal transfers accounted for more than one third of the state’s revenue. Now assistance from Washington is dwindling.
The costs of retirement benefits to Illinois’s retirees are rising faster than state revenue—meaning that even as the Illinois economy recovers from the recession, the state’s income is falling further and further behind its commitments.
Indeed, Illinois faces the worst pension shortfall of any state. The cost of pensions and health benefits to retired state employees has doubled over the past decade, to 15 percent of state spending. As the costs of benefits rise, the state is cutting budgets for schools, Medicaid, and corrections.
The Illinois economy depends on the state’s historic role as the great transfer point of American transportation: first rail, then air. But that status is declining. Chicago’s O’Hare lost its ranking as the busiest airport in the country to Atlanta in either 1998 or 2005, depending on whether you count by passengers or by takeoffs and landings. Meanwhile, Illinois’s budget problems are preventing the state from investing in the infrastructure maintenance and improvements required even to hold on to the traffic it still has.
Some of Illinois’s problems are beyond any individual’s control. As the Sun Belt has grown, the country’s transport nodes have inevitably moved south. Great Lakes manufacturing cities all face challenges, and Chicago has survived better than Detroit or Cleveland or Buffalo, N.Y.
But Illinois has made bad choices too. While its tax rates do not climb as high as those of California or New York, the high headline rates in California and New York apply only to a comparatively few very wealthy people. Illinois applies the same state tax rate to every dollar of adjusted gross income, imposing high average burdens on just about everyone. Sales taxes and fees are also costly.
As of December 2012, Illinois ranked fifth in the nation for unemployment, worse than Ohio or Pennsylvania or Wisconsin or New York. (Michigan ranked fourth.)
But in addition, Illinois has generated a uniquely toxic political culture, one that systematically produces bad governance. This is a state where both the current governor’s predecessors went to prison. (One was a Republican; the other a Democrat: bipartisanship, Illinois-style.) Antique institutions and obsolete practices are frozen in place by family dynasties beholden to public-sector unions: the father-and-son mayorship of the two Richard Daleys; the Madigan family, where father Michael is speaker of the Illinois House and daughter Lisa holds the powerful job of attorney general. (Not only is Michael the top fundraiser in the state, most of it from unions, but when Lisa first ran for AG, in 2002, she was able to raise more than any candidate for governor that year: $1.2 million.)
Organized crime has deeply penetrated Illinois political culture as well. A former high-office holder in the state once joked to me that the three most important jobs in Illinois are, first, mayor of Chicago; second, governor; and third, U.S. attorney: the person who decides which Illinois politicians to prosecute.
Gov. Patrick Quinn campaigned as a reformer. He has a long record of fighting for positive changes in his state. But Illinois has an even longer record of defeating and defying reform. Will this time be different? The results to date are far from encouraging.