The three cost drivers Pritzker should address
Gov. J.B. Pritzker won 55 percent of the vote this November. He can couple that overwhelming voter support with Democratic majorities in the Illinois General Assembly.
Even so, Pritzker faces serious obstacles to getting things done in Springfield. Namely: Passing a balanced budget. Pritzker inherited a $2.8 billion structural deficit the moment he took office, and the state's bill backlog is projected to end the year at $7.8 billion. On the campaign trail, the governor promised a slew of new spending -- but he also vowed to close Illinois' longstanding deficits without hiking taxes in his first two years.
The only new revenue sources he's considering in the interim are legalizing recreational marijuana and expanding gambling. While the potential $700 million per year of marijuana revenue might seem significant out of context, it isn't nearly enough to fix the state's massive financial troubles.
So, can he keep his promise to fix the state's finances without asking Illinoisans for even more money?
Yes -- but it will require heroic action on the state's big-ticket budget items. Fortunately, it's only February and lawmakers still have plenty of time left in session to get to work.
The policy prescription to end what S&P Global Ratings calls Illinois "persistent crisis-like budget environment" requires pension reform, rightsizing union contracts and focusing education spending on classrooms instead of administrative bloat.
Addressing these main cost drivers now could turn the state's perpetual deficits into surpluses in just five years, creating the opportunity to pay off debt, cut taxes and stimulate economic growth. (In fact, if these reforms had been implemented four years ago, taxpayers would have saved a total of $12.6 billion. The bill backlog would be $4 billion lower than it is today, which would have made it possible to pay off Illinois' bills entirely next year and cut the income tax the year after that without adding to the deficit.)
First and foremost, Pritzker should support an amendment to the Illinois constitution that still protects earned pension benefits, but allows for changes in future not-yet-accrued benefits. Without such a change, pension costs threaten both core government services and the retirement security of those relying on state pensions. Additionally, Pritzker should push to gradually align responsibility for setting pension benefits with accountability for paying them at schools and universities. Over five years, these reforms would yield up to $12.2 billion in savings.
Second, Pritzker can invest more money in education; not by pouring in more raw dollars, but by redirecting existing money from a top-heavy bureaucracy into the classroom. Doing so would support both students and teachers, leading to better education outcomes, without worsening the state deficit. Doing this could save the state nearly $3 billion over five years.
Finally, Pritzker must negotiate a contract with state workers that's fair not just to the workers themselves, but also to the people charged with paying for it. This will entail workers paying for a share of their health care costs that more closely matches the private sector and giving up automatic annual raises in favor of a more affordable merit-based system. This reform would save $4.2 billion over five years.
Altogether, a plan based on these concepts can close the state's structural deficit in one year and put Illinois on a path toward eliminating its debt burden in five years. Pritzker has an opportunity on his hands to be the first governor to leave his successor with healthy state finances. If he does nothing, Illinois debt will continue to pile up and the state's problems will become ever harder to solve.
Adam Schuster is the director of budget and tax research at the Illinois Policy Institute, a think tank that promotes free markets and limited government.