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Tabacco Settlement Proves Why You Can’t Cut Deals With IL GA On Pensions

Anti-smoking groups and other do gooders have trusted our state’s “Honorables“  just as the Illinois Policy Institute is asking us to trust them with their pension proposal that borrows now in the hopes of getting spending restraint and tax rebates later.  Here’s what happened to the anti-smoker suckers:

“Illinois finished 41st out of the 50 states in the percentage of settlement money funneled into prevention and stop-smoking programs during the current fiscal year, the nonprofit Campaign for Tobacco-Free Kids recently reported. Tennessee was at the bottom, North Dakota at the top.

The Land of Lincoln’s lowly status was lamented by public health officials and some politicians, who describe a lost opportunity to use the pot of money to help cut the smoking rate.

“That money was supposed to help take care of the problems the industry had caused in all the states,” said Kathy Drea, vice president of advocacy for the American Lung Association in Illinois.

In 2002, $46 million from the settlement was earmarked for prevention and cessation programs, according to state budget figures. In 2004, it had dropped to $12 million. In the current fiscal year, it will be $9.7 million, a fraction of what the U.S. Centers for Disease Control and Prevention recommends. In its own state-by-state ranking, the agency recommended that Illinois spend $157 million on such programs.”

It turns out other priorities trump the deal:

“The money from the settlement is an easy, even a necessary target during an ongoing budget crisis, some lawmakers admitted. Under the 1998 agreement, tobacco companies were required to give billions to the states over 25 years.

“Legislators just use it to fill the budget gaps,” said Craig Johnson, mayor of Elk Grove Village. “It’s become just another source of revenue.”

Of course if the state weren’t saddled with pension payments, maybe lawmakers would keep their word to the anti-smokers?  Yeah, right…

The Master Settlement Agreement and Illinois’ abuse of it began immediately after Illinois started receiving revenues from it.  When a lawsuit bonding issue threatened the tobacco money hose, lawmakers suddenly saw the merits in appeal bond reform i.e. tort reform and even screwed the trial lawyers in Madison Cty. over.

This is a great example of why leading with your chin — putting the money on the table, now — is a truly horrible policy move.

The anti-smokers were suckers to say  the least.  What’s that say about others who now dangle more revenue in front of the General Assembly?

There is a reason why signs at the zoo tell us not to feed the bears.  Similar signs should be posted at the statehouse.  Maybe that’d help fend off some of these bad ideas.

J. WELLINGTON WIMPY, HAS THE ILLINOIS POLICY INSTITUTE GOT A PENSION PLAN FOR YOU!

FOR IMMEDIATE RELEASE

Contact: Greg Blankenship | 217.544.4759 | gkblankenship@all4growth.org

“Cook me up billions to pay pensions and I’ll pay you Thursday”

(Springfield, Ill.) “I will gladly pay you Tuesday for a hamburger today,” is not just the catchphrase of one of America’s most loved scam artists, J. Wellington Wimpy of “Popeye,” it’s also an apt metaphor for an expensive pension scheme from the Illinois Policy Institute that borrows billions to pay pensions today while trusting the Illinois General Assembly to implement spending limits for 35 years into the future.

“The problem for the taxpayers,” according Illinois Alliance for Growth President Greg Blankenship, “is that taxpayers are more likely to get paid by the fictional comic strip character than get meaningful long-term spending restraint let alone reap tax refunds from Springfield.”

The Illinois Policy Institute’s proposes borrowing between $12 billion — according to them — and nearly $20 billion — according to news reports — to make payments to the state’s five pension plans in exchange for a constitutional amendment ballot opportunity to pass a tax-payers bill of rights. Known as TABOR, that amendment, if passed, would limit yearly state spending growth to population growth plus inflation and refund excess dollars to taxpayers.

Last week, The Illinois Alliance for Growth offered pointed criticisms at the proposal. The critique cited specific concerns surrounding the Institute’s pension borrowing scheme that included constitutional issues, implementation challenges and flawed assumptions that would open the spending floodgates in Springfield. The critique, “Mission Possible?” No, More Like “Get Smart” can be found at www.all4growth.org.

On January 22nd, the Illinois Policy Institute emailed supporters and the conservative blog Illinois Review a “defense” of their pension reform scheme offering vague assurances, deflections and accusations that critics offered no alternatives. Tactics not dissimilar to charges leveled from liberal politicians and their supporters to principled opponents of national health care reform legislation.

In releasing this “defense” the Illinois Policy Institute laid bare their “Wimpy proposition:”

“Ask yourself this: If you were in charge of Illinois, would you take out a 10-year, $12 billion loan with strong provisions for quick payback in return for two things:

• tax rebates for Illinois families totaling $690 billion from 2021 to 2045; and
• a constitutionally-protected spending growth limit that reins in spending to the rate of inflation plus population and cannot be changed without voter approval?

This is the choice offered by implementing our Pension Funding and Fairness Act, in combination with the modest pension benefit reforms proposed by Governor Pat Quinn in 2009.”

In sum, borrow and spend today and trust Illinois state government to begin tax rebates in 2021 and keep a lid on spending limits for 35 years. Past attempts at fixing the state’s five pension funds have kicked the hard choices into the future only to be abandoned, as the Blagojevich-Quinn Administration has, when the bills have come due.

A constitutional amendment to institute TABOR in Illinois would require a three-fifths vote of those elected to both houses of the General Assembly and ratification by voters in the following general election. The state has only amended the Illinois Constitution once since the 1970. State debt need only a three-fifths majority in each house — something done routinely. Illinois’ strict single subject rule prevents a spending limitation and borrowing provision from being combined in one legislative vehicle.

“Given past performance and the current political make up of Springfield, the likely outcome is to take the money and undermine, ignore or out-right fail to pass the spending limitations and that’s a horrible deal for taxpayers,” said Blankenship. “Budget reforms must come before new revenues; spending limits before borrowing; and we shouldn’t trust Springfield by gladly giving away hamburgers today for payment on Tuesday.”

The Illinois Alliance for Growth is a non-profit, non-partisan taxpayer protection group dedicated to economic growth and limited government. You can find out more about the Illinois Alliance for Growth at www.all4growth.org.

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All4growth in Today’s IBD

The Illinois Alliance for Growth was quoted today in Investor’s Business Daily.  In the piece, we explain why Mark Kirk is doing so well against Pat Hughes — the more conservative of the two.

Kirk has been focussing his campaign on opposition to health care, the stimulus bill and he’s found Jesus on cap and trade by admitting his error and re-thinking the issue in light of climate gate.

This has made it more difficult for Hughes to gain traction even though from a conservative point of view he is the more attractive candidate on paper.  However, races aren’t run on paper.  Kirk has proven himself as a seasoned campaigner and very strong fund raiser.  That’s a lot to overcome in Illinois.  Given the issue of the economy and government spending as the salient concerns of the electorate, issues such as gun control, life issues, clean govt. etc, aren’t as important to voters. That’s where Kirk is more vulnerable.

David Hogberg runs down Kirk’s success as well as some other key states, here.

Anyone Come Forward to Support Borrowing $20 Billion, yet?

Chirp… Chirp…

Yeah, didn’t think so.

All that “Mission Possible” will accomplish is to give the spenders in Springfield cover to borrow more — for whatever purpose they choose.  Because hey… even conservatives are for borrowing more…

WILL STATE REPUBLICAN LEGISLATORS, CANDIDATES WHO WANT TO BORROW NEARLY $17.9 BILLION PLEASE COME FORWARD?

Illinois Alliance for Growth  Begins Challenges to Think Tanks Claims on Pension Borrowing Scheme

(Springfield, Ill.) Illinois Alliance for Growth President Greg Blankenship today called on Republican legislators, gubernatorial candidates and candidates for other state offices to come forward if they are truly interested in a state pension reform scheme that borrows nearly $20 billion today in exchange for 35 years of state government living on a “…strict diet…” of spending.

On Friday afternoon (January 22nd),  the Illinois Policy Institute emailed supporters and the conservative blog Illinois Review a “defense” of their pension reform scheme that offered assurances but did not specifically address issues raised by the Illinois Alliance for Growth.

Included were claims of legislative “interest” among caucus leaders and rank file members of the General Assembly.  According to the response, “We’ve presented our pension funding proposal to all four caucuses in Springfield, and it has garnered interest from some legislative leaders and members of both parties.”

Both House Republican Leader Tom Cross (Oswego) and Senate Republican Leader Christine Radogno (Lemont) have steadfastly argued that budget reforms must come before revenue increases.  Endorsing a revenue first plan, and then trusting the General Assembly to keep their word on spending limits while waiting for the constitutional amendment process to play out would be at odds with with their stated position.

“Except for four Senate Republicans who supported Gov. Blagojevich’s 2003 pension fix that doubled state debt, Republicans have been universally opposed to borrowing our way to prosperity so I find the claim of bipartisan interest extraordinary,” said Illinois Alliance for Growth President Greg Blankenship. “Just which state leaders are “interested” in their proposal is a reasonable question and if any Republican legislative supporters do exist after bashing Democrats for borrowing these last seven years — they especially should come forward.”

Last week, the Illinois Alliance for Growth released a critique of the Illinois Policy Institute’s  pension plan, “Mission Possible,” a scheme to borrow nearly $20 billion according to the Suburban Daily Herald to meet the state’s pension payments in exchange for future spending constraints.  The critique cited specific concerns surrounding the Institute’s pension borrowing scheme that included constitutional issues, implementation challenges and flawed assumptions that would open the spending floodgates in Springfield. The critique, “Mission Possible?” No, More Like “Get Smart” can be found at www.all4growth.org.

The Illinois Alliance for Growth is a non-profit, non-partisan taxpayer protection group dedicated to economic growth and limited government.  You can find out more about the Illinois Alliance for Growth at www.all4growth.org.

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Medical Marijuana & the Illinois Policy Institute?

Doug Finke’s take on the Illinois Policy Institute’s poorly structured pension plan.  It’s the second item from the bottom.  I think he’s accusing them of being high.

Finke, in his own ideological way, makes an important point that I touched upon. And that is about state spending priorities.  My point is that it’s up to the GA as our elected representatives to make the decisions and then voters will give the thumbs up, thumbs down or a shoulder shrug.  It’s called a democratic-republic and its the principles our country has been founded upon.

One thing I haven’t touch upon is the idea that voters should ok tax increases and other initiatives.  I’m not a fan of direct democracy.  The word democracy itself means mob rule.  A republic — rule of the best — is to this day considered the best form of government save the philosopher king.  All have their drawbacks — the empirical evidence of wise monarchs and dictators, wise republics and wise democracies demonstrates that none work on their own.  It was by combining the mob with the best men (and then women) that the US has endured as the largest and greatest experiment in self rule in the entirety of human history.

Part of California’s problem has been the mixed messages from voters. Spend money on this, don’t raise my taxes on that… It does make things rather whimsical.

We have a GA and a Governor.  The GA represents regional and local interests while the Governor is to be the executive and represent all of us.  They need to do their jobs and be held accountable if they don’t.    That’s not doing nothing as my friends at the Institute claimed.  It’s holding them to the fire.

Illinois Policy Institute’s Pension Plan Proposal is Unworkable, Unconstitutional and Unfathomable

IPI pension plan critique

Mission Possible?  No, it’s more like “Get Smart”

Illinois Policy Institute’s Pension Reform Plan is Unworkable, Unconstitutional and Unfathomable

(Springfield, Ill.) Labeled as “Fully funding Illinois’s state pension while respecting hardworking taxpayers,” Illinois’ formerly free market think tank is calling on the state to “responsibly” borrow nearly $18 billion to bailout the state’s five underfunded state pension plans.

To put that “responsible borrowing” in perspective, Gov. Rod Blagojevich’s doubled the state bonded debt in 2003 with a “mere” $10 billion borrowing plan.

In exchange for opening up this borrowing binge, the “Mission: Possible” report proposes laudable spending limitations that they claim will reasonably restrain the growth in government.  However, given the obstacles those efforts would face, the program is far more likely to open Springfield’s spending spigots rather than solve any crisis.

“Responsible Borrowing?”

The plan written by J. Scott Moody and R. Wendy Warcholick, both of New Hampshire, is proposing that Illinois cap state spending at the rate of population growth plus inflation while simultaneously borrowing approximately $18 billion over 15 years to make the state’s portion of pension contributions.  The idea, known as, “The Pension Funding and Fairness Act,” ostensibly, is a tradeoff for Springfield.  The deal is this:  Lawmakers would trade spending limitations in exchange for cover to borrow nearly $20 billion.  In effect, the Institute is proposing to buy off the Illinois General Assembly.  They get out of the pension crisis and taxpayers get a taxpayers bill of rights.

Illinois Policy Institute CEO John Tillman calls the measure “responsible borrowing.” The problem is that borrowing money is nothing more than spend it now and tax me later.  That’s why economists such as Milton Friedman have always argued that the issue isn’t how the government raises money — through taxes, through borrowing or through printing it –  but how much the government raises.

The idea also offers lawmakers the chance to spend the money then pass reforms in stark opposition to the House and Senate Republican Leaders who have refused to address taxes (another form of raising money) without significant, meaningful reforms first.

Ahem…a Few Problems Here

The Act is fatally flawed both constitutionally and politically.  The proposal can be legislatively undermined, it absolves politicians of their responsibilities and it’s goals are misguided.  Below are the specific shortcomings of the proposal:

• The “Pension Funding and Fairness Act” is unconstitutional.  As the authors describe it, the act violates the State Constitution’s single subject rule.  It combines spending restraint with borrowing.  Borrowing itself requires separate acts of giving the executive the authority to float the bonds, authorizing the spending on pensions and then appropriating the money.  In addition, the tax expenditure and limitation “provisions” are not logically related to borrowing money.  The provisions can’t be in the same legislation and that leads to the second problem.
• That any spending limitations passed as law can be undermined or ignored by the General Assembly and a compliant governor. Without the force of a constitutional amendment a tax expenditure limitation act would lack teeth.  During the sausage making process any number loopholes allowing the General Assembly to spend the money and ignore the reforms could be adopted.  Illinois all ready has a Balanced Budget Amendment that is routinely flouted by Springfield.  The authors as much as admit the limitations of their proposals in the pre-amble of their appendix outlining the model tax expenditure limitation act when they say, “This Act would initially be implemented statutorily and then referred by the legislature to voters for consideration as a constitutional amendment.”If voters reject the tax expenditure limitations, will Springfield give the borrowing up?  Unlikely.  This plan puts a huge amount of trust in the General Assembly, trust that the General Assembly has continuously betrayed in the past.
• It absolves lawmakers of their responsibilities. Right now the means of addressing pension ills exist, it’s called the General Assembly.  It’s the responsibility of the General Assembly to prioritize the state’s spending.  Under the 1970 Constitution the state must pay pensions first.  The fiscal irresponsibility of the Ryan-Blagojevich years now finds the General Assembly in a fiscal straight jacket.  With pension payments ballooning as a result of the last two pension fixes, policy makers are faced with the reality of their uncontrolled spending. This will require spending cuts or tax increases.   By borrowing the contributions, instead of using existing money earmarked for pensioners, the General Assembly would be freed to spend an additional $18 billion over the next 15 years to grow the size and scope of government and engage in social experimentation. There is little doubt that Springfield will take the nearly $20 billion and ignore reforms.
• Illinois neither wants, needs nor can have fully funded pensions. One of the most misguided aspects of this proposal is the idea that at the end of the process pensions will be fully funded and that this is a worthy goal. This goal isn’t well thought out. The dire straights of the current pension crisis tamps down public employee unions’ ability to lobby for more generous benefits.  As Illinois’ pension obligation picture improves, unions will pressure lawmakers to sweeten benefits. In order to purchase votes and enrich political friends tied to operating the states five pension funds, free spending legislators will be thrilled to oblige.   Because of the lobbying prowess of these interests, Illinois will never fully fund pensions and nursing the system along — instead of allowing it whither on the vine and die or implementing major reforms — is a non starter.

Clearly, They aren’t “getting it.”

What’s clear is that the Institute is failing to understand the political history of pension reform in Illinois, the 1970 Illinois State Constitution as well as incentives of political actors.  The balloon payments coming due as a result of the mid-1990’s reforms coupled with the abandonment of those reforms under the Blagojevich-Quinn administrations are all ready beginning to force some tough choices in Springfield.  Policymakers are beginning to take steps to understand the challenges ahead.  The stark choices of reforming or reducing state spending versus higher taxes will give voters ample opportunity to hold Springfield’s political class accountable.  Why undo that?

Pouring more revenue into the system further delays the reckoning.  Under the current regime, the choice is between rewarding public employee retirees versus pork barrel spending, creating welfare dependencies, and enabling Illinois’ famous graft. Overpaying public employee retirees is clearly the lesser of the evils. The high cost of pensions puts Illinois in a fiscal straight jacket and keeps Springfield accountable.  If lawmakers hike taxes, they’ll pay the price at election time.  This leaves public employee unions and the other tax eaters to fight for scraps.  It’s the proverbial next to last scene in life boat movies.

Last year, the Institute launched an effort to pass “Paygo” rules in which every member of the House Republican Caucus has co-sponsored a proposal that would open the door to tax increases.   Now, the organization is floating a plan to borrow nearly $20 billion for a pension fund bailout.  This is a proposal one would expect from the Obama Administration — spend now while only giving lip service to fiscal responsibility.

The Bottom Line

The Illinois Policy Institute is seeking legislative support to introduce this plan. Supporters of fiscal responsibility and free markets should hope they don’t find any takers.

# # #

About Greg Blankenship

Greg Blankenship is President & Founder of the Illinois Alliance for Growth.  From 2002 to 2008 he founded and was President of the Illinois Policy Institute.  He has degrees from the University of Illinois at Champaign-Urbana and Loyola University Chicago.  He resides in Springfield, Ill.

IL GOP Legislators Who Privately Say We Need A Tax Hike Should Step Forward Or SHUT UP!

I prefer the latter.

Republicans who privately say that we can’t solve the state’s budget problems without tax increases should be reported on.  And Republicans who feel that way should come forward.

You ladies and gentlemen know who you are.  5 of the 7 gubernatorial candidates have now said that they will make the tough decisions to get the state out of the mess it is in.  Instead of bailing out liberals who wrecked the Illinois economy you should be cheering them on, not privately dissing them.

In fact, if these Republican are so sure that it can’t be done, then they should say so publicly.  If they don’t have the guts to do so, then they should be the ones that should be dismissed because obviously the don’t have the cahonnes to do what they are saying is necessary.

Pat Brady said it correctly.  Illinois has a spending problem, not a revenue problem.

Twitter Weekly Updates for all4growth

• RT @Suntimes: Kankakee cop Tasers 2 kids for in-school demo. Lawsuits ensue. http://bit.ly/5hAiJ6 Wow, right out of The Hangover. #
• Dem Leader Currie: Illinoisans aren't over taxed. People who believe that should run on it. #
• PBS anchor trying to get Radogno to cave on taxes. D's lucky to have press in this state to negotiate on their behalf. #
• Senator Radogno days GOP says no to tax increases. She is offering no cover. Cross reinforces. #
• Rudderless, that's my 1 word description of SoS, the SoS speech and the Quinn Administration after this speech. #
• RT @ILSenateGOP: Quinn regarding early release program. Refers to increase in prisoners. So how come Thomson prison is "surplus" property? #
• Is there anyone in IL who Gov. Quinn hasn't recognized yet? If so let us know so he can get you plugged. #
• Quinn taking a page out BHO playbook on early release of cons. Blames predecessors. #
• Quinn speaks code about tax hikes– as if no one knows he wants to hike them. So much for honesty. #

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