By Josiah Cantrall
Special Guest Perspective for the MacIver Institute
Wisconsin and Illinois offer contrasting paths to financial stability
Wisconsin's never ending election cycle has made voters increasingly wary of impassioned rhetoric and politicized spin. Sadly, truth from the mouths of politicians is normally subjective at best. What is undeniable, however, are the former similarities and current contrasts between Wisconsin and Illinois.
At the beginning of 2011, Wisconsin faced a $3.6 billion deficit while Illinois had a $13 billion budget shortfall. Proportionately, Wisconsin was actually in a worse fiscal situation.
Governor Walker successfully closed the budget deficit with numerous reforms and budget reductions. His most prominent piece of legislation, Act 10, restricted collective bargaining for most unionized public employees and led to his eventual recall. However, despite the legislation's controversial nature, analysis done by The Beacon Hill Institute at Suffolk University, 2012 in Massachusetts credits it with saving taxpayers more than $1 billion. Suffolk University also reports that without the law, "Badger State governments would have been forced to raise taxes or make deep job cuts to meet budget expenses."
In contrast, Illinois addressed their budget shortfall by passing the largest income tax increase in state history. Despite new record levels of revenue, Illinois continues to raise taxes and cut services. Lawmakers recently passed a $1-a-pack cigarette tax increase and cut $1.6 million in Medicaid funding. These changes will completely end prescription drug coverage for nearly 200,000 senior citizens and health coverage for 35,000 adults.
Next up, legislators in Illinois will soon vote to strip away public worker pension benefits and further cut spending for social service programs. A House committee voted to cut $259.6 million in education aid and the states historic tax hike could also be made permanent.
Even with new service cuts and additional sources of revenue, the states unpaid bills are expected to hit $8.5 million by June 30. Consequently, Illinois's credit rating has suffered, and Moody's Investors Service has downgraded it to the worst in the nation.
Illinois Policy Institute wisely asks, "If Illinois can't cover its bills during a time of record revenues, how will it adjust when the tax hike sunsets and liabilities continue to rise?"
Wisconsin on the other hand has experienced a sharp turnaround. According to John Shannon, CEO of a power-storage company in Franksville, "Things definitely are moving and improving in the right direction."
School districts here are reporting cost savings. As a result of strong personal income growth, the Walker administration says new revenue projections show the state will finish the 2011-2013 budget years with a $154.5 million surplus.
Job creators here are bullish on the future. Just today WMC released the results of their employer service and the responses were the most optimistic in a decade.
On the Chief Executive Best States/Worst States list ,Wisconsin has leapt from 41st to 20th since 2010. Illinois is ranked 48th on the same list and one CEO is quoted saying, "Moved all jobs out of IL to WI because of taxes, anti business attitude and weak worker ethics and poor educational level. High school graduates cannot read, write or count. Complete failure of the public education system in Illinois and terrible political environment."
Wisconsin's current political climate has undeniably left residents concerned about their states future and critical of their elected officials. However, while our Southern neighbor continues to raise taxes, cut vital services, and experience increased financial crisis, we are expecting a budget surplus and arguing over how many new jobs have been created. Recall or no recall, at least we aren't Illinois.