By ALAN J. ORTBALS
When Bruce Rauner was elected, I was hopeful that the non-politician would take a non-political, non-idealogical, objective look at the state’s fiscal situation and craft a pragmatic plan to right the fiscal ship. Instead, he offered dogmatic drivel and shell game antics designed to make the state’s ledger look better while handing the bill to local governments, higher ed and health-care providers.
I, along with about 150 other Southwestern Illinois business owners, attended a presentation by the governor last month. In it, he peddled the old magic beans economics theory — you can’t cut your way to prosperity; you can’t tax your way to prosperity; you have to grow your way to prosperity — a mantra that doesn’t jibe with his proposed budget.
Many people advocate government living within its means. Government needs to operate like a business, they say. Those who say that, however, apparently don’t know much about business. My business, like many of yours, survived the Great Recession. With the suddenness with which the economy tanked, we had to immediately look for ways to cut expenses. But, if that’s all we did, you wouldn’t be reading this newspaper today. We quickly started to brainstorm ways that we could stabilize revenue. I expect that’s what most of you did — pursue new markets; expand product lines; add value to your product. Cost cutting alone creates a downward spiral — cuts diminish your product which reduces your sales which lead to more cuts that diminish your product and further reduce sales until you hang the “Going Out of Business” sign in the window.
Good government — like good business — requires stable revenue. Grover Norquist’s “No New Taxes” pledge is a mindless way to operate and I expected better from Rauner. Imagine running your business on a “No New Revenues” pledge. Rauner needed to take a balanced approach to close the $6 billion gap with a combination of revenue and cuts. You can’t do it all one way.
On Jan. 1, when the state’s temporary income tax hike rolled back, it blew a $3.7 billion hole in the state’s budget. The smart thing to do would have been to propose a budget keeping last year’s tax levels in place then looking for ways that the state could operate smarter and more efficiently to fill the remainder of the $2.3 billion gap.
According to an analysis by the Center for Tax and Budget Accountability, $2 billion of the $3.7 billion in tax cut went to the wealthiest 11.8 percent. Millionaires are keeping an extra $37,000 this year. While that’s nice for them, it does nothing for the state’s economy as very little of that money will go back out in purchases of goods or services.
And even at 5 percent, Illinois’ tax rate was lower than many of its neighbors. We had the ability to keep the tax at the same level but Rauner didn’t have the sense to do it.
Instead, Rauner’s budget fills much of that $6 billion gap by shifting costs to others. Cutting $400 million from funding for higher education doesn’t mean we just saved $400 million. It means that our universities will have to cut programs and services and/or raise tuition — in other words, shifting even more of the cost onto students and their families. Is this really a good idea when the cost of a year at the University of Illinois is already more than $30,000 and sky-high student debt is throttling our economy? Is that how you build a strong Illinois?
His budget also cuts local governments by $600 million. Local governments were already struggling after years of declining property values and home foreclosures. That $600 million isn’t being saved. You’ll end up seeing it in your property tax bill. And poorer communities will find that to be a hard nut to crack.
And, Rauner cuts a whopping $1.5 billion from Medicaid. Does that magically go away? No. Those folks will simply get their medical care in emergency rooms with hospitals footing the bill and passing it along to the insured, further raising premiums.
Yes, government does need to operate like a business, which means working on both sides of the ledger to build a stable organization that can grow and prosper. Rauner should listen to himself — “you can’t cut your way to prosperity.”
Alan J. Ortbals is president and publisher of the Illinois Business Journal.