Illinois financial collapse not postponed as State House of Representatives passes first budget in 2 years

They are moving around the deck chairs on the metaphorical Titanic that is the State of Illinois fiscal regime as it heads straight toward the figurative iceberg known as insolvency.  Even though it is all but guaranteed to never make it into law, the solons in Springfield's lower legislative chamber managed for the first time in two years to actually pass a budget.  Austin Berg of the Illinois Policy Institute reports:

More than a dozen Republicans joined House Democrats in passing a budget that includes a massive tax hike and no structural spending reforms. Gov. Bruce Rauner said he would veto the plan.

The Illinois House of Representatives passed a full-year budget July 2. It's the first time in two years the body has approved such a plan.

The revenue portion of the budget, including a permanent income tax hike, passed on a 72-45 vote, with 15 Republicans voting in favor. The spending portion of the budget passed out of the House on a vote of 81-34.

Well, those deck chairs do look good.  Bipartisan?  Check.  Massive tax hike?  Check.  But the other half of the fiscal sanity equation, spending discipline, is entirely absent.

Illinois State Capitol

The budget package is devoid of any structural spending reforms to slow growth in the cost of government: It lacks comprehensive property tax reform, constitutional pension reform, collective bargaining reform, reforms to Medicaid and more.

And Illinois's Republican governor, Bruce Rauner, "announced he will veto the budget in its current form."


Lawmakers could override the governor's veto with a three-fifths majority vote in each of the House and Senate, which is currently the same share it takes to send the budget to the governor's desk in the first place.

So the most charitable interpretation of the maneuvering underway is that individuals and corporations in Illinois will get a huge permanent tax hike:

... a massive, 32 percent income tax hike on Illinois residents, who are now witnessing the nation's worst income growth. If signed into law, the House plan will hike the state income tax rate to 4.95 percent from 3.75 percent, and the corporate income tax rate will rise to 7 percent from 5.25 percent.

With no spending discipline and a black hole of pension liabilities, the only question is when the iceberg will be struck and the state is unable to pay any of its bills.  At that point, we are in the zone where the rest of America must decide what to do about its problem-child irresponsible states, starting with Illinois.  A new law allowing states to enter bankruptcy and discharge their obligations thereby (including, most notably, the pension obligations that bought unbroken power for Democrats in the legislature for decades) will be compared with a federal bailout in the national debate that will follow.

I do not anticipate a groundswell of support from fiscally prudent states like Texas to send their taxes to bail out the lavish pensions of state employees in blue states.  We can look forward to rhetoric blaming them for pending deaths of impoverished local public servants in the Land of Lincoln.

Hat tip: Peter von Buol

If you experience technical problems, please write to