- Associated Press - Tuesday, December 11, 2018

Dec. 11, 2018

Chicago Tribune

Goodbye to Illinois’ $130 billion pension hole. Now it’s $133 billion. And getting deeper.

Sometimes the clearest warning about Illinois’ fiscal crisis can be communicated using numbers, sometimes with a well-chosen phrase. Here we present both, as reminders during the period before a new Democratic governor takes office with a Democratic mega-majority, that the state’s messes will only worsen. Until lawmakers take decisive action.

First, the awful numbers: For several years we’ve cited the figure of $130 billion to represent Illinois’ estimated unfunded pension liability. Never mind that number, it was $133 billion as of June 2018 - and it’s getting worse - according to a new state report. The Commission on Government Forecasting and Accountability estimates the shortfall in commitments to future retirees will deepen to nearly $137 billion in the current July-to-June year, and to $139 billion in fiscal 2020.



Now a choice word or several: Fitch Ratings in a new report says Illinois has exhibited a “lack of coherent fiscal policymaking over many years” and is guilty of “irresolute fiscal decision-making.” Over the years, lawmakers skimped on payments into the retirement kitty, or avoided making payments altogether, rather than being disciplined about putting enough money into the funds to pay for all the benefits they had promised.

Today, Fitch says, Illinois’ net pension liability plus other long-term debt represents 29 percent of the state’s personal income, the highest of any state (our emphasis) and well above the 50-state median of 6 percent. Oh yes, the annual operating budget - an astonishing one-fourth of which goes to pensions - is also a wreck: Fitch reminds us that about $2 billion of the $38 billion budget revenue is either unlikely to be realized or one-time in nature. Irresolute, indeed.

The costs of lawmakers’ recklessness are borne in many ways. Springfield raised the state income tax by 32 percent in 2017, and still Illinois can’t keep a balanced budget. The current fiscal year is about $1.2 billion out of whack. And despite issuing bonds to pay some unpaid bills, there’s still a backlog of about $7 billion in, yes, unpaid bills. The state is making payments to the pension system, although not as much as actuaries say is necessary, so the shortfall rises. The pension system, which includes government workers and many of the state’s teachers, should be 90 percent funded. Instead, it’s about 40 percent funded.

Illinois, under such intense financial pressure, has the worst credit rating of all states, which makes borrowing more expensive. Employers and residents who aren’t tethered to Illinois have reason to consider going elsewhere before the reckoning comes, in terms of either much higher taxes to pay off all these debts or serious declines in government services. Or both. We imagine that’s one reason Illinois’ population is declining, and why major employers like Amazon choose to locate elsewhere.

Next month, Gov.-elect J.B. Pritzker will take office alongside the Democratic-controlled General Assembly. Once he’s on the job, we’ll be eager to hear his plans for maneuvering Illinois through the thicket. We’ve heard him talk about raising revenue by shifting the state to a progressive tax rate that can extract more money from higher-income earners. That idea strikes us as no panacea. It’s easy to demand more money from taxpayers. It’s also easy to continue borrowing money. Both would weaken the state, and then weaken it further by driving employers elsewhere.

The solution requires a combination of raising revenues (preferably by increasing the number of private-sector workers), cutting expenses, and introducing regulatory reforms to encourage business owners to invest and hire in Illinois.

If budgets are balanced, tax levies are fair, and employers can anticipate the costs of doing business as well as the benefits, Illinois will prosper. Otherwise, the liabilities will keep rising: $133 billion, $139 billion … And the standard of living in Illinois will decline.

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Dec. 5, 2018

The (Champaign) News-Gazette

What’s the limit?

Legalized gambling isn’t the golden goose that it used to be.

When the new Illinois governor and Legislature take office in January, they will encounter difficult financial issues and, given their aversion to facing hard facts, immediately begin looking for an easy solution.

In search of a revenue boost, they can be expected to legalize marijuana and expand gambling.

Marijuana represents an entirely new frontier for this state. Who can say what the future holds regarding tax revenue on that question?

But Illinois has had long experience with gambling, and it no longer looks like the surefire winner it once did.

After all, Illinois has been there and done that.

There is, however, an exception - sports gambling.

Since the U.S. Supreme Court struck down federal legislation barring sports gambling in most states, public officials across the country have been considering how to monetize that practice by legalizing it in their states.

There, surely, will be demand. But how much will it produce in tax revenue for Illinois if it is legalized here in a big way? Everyone will just have to wait and see.

There are fewer questions surrounding other forms of gambling here - the state lottery, racetracks, 10 casinos and video gambling on virtually every street corner.

A recent report prepared by a state legislative commission revealed that video gambling, introduced just five years ago, is growing like gangbusters.

But the other three, in terms of generating tax revenues, are falling off.

The lottery still does big business, although not as much as it used to do.

Horse racing is on life support. Only two of 10 casinos are operating growing businesses.

It’s clear the various gambling businesses - particularly video gambling outlets and casinos - are cannibalizing each other’s businesses. Casinos that once minted money no longer do.

It seems obvious that if Illinois is to benefit any further from casinos, it would have to open a new venue or more in Chicago. After all, it’s the big city, not just in terms of population, but in visitors from all over the world.

That would be a huge business, the kind that political insiders there would fight to control. The mind reels at the potential criminal indictments that could be generated from the scrum over who would own what in that deeply corrupt municipality.

At the same time, it’s a sure thing that owners of existing casinos in Joliet and Des Plaines, the two whose revenues are still going up, would hate the idea because they know they’d lose a big part of their customer base to Chicago.

But in terms of state revenue, Chicago casinos would be a big winner, maybe even the only winner the state can depend on under the current format.

In that sense, those in the gambling business in Illinois are in the same boat as the gamblers in Illinois.

In video gambling, the house always wins. So the individuals gamblers who come out ahead must do so at the expense of the individual gamblers who don’t.

As cannibalization increases, those enterprises that manage to stay afloat or even make big profits will do so at the expense either of other types of gambling - horse racing or lottery - or gambling entities - Chicago competing against casinos in Des Plaines or Joliet.

There’s no telling what the limit on gambling is in Illinois. But there must be one, and this state has to be getting close to reaching it.

___

Dec. 6, 2018

The Daily Herald

Put consumers first when revisiting regulation of car sharing

It’s nice when legislative outcomes favor not the lobbyists but the little guy trying to get by.

It doesn’t happen often enough.

Case in point: Efforts by the car rental industry to create regulations so onerous for those individuals who might rent their car to a stranger as to render it infeasible for them to do so.

The hotel business has not gone under in the face of Airbnb. Taxi companies still exist alongside drivers for Uber and Lyft, though admittedly the ride-sharing companies have taken a huge bite out of taxi and livery businesses.

And Enterprise, Alamo, Hertz and all the other legacy car rental outfits will find a way to thrive in a world that allows people to rent out their personal cars to others through such upstarts as Turo and Getaround.

Legacy companies need to up their game to compete better or diversify in the age of the sharing economy. Newspapers had to get smarter with the advent of Craigslist and the rise of direct advertising on the internet. Other legacy industries have had to get smarter, too. It’s the way of our world.

Of course, the rules have to be fair in the process, and making sure that happens is a process that deserves careful thought and the contributions of all parties concerned. That concern was at the heart of car-sharing regulations we opposed that recently failed to overcome a governor’s veto.

Four months ago, we urged the General Assembly to vote down a bill that would have put heavy restrictions on peer-to-peer car-sharing operations. The bill, heavily influenced by special interests and legacy car rental companies, passed with a veto-proof majority in the House and close to it in the Senate.

Saying the bill sought to unfairly stifle innovation, Gov. Bruce Rauner responded with an amendatory veto, offering a compromise that involved input from the auto, insurance and ride-sharing industries. It made venturing into ride sharing less burdensome on the little guy.

An attempt to override the veto failed in the state Senate, sending the issue back to the starting line where it belongs.

Don’t get us wrong. We recognize this nascent business needs to be regulated. Peer-to-peer car-sharing customers must be afforded protections, such as ensuring the car they’re using is safe. But the hastily written bill rushed through the General Assembly was far too one-sided and may have scuttled a valuable consumer initiative.

Studies show that millennials are less likely to own a car than previous generations, electing to use ride sharing and other modes of transportation instead. That’s good for traffic and air quality. It’s good for entrepreneurs who want to get more out of a car they don’t use all the time. Technology and market forces have found a way to satisfy both interests. Now, we need regulations that will make the process both viable and safe.

Of course, that process needs to be fair to legacy rental car companies, but it also needs to recognize the interests of consumers and the potential for emerging companies to help serve them. We look forward to a return to this issue that considers all these angles.

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