DETAILS MATTER by Bob Ginsburg February 4, 2021
Myths and stories in the fight about the kind of government we want and what we want it to do.
Welcome to Details Matter a Newsletter about urban development, public finance, Transportation, and politics in Chicago and Illinois. You can subscribe/unsubscribe at (https://robertginsburg.substack.com/welcome). Get previous issues which mostly focus on dealing with the fiscal crisis at (https://robertginsburg.substack.com/archive). PLEASE FORWARD if interested.
Myths and stories in the fight about the kind of government we want and what we want it to do.
I apologize for not writing for a couple of weeks but I had a couple of other projects to finish. I would like to think that nothing happened (besides the snow and inauguration) and that everything post-inauguration and post pandemic is clear. Alas that is not the case. There is lots of confusing chatter about budgets, the economy, infrastructure initiatives at the local, state and federal and how to really put equity first in all those initiatives. That is more than I want to address this week and I will get back to infrastructure soon but understanding and framing the budget issues are the most pressing issues.
There have ben lots of articles and press releases looking at estimates of what the economy will do next year and the size of the state and local budget deficits. They seem to give the impression that the “experts” believe the recovery will be smoother than they previously feared. Placing economic data in a positive context is useful and necessary but should not be relied on for planning. For example, the Congressional Budget Office estimate for the US Economy in 2021 was a positive 4.2% increase for 2021 but most of the boosters failed to point out that the CBO said that 2020 economic output (and therefore tax revenue) will be less than 2019 and that 2021 may not reach 2019 levels and with employment not reaching 2019 levels till 2022. The IL Commission on Government Forecasting and Accountability –COGFA- monthly report for Illinois glowingly stated “December Base Revenues Shrug off Economic Uncertainty to Post Decent Gains.” In fact FY2021 sales taxes (most affected by the pandemic and accounting for nearly 25% of state income) are flat compared with FY2020 and FY2019. Income taxes (which account for 60% of state revenue) are up over 2019 and 2020 as higher paid workers (as opposed to many service/essential workers) continued to receive paychecks so that income taxes were not as affected by the pandemic. Municipal and County revenues are highly skewed to sales and real estate taxes (in some cases over 40% of local budgets) which were and still are dramatically affected by the pandemic.
There is a clear role for being able to tell an effective story that people believe and then use to organize other facts into the story in a way that ties it all together. Ronald Reagen’s line that “Government intrusion and Government programs are the problem” was the core of the Myth and storyline that has been spun out for years. Understanding how those myths and stories distort reality is important in crafting and implementing solutions and a new story.
First is the Illinois corollary of the myth that government is incompetent and public employees are paid too much. These days in Illinois, that story is told by the libertarian and corporate critics who, rather than address the real economic problems in the state, only indirectly acknowledge the State’s budgetary problems before immediately attacking the pension shortfall. The Illinois Policy Institute even has the gall to argue that formally cutting pension benefits and thus accrued liability will reduce pension payments so much that there will be enough money to fund “critical” services. Besides being unconstitutional, the pension shortfall is not a problem of outlandish pension benefits, it is the problem of not paying what was required and promised over the last 20+ years. (NB: The table below shows the total payments made each year to the pension funds, the amount required to be paid according to the actuaries and how that “avoided payment” contributed to the General Fund budget for the last 20 years.) While shortchanging the pension payments have helped fund the Illinois General Fund, lowering the required payments will not provide real increases in public funding. It will simply lower the pension payments for retired public employees and impoverish many of them. Also, it is interesting that the corporate and political interests that opposed the Graduated Income tax amendment now talk about “critical” services without defining them. Their real goal is to dramatically underfund government and set the pattern of not paying pensions or not providing retirement security for working people. That opposition over the past 40 years, led to extreme aversion to providing enough funds to provide “critical” services effectively.
So, if it is not pension debt, it is not overpaid public employees, and it is not incompetent government, then what is the problem. That is where the next set of Illinois myths and stories comes in. As I discussed in the last newsletter (Details Matter, January 18, 2021) we have been swamped for 40 years with the storyline of corrupt government and especially Chicago Democratic politicians and bloated state and local payrolls. They say –“If only we cut the staffing we could provide services efficiently.” It would be dishonest and wrong to argue that government programs could not be improved and that there is no waste but I would argue that it is not that much worse than the private sector who get away with underpaying employees and treating people badly with little or no oversight and knowing that the public safety net will provide some health care, some housing, some transportation that people need and that the private sector does not want to pay for..
That story has been so effective we have underfunded and under-resourced public services, expanded regressive taxes and added too much public debt and as a result we have increasingly dysfunctional government – even though many corporations also rely on those public services. Paying less than $20 per hour means that a family of four will likely need food stamps, housing assistance, public transit, emergency room health care and more just to keep that job. The Trump failures in the pandemic from testing and vaccine deployment and economic relief reinforced the problems from decades of hollowing out and underfunding of our public health and other critical infrastructure and public services.
It will not be enough for the federal government to take steps to revive the idea that government is a positive force. It often takes years for the benefits of federal programs to become apparent- look how long it took before the ACA (or at least key parts of it) became untouchable. We need to make the implementation publicly visible and transparent from the beginning so people can take ownership of the changes. We need to pay attention to how these programs are implemented and delivered at the state and local level.
Even if the Feds dramatically step up in the next 6 months, the State’s budget deficit will shrink from $4.9Billion to maybe something on the order of $1-2 Billion. The City deficit would shrink next year from $1.5Billion to approximately $800Million. These are still historically large deficits. Without funding, there will be more staffing cuts (beyond the $700 Million in state budgets cuts and furloughs) and more state and local agency service reductions. The more cuts we allow, the more difficult it will be to implement new programs.
As I have said before, the state cannot go into a shell after the failure of the Fair Tax. We need to be clear that first we need to fix state and municipal funding crises with more revenue from wealthier residents and a move to help middle and working class residents. THEN we need to fully fund plan the $45 Billion State infrastructure plan and redirect the funding and spending to address the needs of underserved communities and those most impacted by the pandemic ( as was proposed in the recent legislative letter to IDOT.)
DIRECTING FUNDING AND INVESTMENTS
I want to end with a brief argument and defense for big overhauls of how we fund government and set up programs. Our funding of government and much of the structure of government was set up 70+ years ago. After that long, the details have been tweaked by the regulated industries. When I worked on environmental issues 35 years ago, the lawyers for the steel industry wrote the Reagan era regulations for air and water permits so that it would make them provide them with legal protections. They then turned around and complained about the irrational and overdetailed regulations. The Pandemic made clear the problems of inequality and unequal development. We need a new, expanded definition of government’s responsibility that makes clear how new projects and investments will expand opportunities in all but especially undeserved communities. There are many ways to establish a counter- narrative to “government is bad/inept and coercive” to a progressive one where insure everyone has resources and opportunity to succeed.