UI experts examine Quinn's speech

Gov. Pat Quinn's political challengers weren't the only ones taking issue with his State of the State address Wednesday, which trumpeted Illinois' "comeback" from political corruption and an unprecedented fiscal crisis.

The News-Gazette asked five experts from the University of Illinois' Institute of Government and Public Affairs for their take on the governor's speech.

Is Quinn going to be re-elected. Ask columnist Tom Kacich about it here

Most agreed he painted a far-too-rosy picture of the Illinois economy and failed to address how the state will combat its mounting deficits.

He also didn't explain how he'd pay for several new programs — including a "Birth to 5" early childhood initiative and a doubling of need-based college grants.

"It was generally a lot of positives and not a lot of specifics," said economist Fred Giertz, an authority on the state budget and Illinois economy.

However, the experts praised Quinn's suggestion to double the Earned Income Tax Credit, saying that's a far better way to help working families and the economy than boosting the minimum wage.

Here's their review:

Pensions

Quinn said the landmark pension reform last year, designed to eliminate the pension systems' nearly $100 million unfunded liability, "stopped the bleeding" of the state's fiscal problems. The plan cut benefits for employees and retirees, and a coalition of unions filed a lawsuit Monday challenging the constitutionality of the measure.

Jeffrey Brown, professor of finance and director of the UI's Center for Business & Public Policy: "Essentially he just used the speech as an opportunity to take credit for passing a historic pension reform bill, and didn't say much more about it than that. I guess I'm not surprised by that. I think if anything he maybe overpromised a bit on where this puts us. ...

"It reminds me a little bit of George Bush's 'Mission Accomplished' sign on the aircraft carrier. It's probably a little premature, given that it's still fighting its way through the courts, given that we still face an extraordinarily large unfunded pension obligation. It's not to say this reform was not substantial, but by no means was this the end of the conversation for the state of Illinois."

The state budget

Quinn didn't directly address the state's growing budget deficits, claiming that "unlike our predecessors we've made the tough calls to balance the budget."

Don Fullerton, professor of finance and expert on taxation and budget policy: "There are three striking facts: One is that he has this extra spending. The other is that he says nothing about how to pay for it. And the third is that not only would that increase the deficit, but he's got this huge deficit already in future years that's completely unacknowledged. ... I don't know what year he's looking at, but it's not balanced for future years to come. The spending continues to grow faster than revenues ... so that's unsustainable."

Taxes

Quinn didn't mention it, but the temporary tax increase that raised Illinois' income tax rate to 5 percent is scheduled to begin racheting down next January. That means a loss of billions of dollars in revenue for the state. Whether Quinn will support an extension of the tax increase likely won't be known until his budget address Feb. 19.

Fullerton: "How could we let the income tax rate fall back down again when the spending that's already planned is not paid for — let alone his new programs? It's not particularly good governance to talk about new spending without a way to pay for it. I know politicians do that ... but I'd like everybody to take heed and engage in better government somewhere."

The economy

Quinn said the state has added 280,000 private-sector jobs since 2010, and unemployment has fallen from 11.3 percent at the height of the recession to 8.6 percent, its lowest point in almost five years. Since last May, he said, Illinois has led the Midwest in the number of new jobs created.

David Merriman, professor of economics and expert on public finance: "It struck me that he wasn't grappling with the very bad performance of Illinois in terms of the economy recovery. (Illinois) is far bigger than other Midwestern states, so if it's the total number of new jobs, yes. But the unemployment rate is among the worst in the Midwest. The recovery has been very, very poor in Illinois. ... The picture he painted of a state that was doing well economically, that's not my perception at all."

Minimum wage

Quinn again proposed raising the minimum wage from $8.25 to $10 an hour. President Barack Obama announced similar plans in his State of the Union address Tuesday, proposing to raise the minimum wage for federal contract workers from $7.25 to $10.10 an hour.

Merriman: "That is probably not a terribly important policy in the sense that it probably will not reduce unemployment by very much, but it will also probably do very little to reduce poverty. Most minimum wage earners are not the sole earners in their family, and we're not talking about huge increases in their pay anyway. It's a popular thing to do, but I doubt it's going to have a very big effect on the economy."

Earned income tax credit

Quinn proposed doubling the earned income tax credit, aimed at helping poor Illinois families keep more of the money they earn. The state last increased the credit in 2011, raising it over two years from 5 percent to 10 percent by this year. Republicans like it because it's seen as an incentive to work, and Democrats like it because it helps low-income families.

Brown: "I actually believe the earned income tax credit is a much better way to help low-income families than raising the minimum wage. It is clearly shown to affect labor market participation, and it clearly helps families who receive it. But furthermore, it does not impose the cost on the employer who, we are hoping, is going to create those jobs in the first place. It recognizes that this is sort of a social and a broader economic issue."

Small businesses

Quinn said he will create a new position in his office that will focus on advocating for small businesses, to help startups and business growth. He also called for reducing a filing fee to create a limited liability company to $39 from its current fee of $500.

Merriman: "That's probably not important except for very small businesses. I doubt it will create many jobs."

'Birth to 5' initiative

Quinn proposed expanding early learning by increasing access to prenatal care, quality preschool opportunities and support for parents. He didn't detail how much money the initiative will cost but said the investment would save taxpayers money in the long run by keeping kids healthy and better preparing them for college and careers.

Jorge Chapa, professor of sociology and Latino/a studies: "I've seen the research on early childhood programs. They really are effective programs in general, including Head Start. A lot of people are critical of them and say they don't work. The research I've seen shows that those programs are very effective and very cost-effective, too. They work, and for the money that's spent they're very effective. The critics who say they're not are not informed by research."

Latino issues

The governor didn't mention immigration reform, but touched on a number of topics of interest to Latino voters, including the minimum wage increase, early childhood programs and expanding grants for college students.

Chapa: "Those are all very positive pro-Latino statements. ... Those aren't specifically pro-Latino programs, they're for everybody, (but) a lot of what the governor said would be very much of benefit for the less well-off in our state, and there are many Latinos in that category."

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Sid Saltfork wrote on January 30, 2014 at 2:01 pm

An ENT physician should have commented on the growth in the governor's nose during his speech.  It is going to get worse as the spending continues.  It does not take experts to figure that out.  There are no priorities except theft, and taxes on the agenda.  Mr. Fuddles knows it; but he cannot say it in the State of the State speech.  Why do any of the gubenatorial candidates want to be governor?  They want to do their civic duty?  We all have heard that before.  It just never turns out that way in Illinois.  The temporary tax will become permanent, and increased later.  Pensions will be stolen again even after "pension reform".  Spending more requires the money to come from somewhere.  

Political Illinois 101: State spending results in "campaign donations", and local votes