State workers in Ohio, Wisconsin and Indiana embroiled in a bitter fight to prevent a reduction in benefits and limit their collective bargaining rights continued protesting today in what is seen as an attack on the middle class.
State Budget Woes
I live in Illinois where legislators recently voted to raise income taxes by 66 percent, from 3 to 5 percent, to cover a budget deficit of $13 billion and avert fiscal insolvency for the state.
In Wisconsin, Republicans proposed school employees contribute to pension funds and health care premiums and to limit their collective bargaining rights to cover a budget deficit of $2 billion.
Similarly, Indiana Governor Mitch Daniels (R) called for educational reform with greater control of education spending, along with limits on teachers' bargaining rights.
Ohio Governor John Kasich (R) called for teachers, police officers and other public employees to make concessions of up to $16 billion to cover the shortfalls in pension funds.
Interestingly, Wisconsin has one of the healthiest pension funds in the nation and is 97 percent funded. A recent report by Dean Baker, author of "The Origins and Severity of the Public Pension Crisis (PDF)," states Ohio is 60 percent funded and Indiana is 48 percent funded compared to Illinois, which is 52 percent funded.
In Wisconsin, opponents to the bill argue that it doesn't make sense to pressure public employees to make concessions by contributing to the pension fund when there is not a shortfall. Also, Wisconsin concessions would apply to all public workers except police, firefighters and state troopers.
State Budget Battles
One of the factors that set Illinois apart in balancing the budget from Ohio, Wisconsin and Indiana, is Democrats retained control of the governor's office in Illinois in the November elections. Illinois has a constitutional balanced budget requirement. Balanced budgets are largely referred to as operating budgets or general funds budget and include funds deposited for state tax collections
Ohio, by contrast, does not have one specific statute that says it must keep a balanced budget; Wisconsin has a constitutional requirement for a balanced budget, however Indiana does not have a constitutional provision for legislators to vote on a balanced budget.
A recent study by the Pew Center produced a scorecard for each state based on six factors, including change in revenue, size of budget gap, change in unemployment, foreclosure rate and GPP "management of money." California garnered the highest score of 30, indicating its fiscal woes exceeding other states. Wisconsin scored 22, Ohio came in at 16, Indiana ranked at 15, while Illinois received a rate of 22.
Lessons Learned
There are a few lessons that Wisconsin in particular can learn from Illinois efforts to balance the budget.
Lesson 1: Slashing taxes for the corporate sector doesn't necessarily stimulate the economy: Wisconsin passed a law forgiving personal and corporate taxes in the hopes of luring companies from states like Illinois to move there. This move created a deficit of $137 million for the state.
Lesson 2: Pitting private workers against public workers doesn't work: If concessions need to be made to balance the budget, it should be distributed fairly. Illinois public and private sector employees both share the pain in the increase of income taxes.
Lesson 3: Targeting areas critical to the public's well being undermines trust: Education, healthcare, and public safety are three areas that have not experienced deep cuts in Illinois, compared to other states.
States lawmakers undoubtedly have an uphill battle to balance the budget. Yet alienating union workers and the middle class will not help them win.
Mike Johnson, Wisconsion AFL-CIO ads attack Walker plan on collective bargaining, The Journal Sentinel
Dean Baker, The Origins and Severity of the Public Pension Crisis (PDF),
Pew Center on the States 2009, scorecard
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