States of Plenty

Last week (1/11 editorial) the Wall St. Journal pointed out that more than 3 dozen states are reporting revenue above forecasts for their FY 2006. There is apparently a lot of underreported economic good news:

According to the National Conference of State Legislatures, states have closed an aggregate $264 billion budget gap since 2001. "State budget conditions continue to improve, showing signs of recovery in nearly every state.

The Journal goes on to point out:

There's some policy irony here. In order to vote for the Bush tax cuts, some liberal Republicans insisted on a $20 billion giveaway to the states to offset what they thought would be "lost" revenue. But the revenue data show that the Bush tax cuts and the economic expansion that has followed have been a windfall for state coffers.

Since the tax cuts passed in mid-2003, GDP growth has averaged close to 4%, the jobless rate is down to 4.9%, and federal tax receipts have climbed at the fastest pace in more than two decades. More workers and rising incomes translate into more taxable income for states.

So where does Illinois rate among the states? On Wednesday, in his State of the State address, Gov. Blagojevich will unveil a $3.2 billion public works program based on an expansion of state gambling revenues. Don't look for much accountability and tranparency on the budget. In last year's address, the governor pointed out Illinois faced a $1.1 billion budget deficit and the largest unfunded pension liability in the nation, and then he kicked it down the road.

It will be business as usual in Illinois, with the governor upping spending and fees, reneging on campaign promises, and sharing the public works' spoils with cronies. Today's Chicago Tribune:

The package has the backing of the two most powerful Democrats in the legislature, House Speaker Michael Madigan and Senate President Emil Jones Jr., both of Chicago, but it faces serious complications because of Blagojevich's previous comments about gambling and the possibility that the governor's insiders could get a piece of the action.

Blagojevich contends that keno is not an expansion of gambling but merely an addition to existing lottery games.

But even as a candidate for governor, in a debate just a month before he won election, Blagojevich chided the government's reliance on gambling revenue to solve fiscal problems.

"You become hooked on gambling. It's almost like the bad habit that it can become for an individual," Blagojevich said.

He once argued that legalizing video poker machines that now proliferate illegally in bars in some regions of the state would be like authorizing "crack cocaine." Some strategists suggest Blagojevich could make a straight-up argument that installing keno machines in those bars could diminish the illegal video poker trade and would allow the state to tap into revenue it otherwise isn't receiving.

But recent revelations that Blagojevich insiders are lobbyists for firms most likely to compete for the business of supplying keno technology also have dampened prospects for the construction package, particularly given the governor's oft-promoted calls for reforming the way the state does business.

The gubernatorial campaign is already beginning. Let's hope his opponents grasp one of the Journal's final observations:

In fact, the state budget "crisis" that we've been reading about for the past few years always had more to do with overspending than revenue shortfalls.