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October 24, 2011

Fiscal Irresponsibility Solution - At the State Level

Last week, I wrote about how the state of Illinois continues to be fiscally irresponsible in light of budgetary problems. The state, which at one point was $15 billion behind in payments, raised taxes from 3% to 5% of income and increased corporate income taxes (a real job creator, right?). Now, despite these initiatives, the state has increased spending and faces an $8 billion shortfall.

My solution is simple will likely be effective.

1) Stop paying the politicians.

As soon as the state gets behind on one payment, the salaries of all state elected officials needs to be frozen. This means if you were elected to public office in the state, you don’t get a paycheck. The pay that you do not get is also forfeited, meaning there is no “back pay” compensation once the funding problem is resolved. This should incentivize politicians to make sure schools and municipalities remain adequately funded if their personal funding is the first thing to go in the event of a deficit.

2) Stop paying the state

County governments, who are sending money to state governments and getting nothing in return have an opportunity to turn the tables. Instead of sending the money to the capital and wait for the funding to return, the county should have the right to withhold any portion of the amounts owed and use that money to pay for the services that are behind.

Some argue this creates more problems at the state level, however, they fail to see that this reduces or even avoids new problems at the local level. Local and county governments may have adequate funding to pay for the programs that the state is responsible for and that they (local governments) may end up ultimately paying for. This also helps the citizens keep current services without needing to increase their taxes.

3) Expanded government shutdown

In the event that the state’s financial problems continue to get worse, more radical action may be needed. State offices will need to reduce staff and hours in order to lower the costs. The DMV will be open 3 days per week instead of 5 ½ (It’s not like it will impact the quality of their service). Schools will need to get creative in order to manage their costs. Finally, pension fund liabilities would need to be frozen. It’s bad enough that thousands of private sector employees have to fund their own retirement plans, but having to pay for someone else’s retirement is completely insulting.

State governments need to adopt to scarcity and recognize that there are limited resources to live by.

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