Illinois Democrats: "Raise Taxes or the Sky Will Fall"

My father had a rule born of the Great Depression: "Pay cash; don't buy on time; and don't pay interest."

Dad didn't buy "things" (our home excepted) unless he had cash to pay for them.

Illinois' Democrat politicians have a "better idea". They buy whatever strikes their passing fancy, even though the state is flat broke. Then to pay, they raise taxes, or borrow and pay interest.

They, for example, want to build President Obama's library. Presidential libraries are ordinarily built with private funds. But their "better idea" is to pay for it with taxpayer dollars they don't have.

This "better idea," like other "better ideas," comes along at a time when Illinois can't pay its bills on time and has a multi-billion dollar pension problem.

Illinois ended 2013 with $7.6 billion in unpaid bills. (Not withstanding the fact that in January 2011 Democrats -- without the support of a single Republican lawmaker -- raised the state income tax on individuals from 3 percent to 5 percent, and the corporate income taxes from 7.3 percent to 9.5 percent.)

Couple that with the fact that "the state's four main state pension funds have an unfunded liability of roughly $100 billion.

Here's a sample of Democrat logic. U.S. Sen. Dick Durbin, D-Ill., describes taxpayer dollars he wants spent on the Obama presidential library as "seed money."

"It's going to have a long-term positive economic impact. ... This library will pay back in terms of visitors to our state, more business, more jobs and people paying taxes. ... Whether $100 million is the right dollar amount, I don't know ...."

And he's not alone. Illinois House Speaker Mike Madigan, D-Chicago, and Chicago Democrat Mayor Rahm Emanuel have been leading the charge to spend taxpayer dollars for the library. Indeed, an Illinois House Committee led by Democrats wanted to appropriate $100 millions for it.

There is of course one flaw in the argument: once built, presidential libraries generally lose money. Therefore, once built, they are normally sloughed off to the U. S. National Archives -- which continues to operate them at a loss.

By comparison, "friends" of presidents Bush and Clinton raised over $200 million in private dollars to fund their libraries. George Washington's library at Mount Vernon operates on private donations.

In addition to this "better idea," Democrats have some others. Spend $520,0000 to fly 91 prairie chickens into Illinois at a cost of $1,166 per prairie chicken, and spend billions for "high speed rail" (e.g., buy 35 locomotives at $5 million)!

On May 31, Illinois Senate Democrats approved a $35.7 billion budget, in which expenses exceed revenues by $4.4 billion or 12.3 percent. To make it balance, Democrats want to extend the 5 percent Illinois personal income tax, and the 9.5 percent corporate income taxes -- not withstanding their promises that the tax increases would be "temporary." The alternative would be -- horror of horrors! -- to actually cut spending by $4.4 billion or by 12.3 percent.

So you can bet that in the lame-duck session -- right after the 2014 General Election -- Democrats will welsh on their 2011 promise to let the personal income tax revert from 5 percent to 3.75 percent, and the corporate income tax revert from 9.5 percent to 7.75 percent in 2015. Recall, that it was in the 2011 lame-duck session that the Democrats raised the income taxes to their present levels. (Why during the lame-duck session? Because that's when "retiring" politicians can pass anything, fully knowing they will not have to answer for their votes while they are collecting their pensions.)

We are already -- predictably -- being told that a $4.4 billion or 12.3 percent spending cut will be catastrophic! Programs will be devastated. Historic sites will be closed. State agencies will be left in limbo.

The sky will fall!

There are two methods of budgeting. Governments generally use baseline budgeting, or a variation thereof. Real people -- like you and I -- use zero based budgeting.

Baseline budgeting uses current spending levels as the baseline for establishing future funding requirements and assumes future budgets will equal the current budget plus upward adjustments for inflation and population growth.

Zero based budgeting requires that all spending must be rejustified each year or it will be eliminated from the budget -- regardless of previous spending levels!

Illinois families don't have the option of using baseline budgeting to run their homes. They can't spend 12.3 percent more then they have. If they expect a 2015 income of $31,300 per year, spending $35,700 is a recipe for bankruptcy -- unless they have savings they can dip into.

Illinois has reached the point were it can't be Santa Claus to everybody. The only rational approach is for the state to thoroughly analyze every one of its programs.Then, set aside the necessary money for the most important program. Next, do the same for the second. Then, do the same for the third, and so on.

When the $31.3 billion runs out, quit spending. No sane man believes that there isn't 12.3 percent waste, duplication and/or cronyism in Illinois' $35.7 billion budget.


Posted Online:  June 12, 2014, 11:00 pm - Quad-Cities Online
by John Donald O'Shea

Copyright 2014
John Donald O'Shea

New Tax Won't Add up to Better Schools

Exactly how much money does it take to educate a student in the public school system?

We are repeatedly told "our kids deserve the best!" But what does the "best" cost? Will another $11.5 million do it? Guarantee it? Moline School District 40 tells us that its 2012 cost per student was $9,488.46.

At the same time, the county can't afford to replace a century-old physically and functionally obsolete courthouse, and is expected to ask for a tax increase to save its nursing home. The American economy stinks, and here comes one more special interest group telling us that our kids will be better off if only we pay an additional 1 percent sales tax. I doubt it!

Moline School District 40's financial statements show:

"Total governmental fund revenues for the fiscal year ended June 30, 2012, of $86,634,518."

"Total governmental funds expenditures for the fiscal year ended June 30, 2012, of $85,333,855."

Not content with that $86.6 million in revenue, a special interest group calling itself, "YES Makes Cents for Students," wants Rock Island County voters to impose a 1 percent sales tax "to provide a better and safer learning environment and to reduce reliance on property taxes." The 1 percent will raise $11.5 million, about $3.8 million of which would go to the Moline schools. In consideration for that increase, the district promises to reduce the real estate tax levy by $400,000. As such, the net tax increase for the people of Moline would be $3.4 million.

In short, the "Yes" people want $90,034,518 to run the Moline schools. The group also blithely claims taking $11.5 million out of the private sector will somehow "boost the local economy." But this isn't $11.5 million for just one year. It's $11.5 million every year!

The Moline School District's financial report also states, "Moline School District No. 40 serves 7,438 students with a 2011-12 total governmental fund budget of $102,556,230." In 2012, there were 47,457 men, women and children in Rock Island County. An $11.5 million tax increase means every man, woman and child's share of the tax will be $78 per year -- year after year.

Therefore, as during the fiscal year ending June 30, 2012, there were 7,438 students, including high school students, in the Moline School system. By simple division, the cost of educating each student was $11,472 ($85,333,855/7438 = $11,472). A $3.4 million tax increase means the Moline schools can spend $90,034,518 or $12,105 per child ($90,035,518/7438 = $12,105). And yes, I question the district's $9,488.46 per student figure.

So, why isn't $86.6 million enough? Why isn't $11,472 per student enough?
According to the district's figures, the 2011-12 student/teacher ratio was 16.15 students per teacher. Taxpayers, therefore, are already spending $184,699 per year to educate the 16.15 kids in each class.

Do the "Yes" people really expect us to believe that if we spend an additional $457 on each Moline child, it will boost the local economy? Provide a better and safer learning environment? At a time when the district barges ahead with the Hamilton School expansion over public objection, how can there be any trust on their promise to permanently reduce real estate taxes? And in the $86.6 million they already have, is there no $3.4 million that could be put to better use?

In the 2012-13 school year, the Moline School District was very "average." It ranked 222 out of 480 (top 46 percent). Only 50 percent of Moline High School graduates meet or exceed the ACT College Readiness Benchmark (defined by an ACT composite of 21 or higher).

Maybe it is time for the public school systems to take an open-minded look at private/Catholic school achievement.

Alleman's 2012-13 enrollment was 457 students. Its student-to-teacher ratio was 17:1. Ninety-eight percent of Alleman's graduating seniors went on to college or joined the military. Over 70 percent of Alleman's 2013 graduates met or exceeded the ACT College Readiness Benchmark. The average composite ACT score for 2012-13 was 23.1.

Alleman's Total Operating Fund Revenues for the 2012-13 year was $2,931,209. Its Total Operating Fund Expenses were $2,959,045. Alleman spent an average of $6,565 per each of its 457 students. And as far as I know, Alleman has football, baseball, softball, soccer, golf, volleyball, tennis, drama, orchestra, etc., just like the "public schools."

Why does it cost $11,472 to educate a student in the public schools, and only $6,565 to do so in a Catholic school? It is rather difficult to argue that Alleman isn't giving more bang for the buck.


Posted Online:  March 09, 2014, 11:00 pm - Quad-Cities Online
Last Updated: March 10, 2014, 7:40 am
by John Donald O'Shea

Copyright 2014
John Donald O'Shea

Reducing the Deficit: Government Jobs vs. Private Sector Jobs

President Obama and Gov. Mitt Romney have two very different visions of how the U. S. government should "raise the revenues" it needs to pay the nation's debts, and to provide for the common defense and the general welfare.

Assume for a minute

-- a. That the U.S. government needed revenues in the sum of $2,000 to do all of the above,

-- b. That there were only two American citizens,

-- c. That the "First Citizen" has a salary of $5,000 and pays $1,000 in federal income tax, and

-- d. That the "Second Citizen" is unemployed, has no income and pays no federal income tax.

I use this simple "two citizen" example for ease of understanding because nearly half of the American people (47 percent ) presently pay no federal income tax while the other half (53 percent) do.

So, assuming the government needs $2,000 in revenues to meet its needs. What are the government's options? There are only four:

-- Run the printing presses, and print more money;

-- Reduce government expenses to $1,000;

-- Raise taxes on First Citizen from $1,000 to $2,000;

-- Create a job for Second Citizen that pays him $5,000, and have him pay the same $1,000 in taxes that is already being paid by First Citizen.

Neither the Mr. Obama nor Mr. Romney advocates "running the printing presses." That may be implied in their policies, but neither would dare overtly advocate it. To do so they would also have to espouse "inflation" which always follows "running the presses."

As to "reducing government expenses," the record of the "$1 trillion-plus (!) deficits for the last four years demonstrates that President Obama is less likely to "cut government spending" than the Cubs are to win the pennant.

Mr. Romney may cut some spending, but he is candid enough not to tell the voters that he can eliminate the deficit simply by cutting expenses.

As to the third alternative, "raising taxes on the rich (about 3 percent)," President Obama tells America that this is his plan to eliminate the deficit. Gov. Romney says he will lower federal income tax rates for middle class and wealthy Americans, but eliminate deductions for richer Americans. But the governor states that his tax reforms will be "revenue neutral."

Gov. Romney's honestly admits his tax revision plan will not eliminate the deficit. The president's claim that that he can eliminate deficit by taxing the rich and extra 3 percent is utter nonsense. You can run the numbers yourself.

If the deficit is to be eliminated, it will have to be eliminated by creating good paying jobs, and by getting those who are presently not paying income taxes onto the federal tax rolls.

President Obama's solution seems to be to create more "government" jobs by hiring more teachers, more policeman and more government workers. If you hire a teacher and pay that teacher $50,000 a year, and if he then pays $10,000 a year in federal income tax, you have spent $50,000 in federal revenues (tax dollars) for a return of $10,000! You are merely redistributing tax dollars taken from First Citizens and giving them to the Second Citizens.

This is what Mr. Romney describes as Mr. Obama's plan "Government trickle-down economics." (This does not mean that teachers and policemen are not "necessary;" but it does mean that tax dollars are spent to hire them.)

Gov. Romney's solution is to let the private sector to create the new "good paying" jobs. One example of how he would do it, is seen in his energy policy. He would drill for more gas and oil, and dig for more coal. Under Mr. Romney's plan, the wages of the people who drill for gas and oil, and dig for coal wouldn't be paid by the American taxpayer. They would be paid by private industry. If the oil worker was paid a salary of $50,000, it would come from his employer, without cost to the government. But that individual would still pay $10,000 in federal income tax.

Under Mr. Obama's "government" employment plan, the government loses $40,000. ($50,000 to pay salary generating $10,000 in taxes). Under Mr. Romney's Plan the government has a net gain of $10,000 (no government salary generating $10,000 in taxes.)

If 50 percent of the American people pay $1 trillion in taxes, the goal should be to get 100 percent of the American people paying $2 trillion -- without cost to the government!

Posted Online: :   Oct. 09, 2012, 2:46 pm  - Quad-Cities Online

by John Donald O'Shea

Copyright 2012
John Donald O'Shea