Thousands Abandoning Illinois and Its Big Government Debacle
There is a mass exodus from Illinois.
According to the US Census Bureau, the Prairie State lost a net 33,700 residents in fiscal year 2017. More people bailed out of Illinois than any other state in the US. And based on calculations the folks over at ZeroHedge worked out, the exodus was even worse than the Census Bureau numbers indicate.
Of course, the net population loss masks the true gross outflow of Illinois residents as it doesn’t account for natural births/deaths. Assuming that Illinois has the same natural population growth as the US as a whole (0.7%) implies that the state lost a staggering ~125,000 residents in aggregate, or roughly 1 man/woman/child every 4.3 minutes.”
So, why the big rush to bail out of the great state of Illinois?
The state is a fiscal mess.
Over the summer, the Illinois legislature pushed through a budget that included $5 billion in tax hikes. Even so, the state’s bond rating continues to teeter just above junk status. Moody’s wasn’t particularly impressed with the new Illinois budget.
The $36 billion fiscal 2018 budget and $5 billion income tax increase passed by lawmakers over the extended Fourth of July holiday weekend, may fall short in addressing the state’s financial woes, particularly its huge unfunded pension liability and $15 billion unpaid bill backlog, according to Moody’s. ‘On both those fronts, it’s not yet clear if the legislation being enacted will have a substantial and clear positive effect.”
Apparently, the people of Illinois aren’t impressed either. They’re abandoning ship.
This isn’t anything new. As government officials at every level in Illinois ran finances into the ground, the state’s Ponzi Scheme – otherwise known as its pension system – slowly collapsed. Just consider this selection of ZeroHedge headlines about the Prairie State.
- Illinois Pension Funding Ratio Sinks To 37.6% As Unfunded Liabilities Surge To $130 Billion
- Illinois Unpaid Vendor Backlog Hits A New Record At Over $16 Billion
- The State Of Illinois Is “Past The Point Of No Return”
- “What The Hell Is Going On In Chicago” And Other Highlights From Trump’s Speech To FBI Grads
No wonder people just packed up and left.
In 2011, the powers-that-be in Illinois jacked up taxes 67%. In 2016, Illinois ranked as the state with the fastest shrinking population for the third straight year. According to the Chicago Tribune, Illinois’ population first began to drop in 2014, when it lost 11,961 people. The number more than doubled in 2015 to 28,497 people. It further multiplied in 2016 with a 37,508 net population loss. And here we are today. Make that the fourth straight year.
The Census Bureau doesn’t include demographic information in its numbers. but it seems likely the people leaving the state are probably primarily taxpayers looking to escape the high-tax hell-hole Illinois has become. The poor people dodging gunfire in Chicago don’t have the luxury of leaving. It’s a sort of Atlas Shrugged phenomenon. The left may condemn it as greedy, but the cold hard reality is that incentives matter. The big government debacle in Illinois has created perverse incentives. Why would any sane person with options stay in Illinois?
Of course, there’s a lesson here. When governments spend more money than you take in, when they increase government services beyond the population’s ability to support them, it all eventually collapses. Especially for state governments that don’t have access to the Federal Reserve’s printing press.
Even without over-taxation and unrestrained spending by Illinois politicians, the state would be in a precarious position. The pension system in the Land of Lincoln is a mess. It currently has a shortfall of at least $130 billion.
Of course, Illinois isn’t alone. It is just the state that has walked furthest down the road. Several other US states are heading down the same path.
A report last year showed that teetering pension systems across the US are not only jeopardizing Americans’ retirement, they are also pulling a number of states down into a black hole with them. The states in the worst financial shape also share the problem of underfunded pensions. Along with Illinois, Connecticut, and Kentucky have less than half of their pension obligations funded.
Not to mention the US federal government and its $21-something trillion in debt and trillions more in unfunded liabilities.
So, what’s the takeaway here? Governments can’t – or simply won’t – fix these problems. They’ve kicked the can down the road for so long that they’ve just about run out of road. At some point, the inevitable collapses will begin. Illinois isn’t far from the edge of the cliff, and many other governments are hot on its heels.
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