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Commentary: Illinois' red ink requires overhaul, not Band-Aids

This article first appeared in the St. Louis Beacon, Sept. 13, 2009 - The resounding failure of Illinois leaders to deal responsibly with the red-ink flood of near biblical proportions besieging the state treasury hardly builds confidence they can simultaneously and resolutely tackle yet another deficit in the billions. But that is exactly what they must do to keep and grow jobs here.

By the end of this year, the trust fund that bankrolls unemployment benefits will teeter more than $1 billion out of kilter, kept afloat by federal loans that forebode onerous interest payments. In fact, the deficit could approximate $5 billion by the end of 2010 and $7 billion by the close of 2011, according to the latest projections published by the Illinois Department of Employment Security.

Those forecasts do not anticipate dramatic economic fluctuations. They understandably do not presume additional federal grants - a distinct possibility given the numerous states trapped in dire straits. They also do not reflect changes in jobless benefits or in the taxes Illinois employers pay to support them. But such changes appear unavoidable, posing a monumental challenge for the state's business, labor and political establishments.

In other episodes of trust fund distress, the principals in those provinces have responded admirably.

To deal with recession's ravages in the 1980s, Gov. James R. Thompson and lawmakers urged business and labor to forge a package of payroll tax increases and benefit curtailments that rehabilitated the fund. In the throes of another downturn, Gov. Rod Blagojevich and legislators prodded those frequent combatants to do likewise in 2003. Just a few months ago, with Patrick Quinn freshly installed as governor, House Speaker Michael J. Madigan and Senate President John Cullerton took the lead in pressing labor and employers to shape benefit enhancements key to receiving unemployment assistance from the feds.

The negotiations in those instances were difficult; yet, the shared pain, in both the process and the outcome, strengthened the safety net for workers without strangling the entrepreneurship that drives our economy.

Those precedents provide hope and even inspiration but not a precise prescription for the crises of the moment.

Consider that the most revenue to flow into the trust fund was $2.5 billion in 2005, compared to the $1.6 billion estimated for this year when $4.6 billion in benefit payments are expected.

As Blagojevich convened negotiating sessions, the state's annual unemployment rate was 6.7 percent; it is projected to average 9.7 percent this year and 10.6 percent in 2010. When Thompson called the parties to the table, the annual jobless rate peaked at 11.7 percent, but businesses were contending with only modest increases in taxes to protect school funding and essential services.

We should not expect employers to contribute substantially toward closing the historic, haunting and daunting deficits at hand in the unemployment account and in the state's general operating fund without relief elsewhere. That would chase jobs away from Illinois, already among only five states to lose them in the last decade, according to federal reports. The governor and the General Assembly should enact reforms in our overall revenue structure, our tort and workers' compensation laws and our regulatory framework to ease the cost and stress of doing business. They also should heed the call of thoughtful business leaders for education reforms to help build a skilled workforce.

Illinois employers and labor have demonstrated they are willing to concoct and swallow medicine for the jobless fund. But we need to nudge political leaders to muster the foresight and guts to take a more comprehensive approach that would reflect as much concern for the state's future as their own.

Mike Lawrence retired Nov. 1, 2008, as director of the Paul Simon Public Policy Institute at Southern Illinois University. He is returning to his journalism roots as a twice-monthly columnist.