Wisconsin Governor Scott Walker’s victory in a recall election at which organized labor threw everything but the kitchen sink will likely encourage lawmakers in other states to take bold action to address their own budget problems. However, government employee unions still have plenty of space in which to fight a rearguard action, because not all governors and not enough legislators take their states’ fiscal problems as seriously as they should.
Take Illinois, whose finances politicians in Sprinfield seem determined to drive off a cliff. As the Manhattan Institute’s Steve Malanga notes in Real Clear Markets:
In Illinois, legislators fear government worker unions far more than they fear taxpayers, business leaders, unending red ink, and a dearth of new investment. In a fiscal emergency back in January of 2011, Springfield lawmakers rushed through $7 billion in tax increases that have managed to do little to right Illinois’ fiscal ship. Instead, the money has gone largely to cover rising retirement costs, including a $4 billion pension payment and $1.6 billion in interest costs on bonds floated to make the state’s annual pension payment in years when it didn’t have the tax money to do so.
Then there’s Maryland, where state lawmakers found it easier to impose a large, retroactive tax hike than to try to cut spending. But the unions can only push back so hard for so long. “Today it’s difficult for states and their municipalities, especially those with growing employee retirement costs, to escape the new fiscal reality around them,” notes Malanga.
It’s already caught up with two cities in California. On Tuesday, June 5, the same day of the Wisconsin recall election, voters in San Diego and San Jose approved by large margins ballot measures to help balance their cities’ budgets by reducing retirement benefits for city employees.