I’ve been thinking about Madison. Actually I’ve been thinking about Wisconsin, Illinois (and other states), pensions, governmental employees, labor unions, and the coming summer of our discontent. Madison, Wisconsin is a beautiful city, it is the State Capitol of Wisconsin, it is on the shores of Lake Mendota, it is home to the University of Wisconsin, and it is now the city where the rebellion of “the public sector” vs. “the private sector” began. Don’t say I hadn’t warned you about what lay ahead for us as a nation with regards to the brewing storm about government employees and their benefits. I talked about the subject just four weeks ago in TH*NK*NG (PENSIONS). I didn’t believe the crowds and the protests would materialize until late May, or early June, and I certainly did NOT TH*NK they would begin in Madison, Wisconsin! Once again I was correct on the substance of the coming problems, but once again I was wrong on the timing. This time my prognostications came early. Many of my earlier predictions have yet to materialize, but they will! Trust me.
You see Wisconsin like 45 of the 50 states has a deficit problem and a growing problem with its teacher (and governmental employee) pension fund(s). The Wisconsin deficit projected for the coming year at $3.7 BILLION and the BILLIONs in pension shortfalls pales in comparison to the $15 BILLION + current year deficit, the pending $8 BILLION loan from Red China, and the $208 BILLION in pension arrears, plus whatever is owed to the Universities, the hospitals, the nursing homes, and any other unpaid bills in my own State of Illinois. The Prairie State is going down like the Titanic, yet Governor Quinn is mumbling about pennies in cuts, and has ignored all the major areas of expenditures. Both parties in our legislature talk with the bravado of a Marc Anthony orating over the burning body of a dead Caesar, yet we get no details, and the vote on a budget is not even on the legislature’s calendar docket. “Full of sound and fury signifying nothing...” so typical for Illinois! Yet, in Wisconsin, Governor Walker went for the jugular at the get go and “badgered” the real sources of the problems. Let the games begin...
The problem in all of the states centers around deficits from promising more in payments than any state could deliver. These problems are literally generic across this nation. Education is the largest expenditure for a state in almost all cases. Amounts promised to teachers (or their Unions) in salaries and pension benefits (used like deferred compensation) are not met by the cash flow. Illinois antes up about 28 to 29% of the costs of education which is down from the 52 to 53% from years past, but this reduced contribution still embodies over 40% of the state’s total expenditures. Ditto for the amounts to fire districts and police units (on the local level), and the general employees of the state agency pool. We are talking about HUGE numbers. Such negatives are commonplace in California, New York, Florida, Michigan, Ohio, Pennsylvania, but the first real flash from the fire came from Wisconsin.
The surprise showing from Madison came from the blue and the screenplay for the circuses reads like a parody (and a comic one at that). Governor Walker knows the numbers, and knew what needed to be done. No false namby pamby sugarcoating here. He was going to follow through on his campaign promises (which when you actually TH*NK about it is really quite refreshing). He sought an abrogation/ negation of prior agreements and went after the source of the unequal footing --- his legislation would curtail/ end the collective bargaining powers of the teachers and governmental workers unions. Walker also knew he had the votes to get the job done. All eyes became focused on the Capitol. Thousands (no make that tens of thousands) convened on the legislative center of Wisconsin to demonstrate both against the attack on the unions and collective bargaining, and for it. Illinois’s aging “rabble rouser” crossed over the state line to join the “fun,” but the 14 democratic senators who fled to Illinois to prevent the quorum, and thus delay a vote they could not stop; made a mockery of the process. Legislators are paid to legislate, and not to flee cowardly across state lines in the dead of night to evade doing their jobs.
Wisconsin as the first state to truly tackle the chronic problems of deficits, imbalances between the costs of and the benefits to public employees, and the broken system of collective bargaining in times of economic dislocation; is under the microscope. It will set the precedents. The rest of the states will follow examples set in Madison if they really intend to address the problems identified in this similar Wisconsin case study. We need to go for the jugular at the state and federal level even though the final decisions will more than likely be settled by the US Supreme Court at a much later date.
I wonder if Illinois legislators will reciprocate by fleeing and seeking “asylum” in Wisconsin? Where will the legislators from California, New York, Ohio, Pennsylvania, Florida, Michigan, or Indiana flee to escape fulfilling their elected responsibilities when the time presents itself? Will our Congressmen, or our US Senators; flee to Canada, Mexico, the Caribbean, South America, or the Mediterranean for their government “junket in exile?” Who will write the passes for their “sick days???” I know who will be paying for ‘em...
I’m Fred Cederholm and I’ve been thinking. You should be thinking, too.
Copyright 2010 Questions, Inc. All rights reserved. Fred Cederholm is a CPA/CFE, a forensic accountant, and writer. He is a graduate of the University of Illinois (B.A., M.A. and M.A.S.). He can be reached at email@example.com.
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This story was published on February 21, 2011.