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Congratulation or condolences?

Congratulations are usually offered to the winner and condolences to the loser in electoral contests. The reverse may be appropriate in the recent Illinois gubernatorial race. The loser, Gov. Pat Quinn, could be congratulated on a successful political career that achieved the highest state office and exceeded most expectations (probably his own included). Quinn can, if he chooses, move into retirement where his substantial state pension will become one of many the obligations of the new administration.

Gov.-elect Bruce Rauner should also be congratulated on winning election as a Republican in a very blue state. Condolences may also be in order because Rauner must now assume leadership in a state that has monumental short-run and long-run fiscal problems. Former Gov. Jim Edgar once said that the reason he did not run for governor again was not the fear of losing, but the prospect of winning.

Further, Rauner does not come to office with a strong mandate that will allow him to take unilateral actions to address the looming problems. In Illinois, the 2014 national Republican wave did not drench or even dampen the Democratic General Assembly, where both houses retain their veto-proof majorities. This means that Rauner will have to work closely with the legislative leaders of both parties to make progress on the state's problems. Even though the Republicans are still in the minority in both houses, they will no longer have the luxury of voting "no" on every difficult issue since the Democrats will not be willing to take all the political heat as they might for a Democratic governor.

The immediate problem Rauner must face is to get the state through the current 2015 fiscal year that ends June 30. The state's 2011 temporary income tax increase is scheduled to ratchet down from 5 percent to 3.75 percent beginning in January with a loss of around $2 billion in revenue. However, earlier this year the governor and General Assembly approved a budget predicated on the continuation of the higher rate.

In the longer term, the state faces a growing structural deficit where the growth of future spending under current law will far outstrip projected revenues. Even if the temporary tax increase were made permanent, this deficit would still be a heavy burden that would have to be addressed. These problems will likely be exacerbated if the court rules the recent pension reforms to be unconstitutional. This is likely given that the court has already overturned the state's attempt to increase the cost to retirees of medical care -- a change that most observers believed would be upheld. Rauner is also constrained by his campaign promises to eliminate the temporary tax increase and freeze property taxes while promising support for education.

What options are available to the new governor and the state? John Wooden, the legendary UCLA basketball coach, once said that if you find yourself far behind in a game, do not try to catch up instantly. Instead, go back to a reasonable plan and implement it carefully over a longer period. The advice is clearly applicable to Illinois. There are no instantaneous remedies to the state's problems. Both politically and economically, taxes cannot be suddenly increased and spending cut enough to bring the state back into equilibrium.

To his credit, Rauner has not asked the lame-duck legislature to make the hard decisions. He wants to address them himself when he takes office in January. The governor-elect has also not ruled out a more gradual elimination of the income tax. If things go well, the state faces a fairly long period of higher taxes along with reduced state spending, both of which are unpopular options. This may be where condolences are really needed.

Economist J. Fred Giertz is on the faculty of the University of Illinois' Institute of Government and Public Affairs. He can be reached at 217-244-4822 or jgiertz@uillinois.edu.

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