St. Louis Business Journal by Rebecca Wohltman, Editorial Assistant
Date: Tuesday, November 27, 2012, 10:18am CST
- Rebecca Wohltman
- Editorial Assistant- St. Louis Business Journal
- Email | Twitter
I live in Illinois, where the joke is that our governors make our license plates (although that may not exactly be a joke), people nationwide mock the state’s politics (by politics they mean corruption) and are shocked by its ridiculously underfunded pensions.
I like where I live, but Illinois certainly has its problems. Add being called a “death spiral state” by Forbes to that list.
Eleven states made the death spiral list this year, determined by whether there are more makers than takers and an analysis of credit-worthiness by Conning & Co. A taker is someone who draws money from the government, whether by employment, unemployment, pension or welfare. A maker is someone “gainfully employed in the private sector.”
According to Forbes, there are 103 takers to every 100 makers in Illinois. Sounds bad? Not so much when you compare Illinois to New Mexico (153 takers to every 100 makers) or Mississippi (149 takers to 100 makers). But in Texas, there are only 82 takers to 100 makers.
Forbes warns that residents of these states will face rising taxes, crumbling state finances and employers fleeing the state. Illinois already has all of these things going for it - including last year's 67 percent state income tax increase from 3 percent to 5 percent and a current unfunded pension liability of $96.8 billion as of the end of fiscal 2012,according to the Chicago Tribune. (That tax increase is “temporary” and supposed to drop to less than 4 percent in 2015, but that doesn’t seem likely.)
If you live in one of these states, Forbes says to rent instead of buy a house because property taxes will inevitably rise (too late for me with that advice) and sell municipal bonds you have in those states because they’re more likely to default or go Greek and restructure those bonds so that they pay back less.
Or maybe you should do as Wisconsin Governor Scott Walker urged Illinois businesses to do and “Escape to Wisconsin.”
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