79,000 more Illinoisans are in poverty because state can’t fix its culture of corruption

If Illinois could have reduced corruption to the national average, an estimated 79,000 fewer people would be living in poverty, according to an analysis by the Illinois Policy Institute. State lawmakers can help by passing ethics reforms.

When the 2021 legislative session began, the arrival of a new House Speaker brought hope the Illinois General Assembly would tackle desperately needed ethics reforms.

Then Gov. J.B. Pritzker added his backing in February, telling state lawmakers “restoring the public’s trust is of paramount importance.”

So now, with less than a month remaining before lawmakers adjourn, will the reforms emerge that both Pritzker and Illinois House Speaker Emanuel “Chris” Welch have said are priorities? Will those reforms be enough?

An estimated 79,000 fewer Illinoisans could be lifted out of poverty if the state just made average curbs to its culture of corruption. Here’s why, and how.

Corruption fuels poverty and inequality

New research by the Illinois Policy Institute shows Illinois’ corruption has left an additional 79,000 Illinoisans impoverished when compared to the rest of the nation. That’s because corruption hurts economic growth by driving away new investment and reducing the effectiveness of public and private investment. Lower economic growth means disproportionately fewer opportunities for the working poor.

The investigation into the role of corruption and state policies on economic outcomes using data from 1981-2017 found a 1 percentage point higher level of public corruption convictions per million residents during that period was linked to a 0.5 percentage point higher poverty rate at the end of the study period in 2017.  States with higher public corruption convictions have higher poverty rates.

From 1981-2017, corruption cases per person in Illinois were 41.4% higher than in the rest of the country, according to data from the Public Integrity Section of the U.S. Department of Justice. If Illinois had just curbed corruption convictions to the nation’s average during that period, an estimated 79,000 fewer Illinoisans would have been living in poverty in 2017. That’s 5.6% of the estimated 1.4 million Illinoisans who live in poverty.

This finding is consistent with the bulk of expert literature on this topic. Globally, corruption hurts economic growth, hurts the poor and results in higher inequality. Economic research shows corruption lowers investment, thus reducing the rate of economic growth. In addition, higher levels of corruption raise income inequality and poverty, because high levels of corruption increase the ability of the wealthy and connected to manipulate laws to benefit themselves at the expense of everyone else.

This is what makes Illinois leaders’ sluggishness on ethics reform surprising. Less than six months ago, concerns about income inequality fueled a plan to raise taxes on the rich, falsely promising property tax reductions and higher funds for education as well as Illinois’ poor. Curbing corruption can help to accomplish those same objectives, yet is there progress in Springfield?

In Illinois, corruption reaches all the way to the top with four of the state’s past 10 former governors ending up in prison. The current governor, Gov. J.B. Pritzker is subject to his own federal criminal investigation arising from property tax breaks on a mansion he owns in Chicago’s Gold Coast neighborhood. Most recently, allegations of wrongdoing forced the four-decade long House Speaker Michael Madigan – a property tax attorney – to step down, and over a half dozen former and current state lawmakers were hit with federal corruption charges.

According to research published by the University of Chicago, property taxes and corruption aren’t unrelated. The wealthy hire property tax attorneys – some of them lawmakers whose decisions influence local government budgets – to lower valuations of their more expensive properties, while less expensive properties end up overvalued leaving the poorest Americans to shoulder higher property tax burdens.

In Illinois, former Cook County Assessor Joe Berrios was sued for violating civil rights and housing laws by knowingly producing inaccurate assessments that punished poor and minority homeowners across the county.

Without reforms, Illinois will only get worse for low-income families

Property taxes in Illinois are expected to continue to increase at a record pace. This is because Illinois’ unfunded pension liabilities reached an all-time high of $317 billion in 2020 and the bulk of property taxes fund pensions.

Massive pension debt makes Illinois more prone to increases in state and local taxes. As income and property tax burdens increased at record pace, state government in Illinois increased pension spending by more than 500% while education spending went up only 21% in the past two decades. All other spending, including social service spending for the disadvantaged, fell 32%.

In one of the most corrupt states in the nation, record tax hikes fund outsized pension benefits instead of social services shouldn’t come as a surprise.

According to campaign finance data, public sector unions contributed over $15 million – 18% of all political contributions to sitting Illinois state lawmakers – during the 2020 election cycle. So long as politicians face their political contributors across the bargaining table, the cost of government services to taxpayers will continue to increase.

Research shows corruption is also a factor in the pension crisis. States with high levels of corruption have higher pension debt, lower actuarially required contributions and poorer pension fund performance. A corrupt culture in Illinois makes it easier for Illinois politicians to use higher pay and pension benefits as rewards for the campaign cash delivered by public employee unions. Inflating pensions fails to deliver value for taxpayers, and like other forms of corruption it tends to benefit a few at the expense of everyone else.

Restoring fairness and opportunity in Illinois 

COVID-19 brought disproportionately more pain to low-income families, particularly minorities and women with young children. The sluggish jobs recovery also suggests the number of people who have fallen below the poverty line has likely increased this past year.

Restoring fairness in Illinois starts with meaningful ethics reforms. If reforms are packaged together, there are specific reforms, as well as bills that should serve as the models for those reforms. The path forward:

• empowers the watchdog charged with holding lawmakers accountable for wrongdoing. Those reforms are embodied in House Bill 2774.
• improves transparency by improving financial disclosuresfrom lawmakers. House Bill 3751 and Senate Bill 1597 would achieve that goal.
• prohibits members of the General Assembly from working as lobbyiststo executive agencies and local governments. House Bill 3664 calls for that change.
• requires a cooling offperiod before lawmakers can become lobbyists to the General Assembly after leaving office. The revolving door would be stopped by House Bill 3486.

These simple changes could pave the way to less fiscal mismanagement. Anti-corruption nonprofits and groups that advocate for the poorest communities in Illinois share this goal: a fair and more inclusive Illinois government that works for everyone. Ethics reforms would be a good start.