Have you seen this Wall Street Journal Editorial?

December 27, 2018

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The Blue State Challenge

Democratic dominance means they now have to pay the union bills.

Democrats received a mixed blessing in November when they seized complete control of state governments in California, Connecticut, Illinois and New York.

They now own responsibility for fixing the dysfunctions of liberal governance even as the left wants more spending and taxes.

Anti-Trump furor helped Democrats retake the governorship in Illinois and augment legislative majorities in California, Connecticut and New York.

Democrats picked up 12 seats in the Connecticut House and six in the Senate where control is split with Republicans.

Democrats in New York flipped eight Senate seats and won a legislative majority for only the third time in 50 years.

With legislative supermajorities, liberals in California can raise taxes without GOP votes and in Illinois place a progressive tax on the ballot as unions have long wanted.

Democrats campaigned on more spending—for schools, roads, child care, you name it.

But Illinois and Connecticut are spilling red ink while the progressive tax-and-spending structures in New York and California are profiting from the Trump economy while storing up future trouble.

Illinois is forecasting a $1.2 billion deficit next year and has accrued $7.5 billion in unpaid bills despite a $5 billion income and corporate tax hike in 2017. Pensions consume 25% of state revenue, up from 10% a decade ago, yet are still only about 40% funded. Chicago is leaning toward insolvency as pension costs have doubled in a decade.

Property taxes have grown commensurately, and lame-duck Mayor Rahm Emanuel is begging Springfield for relief. Mr. Emanuel and Democrat Bill Daley, who is running to succeed him in the February

election, recently endorsed amending the state constitution to allow changes to public worker pensions. But a supermajority of the Legislature is needed to place such an initiative on the 2020 ballot.

The picture is no rosier in Connecticut where the economy has been shrinking for a decade as politicians have raised taxes again and again, driving out high earners and businesses.

Democratic Gov. Dannel Malloy reduced government pension costs by re-amortizing payments, but the result is pensions are no better funded than in Illinois.

As revenue growth has flagged, the state faces a $1.7 billion budget hole next year with little flexibility to cut spending since Mr. Malloy locked in labor contracts with government unions through 2027.

While New York’s fiscal problems are less glaring, its taxpayer flight is also ominous.

The state lost a net $8.6 billion in adjusted gross income in 2016 as high-earners fled for lower-tax climes. Growth has stalled upstate—half of upstate metro economies have contracted over the last five years—as residents have moved.

New York City has benefited from its finance industry and cultural attractions, but even its economy has grown only half as fast as the rest of the country. Roads and subways are in disrepair as politicians have neglected public works to boost pay and benefits for their union friends.

Then there’s California, which for now is flush with cash. The state ran a $9 billion surplus last year amid a surge in capital-gains revenue and has $13.8 billion in reserves. But its severely progressive tax system with a top rate of 13.3% means revenues are volatile. During the last downturn the state ran more than $100 billion in deficits over five years until voters in 2012 approved a referendum to raise taxes on the rich even more.

State general-fund spending has since increased by nearly two-thirds to $139 billion. Meantime, local governments have been raising sales and other taxes to pay for pensions, whose costs are projected to increase by more than 50% over the next five years.

Enter the new Democratic Governors who promised fiscal chastity as candidates.

After the Legislature proposed $40 billion in new spending, California’s Gavin Newsom assured voters “we’re not going to deviate from being fiscally prudent.”

Ned Lamont was elected Governor in Connecticut on a promise not to raise taxes, though he has no plan to fix the state fisc.

Even Illinois Governor-elect J.B. Pritzker is stepping back from the progressive tax that he endorsed during the Democratic primary.

“What I see are opportunities for us to bring efficiencies to government,” he told the Chicago Sun-Times.

He also said he wants to raise revenue from legalizing recreational marijuana and sports betting.

New York Gov. Andrew Cuomo won a third term and will be a fascinating study in political calibration. He once fashioned himself as a centrist and ridicules New York City Mayor Bill de Blasio for proposing a millionaire’s tax to fund subway repairs. But as he prepares to run for President in 2020, he recently promised to extend the state’s current surtax on millionaires that he once opposed.

The time to drive the hard tax and spending reforms is while the economy is still humming.

Democratic political success will ride on whether they clean up the messes in their states or dig deeper holes.