July/August 2017 Tax Facts

Taxpayers’ Federation of Illinois 70 • 1 January 2017 Costs of Corruption Weigh Heavily on TFI Illinois 18th Annual By Jim Nowlan STATE & LOCAL TAX CONFERENCE This essay by former TFI president Jim Nowlan assesses both the hard dollar as well as the hidden, probably impossible to quantity, costs imposed on Illinois by what Jim considers a September 26, 2017 “culture of corruption.” Jim is a former chair of the Illinois Executive Ethics Commission, a Meridian Conference state agency. He and J. Thomas Johnson, another former TFI president, are authors of Center Fixing Illinois (University of Illinois Press, 2015). 1701 W. Algonquin Rd. Rolling Meadows, IL The costs of corruption in a state reputed for it are real, varied and high, though damnably difficult to quantify. I suggest below that the hidden costs Register here or at of corruption in Illinois are probably multiples greater than the evident, iltaxwatch.org dollar-denominated budgetary costs associated with stemming corruption in our state and local governments in Illinois. I define public corruption simply as “personal gain at public expense.” For context, let’s look at just a few of the hundreds of convictions for public corruption across history in Illinois. For a more complete, and distressing, litany of corruption, seeCorrupt Illinois, the 2015 book by Thomas J. Gradel and Dick Simpson. My first acquaintance with corruption was a story told to me in my childhood in the 1940s. My Uncle John Sanner was chair of the Stark County (IL) Republican Central Committee. A house painter, Uncle John was pleased when the office of governor Dwight Green (1941-1948) offered him a state job. He accepted and a couple of months later, uncle began receiving regular paychecks. But he had no instructions as to where to report nor of what to do. 430 East Vine Street, Suite A Springfield, IL 62703 V. 217.522.6818 www.iltaxwatch.org [email protected] NOTES FROM THE INSIDE. After a while, Uncle John called Springfield, asking about where to report and work. “Oh, you By Carol S. Portman don’t have to report anywhere, or work,” said the representative of Gov. Green, maybe For this month’s issue ofTax Facts we turn amused by uncle’s naivete. from specific tax issues to the broader societal issue of government corruption in Uncle John was to be a “ghost payroller.” He Illinois. We approached one of our favorite turned the job down and returned to shoving authors, former TFI President Jim Nowlan, heavy wood extension ladders up the sides of handing him the daunting task of quantifying houses. the cost of government corruption to Illinois Much earlier, even back to gaining our statehood citizens. in the early 1800s, territorial and later elected Jim defines corruption as “personal gain at governor Ninian Edwards decried the corrupt public expense,” and gives us a colorful practice of “treating” citizens to alcohol and food history dating back to before statehood. He in return for their votes. Such “vice and depravity shares insights on how corruption affects would confine elections to the rich, as they alone business and the state’s economy, attempts could meet the expenses of elections,” said Edwards, a former secretary to President to compare corruption in Illinois to that in Thomas Jefferson. other states, and he reviews efforts to stem corruption in state government, from In the 1884 mayoral election in Chicago, employee ethics training to procurement according to an investigation by the Union “reforms.” League Club of Chicago, fraud was so pervasive that an honest vote appeared quaint. In one Jim ticks off what Illinois taxpayers spend to precinct, 907 of 1,112 votes cast were found to fund the auditor general, various inspectors be fraudulent. In another, more votes were cast general and other entities charged with than population in the precinct. Of 171 precincts keeping state government above board. But analyzed, only seven were found to be without he concludes the real costs of corruption – irregularities. the damage to our economy – are great, but In 1909, supporters of U.S. Rep. William Lorimer “damnably difficult to quantify.” paid $100,000 in bribes to 40 Illinois House On another note, TFI will host its 18th annual Democrats for their support to elect Republican Lorimer to the US Senate. Two years later, Illinois State and Local Tax Conference on Lorimer was expelled from the US Senate September 26 at the Meridian Conference because of the bribery. This reignited the drive, Center in Rolling Meadows. We have successful in 1913, to amend the US Constitution another great line-up of speakers and topics. to provide for the citizens instead of state Please join us for this worthwhile event. legislatures electing U.S. senators. The bribe of about $2,500 per lawmaker was, by the way, big 2 • Tax Facts • July/August 2017 money; at the time, Henry Ford’s new Model T Possibly even more damaging is the strong was selling for $750. perception among many Americans that Illinois is corrupt. I conducted a survey in 2012 that asked In 1910, Des Moines Register cartoonist J. N. 1,000 respondents across the country to name (Ding) Darling published, “What’s the Matter what they believed to be the most corrupt states with Illinois?” (see page 4). The cartoon depicts in the nation. One-third of those surveyed Illinois politicians, including Lorimer, in a pig pen identified Illinois, unsolicited, as such, following of graft and corruption. Farmers from only New York and California, which had more neighboring states look over the fence, mentions. A full 45 percent of respondents over wondering quizzically why Illinois is so corrupt— age thirty-five named Illinois as one of the most and different from its neighbors. corrupt. Other Midwestern states were rarely The most disheartening corruption of all, to me mentioned by respondents as among the most anyway, was uncovered in the 1980s when 150 corrupt, which makes Illinois stand out like a sore judges and other officers of the Cook County thumb, just as in Ding Darling’s cartoon a century Court were convicted of bribery, even to quash earlier. likely convictions for Mob-instigated murders. So, what are the costs of all this corruption? I invariably get a knowing chuckle from Rotary Nobody really knows, of course, because the Club audiences when I note that I have worked in costs are mostly hidden in the interstices of life, fairly senior positions for three unindicted as I will try to explain a bit later. But let’s start governors, to wit: Richard Ogilvie (1969-72), Jim with the easy stuff, which we can count. Thompson (1977-1990), and Jim Edgar (1991-98). Of course, we want to reduce “personal gain at Those three contrast with Otto Kerner (1961-68), public expense,” which as such seems maddingly Dan Walker (1973-76), George Ryan (1999-2002) unfair to you and me, the taxpayers. Thus, we and Rod Blagojevich (2003-2009) who were pass laws to combat corruption, prosecute it indeed convicted, though Walker for “white where we can find it, and create government collar” misdeeds rather than for public watchdogs to prevent it from occurring in the corruption. first place. Statistics bear out reputation of Illinois for For example, in the 1950s elected Auditor of corruption Public Accounts Orville Hodge was convicted for From 1976-2012, only Louisiana among the 50 embezzling $1.5 million from the state. As a states recorded more convictions for public result, the framers of the 1970 Constitution corruption as a percentage of population than created new arrangements for monitoring how Illinois. In the same period, the US Court for the state dollars were expended. The old Auditor was Northern District of Illinois (metropolitan responsible for both the pre-audit as well as the Chicago) recorded more such convictions (1,597) post-audit, which made absconding with state than any other federal district court in the nation, money easy for Hodge. A new office of the Illinois with Central Los Angeles (1,341) and New York Office of the Comptroller was given responsibility Southern (Manhattan) (1,247) coming in second for the pre-audit of state funds and a new and third. Tax Facts • July/August 2017 • 3 4 • Tax Facts • July/August 2017 legislative branch office of Auditor General that However, the figures do not reflect the increased of the post-audit. cost to agencies in dealing with the procurement staff and having to run justifications for buying a Later, in the early 2000s, as the Blagojevich needed item to another layer of bureaucracy. Administration was imploding in corruption, the legislature created several new agencies: the So, you can see how difficult it is to quantify the offices of Executive Inspectors General; the costs of corruption. Executive and Legislative Ethics Commissions; Then we have the courts. Most oversight and and the Procurement Policy Board, to oversee prosecution of corruption in Illinois is conducted the Illinois Procurement Act. by the US Department of Justice and its district The costs of these offices can be counted, using offices of the US Attorney (three districts in 2014 budget year figures, the last year Illinois had Illinois, with the Northern District of Illinois a comprehensive budget, to wit: [metro Chicago] by far the largest in the state). I asked a former presiding judge for a federal State Anti-Corruption Entities district court in Illinois about the costs of Illinois Auditor General $29.0 million prosecuting corruption, and his response Executive Inspector General $7.5 illustrates why it is difficult to quantify: Executive Ethics Commission $.5 Only the U.S. Attorney for the Northern Legislative Ethics Commission $.3 District could come up with the time spent Illinois Procurement Act $6.0 on their end of a prosecution.

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