Another scandal: Illinois budget does nothing about biggest problem--pension debt

Funny how so many people are glossing over this scandal: The budget that was crammed through by House Speaker Michael Madigan does absolutely nothing about the outrageous public employee pension debt.

All the hosannas about how Illinois finally got a budget after three years are either a sign of

Yuck it up, Mike. You'll still get your profits from getting property assessments reduced, thanks in part to you opposition to a property tax cap.

Yuck it up, Mike. You'll still get your profits from getting property assessments reduced, thanks in part to your opposition to a property tax cap.

willful ignorance or intentional deception. Most likely both.

Here's a great analysis of the situation by Joe Cahill in Crain's Chicago Business:

When it comes to the state's gravest budgetary peril, however, the 2018 budget is another exercise in denial and can-kicking. Legislators did nothing about unfunded state employee pension obligations estimated at $130 billion, an albatross that will surely drag Illinois under unless aggressive action is taken to reduce the shortfall. In fact, the new budget could even enlarge the pension funding sinkhole.

Moody's Investors Service agrees. After the fake Madigan budget passed, Moody's said that it is still reviewing whether to lower Illinois' bond rating to junk status because of the...

 likelihood of further deterioration in Illinois' most pressing credit challenges: its severely underfunded pensions and a backlog of unpaid bills, which has doubled during the past year....

So far, the plan appears to lack concrete measures that will materially improve Illinois' long-term capacity to address its unfunded pension liabilities. A June 30 order from a federal judge that the state accelerate payments owed to Medicaid managed care organizations and service providers cast doubt on the state's immediate ability to keep up with its statutory pension contribution schedule while also meeting obligations for debt service, payroll and school funding. The state anticipates addressing its approximately $15 billion backlog of payments owed partly through a bond offering that probably will rank among the largest in the state's history. This component of the state's broader fiscal plan leaves Illinois not only dependent on market access to ease liquidity pressures, but also facing a significant increase in its tax-supported debt burden. Moreover, the effectiveness of the state's strategy to contain and reduce its deferred bills, once the backlog-financing debt has been issued, remains to be seen.

Merrily Madigan, Democrats and their media rationalizers go along, failing to provide any way at all for Illinois to recover. If anything, Illinois will slide further down into the financial abyss.

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  • In that same July 5 report, even before citing the problem of unfunded pension liability, Moody’s pointed to a bigger threat: obstruction by the governor and other Republicans. “Despite the progress toward budget balance that the emerging fiscal plan embodies, the plan entails substantial implementation risk.” What risk? “The plan … appears to lack broad bipartisan support, which may signal shortcomings in its effectiveness once implemented.”

    In other words, in deciding whether to lower the Illinois bond rating, one of the big factors is the willingness of Governor Rauner and some Republicans to sabotage the budget and Illinois’ bond rating.

  • In reply to jnorto:

    An now that we "worked together" to "balance" the budget that part of the Moody's analysis is no longer the issue. Leaving "only" the more serious and difficult issue of the lack of "concrete measures that will materially improve Illinois' long-term capacity to address its unfunded pension liabilities." You choose to ignore the more fundamental, deep-rooted and longtime problem that got us into this mess.

  • In reply to Dennis Byrne:

    The answers are:
    (a) Moody's only rates debt. That doesn't mean that the budget doing nothing about pensions is a scandal.
    (b) As I indicated earlier, you haven't indicated a constitutional way out of the pension mess. It certainly isn't Moody's job to do so. Elaine Nekritz tried, had it ruled unconstitutional, and quit. Maybe you can be appointed to her seat.
    (c) You seem to be continually griping that the appropriation and revenue bills didn't solve anything, and hence the scandal is the single subject clause. Is it also a scandal that there is a school funding formula bill and the Senate doesn't have the sense to send it to the governor? You seem selective in your use of the term.

  • Besides that, you haven't figured out how to get a pension bill past the Illinois Supreme Court.

    Also, you still haven't figured out the single subject rule.

    Griping alone isn't going to solve the problem. As the Illinois Supreme Court pointed out the last time, be prepared to pay the services tax (or some other ones).

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