That characterization should come as no surprise to anyone who lives around here. From the piece (my emphasis):
The
state faces a range of problems. Illinois has one of the worst-funded
pension systems in the nation, [estimated to be more than $100 billion
short]. Chicago also has a pension crisis, leading Moody’s Investors Service to downgrade its credit rating to junk status on May 12, potentially threatening the city’s ability to borrow.
And the state faces an expected budget deficit of $6 billion,
which it needs to address quickly. With just days before a legislative
deadline, the new Republican governor, who ran on cutting costs and
holding down taxes, is at odds with Democrats who hold a veto-proof
supermajority in the legislature.
[Chicago] is facing about $20 billion in unfunded pension
liabilities, an additional $550 million yearly pension payment it must
start making next year, and a school system that has a $1 billion
deficit of its own, underfunded pensions and a new contract for teachers
under negotiation.
Hoo boy! We're in trouble. What are we going to do? Some people around here are even using the "B" word -- bankruptcy.
Now while I don't know how this is all going to play out, I do know that California faced a similarly "dire" fiscal crisis just a few years ago. After Jerry Brown was elected governor in 2010, the state took the "unusual" step of cutting spending and raising taxes.
Could Illinois do the same thing?
First a little perspective: the state of Illinois has the fifth-largest economy in the United States. That's right -- Illinois generates about $720 billion a year in GDP. (That's billion, with a "B.") Every year. That's about the same as the economies of Saudi Arabia or the Netherlands.
So while Illinois' pension shortfall of $100 billion and Chicago's $20 billion are certainly eye-popping numbers, they don't seem so "dire" when you consider the amount of wealth created by the state's and the city's economies.
Does Illinois and the city of Chicago have the ability to pay its bills? Of course! Maybe we all just need to take a deep breath.
1 comment:
Absolutely. and raise taxes, especially on the wealthy. The "solution" currently on the table are to 1) freeze property taxes while 2) push the state's unfunded pension debt for teachers and municipal employees BACK to those entities. This would mean that each town and school district - who already paid the part that they were supposed to - would be forced to come up with the portions the state failed to pay - but WITHOUT being able to raise taxes. So Illinois would turn into a state with (more) horribly underfunded schools and cities and towns without any money for services. Michigan and Wisconsin have both been trying this - in a race to become the "Mississippi of the North" - as both of their Governors tried to prove their bona fides for the GOP presidential primaries. Meanwhile, Minnesota has a progressive state income tax up to 13.3% - and spends the money on education and infrastructure. Like the whole country did in the 50's and 60's. And Minnesota is cleaning our clocks.
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