Items of note:
“Their pension is the most underfunded in the nation,” said Karen S. Krop, a senior director at Fitch Ratings. “They have not made significant cuts or raised revenues. There’s no state out there like this. They can’t grow their way out of this.”
The state’s income tax burden is not terribly high — Illinois ranks in the bottom half of states — and its government is not terribly large. (The budgets in New York and California, per capita, are much larger). Even if the state cut out all family and human services spending, more than half of the budget deficit would remain.
“We are a fiscal poster child for what not to do,” said Ralph Martire of the Center for Tax and Budget Accountability, a liberal-leaning policy group in Illinois. “We make California look as if it’s run by penurious accountants who sit in rooms trying to put together an honest budget all day.”
Illinois reports that it has $62.4 billion in unfunded pension liabilities, although many experts place that liability tens of billions of dollars higher.So what do they do? Raise retirement age and slash benefits - for future workers.
NY Times, July 2, 2010
Wonder what Michigan, Ohio and New York look like?
This cannot continue. People, agencies and businesses will be literally bankrupt because the state cannot make payroll and won't even give letters of credit so agencies can borrow against future payments (not that more borrowing is a solution). Those people, businesses and agencies will in turn default on their obligations, causing a cascade of pain that will spread to other states.
And the rest of us (states and citizens alike) will be expected to pick up the tab. Look, I don't have a problem taking care of people who are victims of circumstances. But you can't claim victimhood when you keep electing irresponsible idiots to run your affairs. You can't cannot hold these pensions as untouchable while everyone else loses their job. And you can't keep funding all the things like mental health, after-school programs, and subsidized transportation. You need to eliminate half the things you do if you are buying twice what you can afford. Given the interest due on the Illinois loans, its citizens cannot afford to cross the street right now. More borrowing is not the solution as you won't make interest payments on your loans as it is. The time for tough choices and a change in stewardship is at hand.
If everything is important, nothing is important.
Citizens must hold their elected officials to account and force them to cut up the credit cards. You cannot continue to throw up your hands and claim it wasn't you, it was someone else that brought this on. If you don't, why should the more responsible (or perhaps luckier) people in other states come to your rescue?
This is a recipe for financial disaster and in the case of Illinois, the oven timer is beeping because the goose is cooked.
This is a microcosm of the US in general. Unfunded pensions (social security), unfunded benefits (medicare and veterans) and debt obligations are looming ahead like Jaws, and will consume better than half the federal budget in the near future. Military costs look small by comparison. The taxes you pay now for benefits you think you will get in the future are really taxes for benefits that were given in the past. There is no money set aside for those future benefits and we don't even count them as liabilities in the federal budget. We long ago spent the so-called social security and medicare trust funds. We are simply borrowing more and more money that is not even planned for the government's revenue stream. Healthcare is no different, it is another ponzi scheme that will suck the revenue out of our economy like a large leech, leaving the middle class not only without medical care, but without the infrastructure to restore privately funded services.
Is the answer to grow the economy out of this? Here's the problem with that idea: interest payments are non-productive. They do not build infrastructure, provide any services, create any industries, improve education, save for the future or pay for expenses. Think of it like money thrown in the fire. Interest payments do not build the economy. It enriches the financial industry and is used to lend more to -- whom? To the "little people," the small businesses and the local governments who will be broke because of taxes (to pay the interest). On the other hand, if we refuse to pay the interest, then we destroy the very financial institutions that we borrowed to the hilt to save just last year. The ones we say we need so we can borrow just to survive. They provide the mortgages, car loans, even the infrastructure we use now to pay "cash" for everything from gas and groceries to cable and phone bills.
It is a vicious cycle. It destroys your standard of living, therefore quality of life. It consumes your freedoms as the government makes your choices and you can't afford any alternatives. The more you make, the more you are taxed. It makes you a slave to the bank. And now we are doing it on a national scale. So, even if you are debt free with 6 months of food in your basement, your neighbors are not, your government is not, and both will be at your doorstep to take what you have.
Stop the madness, stop the spending!