By Jonathan Ingram, Illinois Policy Institute -
President Barack Obama has won a second term, giving him what he described earlier this year as “more flexibility” in his policy choices. Will one of those choices be bailing out state pensions?
Under new accounting rules, Illinois’ unfunded pension debt stands at more than $200 billion. That’s not counting the billions owed for retiree health benefits, pension bonds or any of the retirement debt at the local level.
The past few years have shown exactly what happens when large institutions face big problems: the federal government swoops in to bail out those institutions it deems “too big to fail.” The next big bailout request is on the horizon.
Gov. Pat Quinn has floated the idea, both in meetings with U.S. Treasury Secretary Timothy Geithner and in his original 2012 budget. Earlier this year, U.S. Rep. Hansen Clarke introduced a bill that sought half a billion dollars in federal loans to bail out Detroit’s finances and help its underfunded pension program.
It’s only a matter of time until other governors, mayors and city council members with mismanaged finances follow suit, heading to Washington, D.C., with their hands out. Even if the federal government had the money to bail out state pensions, it would only punish responsible states and reward reckless ones. Sadly, as long as a federal bailout is on the table, state and local governments will continue to kick the can down the road, delaying the structural spending reforms that are so critical to their long-term fiscal health. ...More HERE