Over the weekend, the Peoria Journal Star published a letter to the editor from an elementary school principal in downstate Illinois. The introduction read:
“Has anyone in an elected position in Illinois looked at the feasibility of pursuing a federal bailout of the state's Teachers' Retirement System?”
Why yes – yes, they have.
Back in 2009, Gov. Pat Quinn's budget team met with U.S. Treasury Secretary Timothy Geithner about the possibility of a federal bailout. Quinn then included the possibility in his original 2012 budget. At the federal level, U.S. Rep. Hansen Clarke, D-Michigan, introduced a bill in 2012 that sought $500 million 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. That's why the Illinois Policy Institute launched NoPensionBailout.com last year. We joined forces with then-Sen. Jim DeMint, R-S.C., lawmakers from fiscally responsible states and national pension experts to stop the idea of a potential bailout before it gained much traction.
Our analysis was clear: a federal bailout of state pension debt would be disastrous. It would reward reckless states – like California and Illinois – at the expense of states that have managed their finances responsibly.
We also worked with state Rep. Renée Kosel, R - New Lenox, and state Rep. Dwight Kay, R - Glen Carbon, to pass a resolution telling the federal government "no thanks" to the potential offer of a bailout. That resolution was adopted by the Illinois House of Representatives on March 9, 2012.
Yes, it's true that Illinois' pension crisis is severe. We have the worst-funded pensions in the nation. Just last week, S&P Rating Services downgraded Illinois’ debt – the 11th downgrade since Quinn assumed office in 2009 – because the state has yet to enact any kind of meaningful pension reform.
But big challenges need big solutions. Only major reforms, like moving to defined contribution plans for all future work and tackling the automatic, compounded cost-of-living adjustment, can get the problem under control.
Sadly, as long as government workers and politicians think a 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.
Jonathan Ingram is Director of Health Policy and Pension Reform at the Illinois Policy Institute