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9/20/12, "An Illinois Pension Bailout?," Wall Street Journal, "Governor Quinn wants you to guarantee his state's pensions."
"Readers who live in the other 49 states will be pleased to learn that
Governor Pat Quinn's 2012 budget proposal already floated the idea of a
federal guarantee of its pension debt. Think Germany and eurobonds for
Greece, Italy and Spain. Thank you for sharing, Governor.
Sooner or later, we knew it would come to this since the Democrats
who are running Illinois into the ground can't bring themselves to
oppose union demands. Illinois now has some $8 billion in current debts
outstanding and taxpayers are on the hook for more than $200 billion in
unfunded retirement costs for government workers. By some estimates, the
system could be the first in the nation to go broke, as early as 2018.
Liabilities are also spiralling nationwide, with some $2.5 trillion
in unfunded state pension costs. According to a paper released Thursday
by the Illinois Policy Institute, the crisis will end up pitting states
against each other as taxpayers in places like Tennessee, Texas,
Virginia and Utah will be asked to subsidize the undisciplined likes of
Illinois and California.
For years, states have engaged in elaborate accounting tricks to
improve appearances, including using an unrealistically high 8%
"discount" rate to account for future liabilities. To make that fairy
tale come true, state pension funds would have to average returns of 8% a
year, which even the toothless Government Accounting Standards Board
and Moody's have said are unrealistic.
It's no surprise that many of the states deepest in the red are
public union strongholds. For decades, Democrats have bought union
support in elections by using surplus revenue during good times to pad
pension and retiree health-care benefits.
Look no further than the recent Chicago
teachers strike. The city is already facing upwards of a $1 billion
deficit next year with hundreds of millions of dollars in annual pension
costs for retired teachers coming due. But despite the fiscal
imperatives, the negotiation didn't even discuss pensions. The final
deal gave unions a more than 17% raise over four years, while they keep
benefits and pensions that workers in the wealth-creating private
economy can only imagine.
As a political matter, public unions are pursuing a version of the GM
strategy: Never make a concession at the state level, figuring that if
things get really bad the federal government will have no political
choice but to bail out the pensions if not the entire state. Mr. Quinn
made that official by pointing out in his budget proposal that
"significant long-term improvements" in the state pension debt will come
from "seeking a federal guarantee of the debt."
Look for Democrats in Washington to take up that call, and for such an
effort to get some traction if Democrats control one or both houses of
Congress next year. Jim DeMint, the South Carolina Republican, has seen
this future and is already warning against it. He and Illinois Senator
Mark Kirk have proposed a resolution opposing a federal bailout of state
pensions, and we hope more sign on. States need to clean up their own
fiscal messes." via Free Republic
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