Illinois taxpayers are facing huge liabilities for their state’s bloated, poorly managed, and underfunded pension system, and public sector workers face an uncertain future, as taxpayers are unlikely to cough up the huge sums required to make good on the debt.
Now everything is getting worse: S&P has downgraded Illinois bonds, meaning that the interest rate on the state’s huge debt is likely to rise, squeezing the state treasury even further. As Businessweek reports:
Standard & Poor’s Ratings Services said it lowered Illinois’ rating a notch because of “weak pension funding levels and lack of action on reform measures.” The firm also said the financial outlook for Illinois is negative, in part because the state’s temporary income tax is scheduled to expire in 2015.
Illinois politicians agreed the state’s massive pension shortfall must be corrected quickly, but they blamed others for the delay. Democratic Gov. Pat Quinn said legislators didn’t do their job. Republican legislative leaders said Democrats were the ones who quit.
Unfortunately for Illinois, the political situation is extremely messy, pitting public unions and their pet democratic backers against a mix of GOP lawmakers and reform-minded Democrats who are holding out for tougher terms on pensions. Gridlock perpetuates the status quo. There’s a lot of finger-pointing, but not much is happening to address one of the worst pension crises in the country.
With public-sector unions fighting tooth and nail to preserve their cushy benefits and expensive pension plans, old style Dems like FDR, Harry Truman and Fiorello LaGuardia—all of whom thought that public sector unionism was a terrible idea—are looking smarter and smarter all the time. The combination of collective bargaining and the power of a focused voting lobby and campaign finance machine has unbalanced the budgets of too many cities and states to retain much appeal to the general public.
If the Democrats lose this election, the impact of the clammy embrace of the public sector union movement in the Midwest will be a major factor in the defeat. Defending an unsustainable governance model is no place for a serious political party.