GOP gubernatorial newbie Bruce Rauner gave his State of the State address this week, telling his constituents that he’d “leave no stone unturned as we look to bring good government, good management practices, here to Springfield.” “Good government, good management”…in Illinois? Good luck. What the new state chief didn’t include in his speech, notable for its attacks on public and private union power, was a plan that will have dramatic repercussions for municipal governments: the removal of a hurdle they have to jump in order to declare bankruptcy. The Chicago Tribune reports that it was hidden in “a list of talking points…distributed to lawmakers”:
“Gov. Bruce Rauner wants to give cities, towns and counties the authority to file for bankruptcy protection, a move that could give local governments a stronger foothold when negotiating with local police and fire officials over costly pension obligations. […]Federal law only allows municipalities to file for bankruptcy with explicit permission from the state where they are located, said James Spiotto, a municipal bankruptcy expert and attorney who is managing director of Chicago-based Chapman Strategic Advisors.Currently, only the Illinois Power Agency has been given such authority. It would take passage of a new state law to extend the authority to municipalities.Asked to explain how the law would be structured, Rauner spokesman Lance Trover said, “the specific details regarding authorizing communities to pursue that option will be part of an ongoing dialogue in the coming weeks.”
So far, as the Tribune notes, no municipality has admitted its intention to declare bankruptcy, though the Illinois Municipal League has been making the case for greater freedom. The law authorizing towns to file for bankruptcy would strengthen municipalities’ position relative to unions, while clearing the way for an eventual filing if no solution is reached.The Chicago mayor’s office waved away the news; for now, the Second City has no intention of becoming a second Detroit. But though declaring bankruptcy may be the “nuclear option,” as one state representative put it, Illinois’s fiscal future is downright woeful (and its pensions’ unfunded liability is the worst in the nation). The possibility that the state will see a municipal bankruptcy soon is on more than a few minds in Lincoln’s land—including its Governor’s.