The American Interest
Analysis by Walter Russell Mead & Staff
D-Day in Illinois's Blue Civil War

The most unpopular governor in the country, Illinois’s Pat Quinn, will stand up to give the State of the State speech this evening, and he won’t be bearing good news. Due mostly to a crisis of unfunded pensions, Illinois has the worst credit outlook in the country, having been downgraded a dozen times by credit agencies since 2008. Reuters reports:

Illinois’ pension systems are in the worst financial shape of any state at 39 percent funded when no less than 80 percent is considered healthy. State pensions are in the hole by the staggering amount of nearly $97 billion, or $20,000 per Illinois household and nearly four times the annual state revenue. [...]

At the same time, teachers in Chicago’s wealthy suburbs are retiring with six-figure salaries set by school districts on which pensions are calculated, and the state pays the bill. The benefits cannot be reduced, according to the state constitution. [...]

A huge obstacle to reform is an article of the Illinois Constitution that says any state pension is an enforceable contract and “shall not be diminished or impaired.” The requirement to fund the system, by contrast, is not enforceable under the state’s constitution. Unions have said they will challenge pension reforms in court, and rating agencies warn this could drag out reform for years.

Things are so bad that ambulance providers and hospitals have had to cut back on employees and equipment because the state delays payments in a lame attempt to balance the budget. Some doctors haven’t been paid in a year for services given to state employees.

Pat Quinn’s two predecessors were jailed for corruption, and to his credit he’s tried hard to push through reforms that would start to bring his state back from the edge of the abyss. Nevertheless, some of his efforts verge on the comical: He was ridiculed recently when he unveiled “Squeezy” the cartoon snake, a mascot characterizing how Illinois’ pension costs are squeezing spending on other government services.

Expect Quinn to have a familiar message tonight: pleading with lawmakers to pass reforms and urging the unions to negotiate on pension issues. That latter point may be a particularly sore point moving forward. Democratic Party politicians are increasingly frustrated with organized labor’s unwillingness to make serious concessions:

Majority Democrats, who have relied for decades on labor unions for political and financial support, are showing signs of a willingness to confront organized labor.

“To date, we have received no cooperation from the labor unions representing state employees on addressing these challenges,” powerful state House Speaker Michael Madigan wrote in a January 30 letter to the head of a labor coalition.

As the Illinois Comptroller says, “The state of the state is dire—and it is getting worse.” Which side will Quinn and his fellow Democrats pick in the blue civil war? This is one of the questions to watch in Governor Quinn’s speech tonight and in the coming days.

Published on February 6, 2013 9:31 am