Blue Model Meltdown
Crisis Point Approaching in Illinois

Illinois’ Supreme Court ruling against a pension reform bill has left the gridlocked state’s government facing a series of unpleasant choices to make the numbers work, the New York Times reports:

[The State Supreme Court decision] has left officials scrambling at a moment when the state has a divided government for the first time in a decade and the political differences between Mr. Rauner and the Democratic-controlled legislature make compromise difficult. A splintered set of political leaders is now debating options including tax increases, large spending cuts, new pension reductions, changes to the State Constitution and even legislation to permit Illinois municipalities to file for bankruptcy.

Some in Illinois assert that changes to pension benefits remain possible under certain conditions, and various deals are being discussed in the State Capitol in Springfield, though cuts are all but certain to draw more legal challenges.

Mr. Rauner has proposed switching workers into a pension plan that would let them earn less generous benefits starting in July, but he has acknowledged that even he is uncertain whether his idea would hold up in court.

Some leaders want to amend the State Constitution so benefit changes for future years of service can be made — an idea that other states are closely watching. But that path is long and uncertain: An amendment would need support from three-fifths of the House and Senate, then approval from voters. […]

Others say the pension ruling takes benefit changes off the table and means that the government must pay what has been promised even if it means tax increases and spending cuts.

Illinois’ budget for the coming fiscal year that starts on July 1 will have as much as a quarter of its general fund spending consumed by pension payments. And the court’s decision is casting doubt on beleaguered Chicago’s own initiatives to curb pension costs.

For Chicago, the state pension ruling could not have come at a worse time. The city is facing about $20 billion in unfunded pension liabilities, an additional $550 million yearly pension payment it must start making next year, and a school system that has a $1 billion deficit of its own, underfunded pensions and a new contract for teachers under negotiation.

Only a few American cities have shakier pension systems than Chicago’s, according to a 2013 Pew Charitable Trusts report on 61 major city pension systems.

States and municipalities around the country, facing similar if perhaps less dire situations are watching closely to see if and how Illinois—a showcase of blue model governance—resolves its problems. Some toxic mix of tax hikes and service cuts seems just about inevitable. Maybe, just maybe, President Obama’s home state can become a “teachable moment” of sorts for other parts of the country facing similar problems.

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