45 Comments - Highland, IL - Monday, Dec 20, 10 @ 10:48 am: What stuck with me the most from last night’s 60 Minutes is when Whitney said that the states would pay their debts, but that would dry up the monies for the municipalities - causing them to default. Perhap 50 to 150 huge defaults. Some cities rely on the states for a third of their budgets. - Rich Miller - Monday, Dec 20, 10 @ 10:50 am: That’s why I included it in the post. Very scary stuff. - Wizard of Ozzie - Monday, Dec 20, 10 @ 10:52 am: That Freeport paper is a doozie. Allow state’s to declare bankruptcy and any and all access to the bond market disappears. Credit is as crucial to states’ ability to function as it is to every business and family. - shore - Monday, Dec 20, 10 @ 11:03 am: good work to you but another black mark on the awful dying chicago msm which spent the entire gubernatorial campaign focusing on brady’s social positions (hey carol marin and phil ponce) and canine killing and ignored the fiscal mess. - hawksfan - Monday, Dec 20, 10 @ 11:04 am: Maybe we can get some of those superior autobiographical memory individuals who were featured later in the episode to help come run our state so we dont keep making the same budgetary mistakes. - western illinois - Monday, Dec 20, 10 @ 11:11 am: The Illinois figures look like percentage of the operating budget . Our defict has been stated as low as 7 billion for one year and as high as 15 billion for the accumulated neither of which is near 40 or 50% of 60 billion so Illinois may not be much worse or better than the other states - Seriously??? - Monday, Dec 20, 10 @ 11:15 am: When the financial analyst Ms. Whitney talks about “complacency”, is she referring to the state legislatures that have been sitting on their hands for the last two years? - Pot calling kettle - Monday, Dec 20, 10 @ 11:18 am: Allowing bankruptcy is another one time fix. When there is a guarantee (or perceived guarantee) of payment, it is much easier (and cheaper) to get a loan. Once that guarantee is removed, who would want to loan the state money? Of course, that would force much tighter fiscal policy on the state legislatures, so maybe it’s not such a bad idea. - cassandra - Monday, Dec 20, 10 @ 11:19 am: I disagree with Whitney that it’s a matter of complacency. Rather, legislators and other elected officials don’t want to do anything which would jeopardize their re-election, combined, of course, with a very bad economic situation which will persist for at least a couple of years. Going to the taxpayers for more will generate more anger than it might in better times…and perhaps longer memories at election time. Making cuts would annoy some important constituencies like public employee unions (huge contributors), connected contractors, powerful business interests. The pols don’t want to take these interests on except at a very superficial level. Politicians of states in financial trouble like Illinois are probably hoping for a potentially destabilizing financial crisis as we have seen in Europe, in which the markets essentially make the decision and greatly raise the price at which they’ll buy the debt. At that point, the pols will be able to say, it wasn’t me, it was the markets, out of my hands. The feds or some commission will be given emergency authority to make decisions the pols are avoiding. That’s what nearly all the pols want–somebody or something to take it out of their hands. They really are useless. - Leroy - Monday, Dec 20, 10 @ 11:24 am: Shore - you are missing it. If Brady was elected governor, the media would spend the next four years talking nonstop about his extremist positions, and scapegoating his extremism as to why Illinois was on the eve of destruction. Illinois had 2 years of confrontation with Blago and look where it got us…I couldn’t stand to think of what would happen if we had 4 more. I’ll take the appeasement of Pat “There will be peace in our time” Quinn instead. At least then I’ll know exactly why Illinois hit rock bottom, rather than having the issue be clouded by extremism. - Plutocrat03 - Monday, Dec 20, 10 @ 11:24 am: How can one expect the people who created the problem by pandering to the special interests to come up with a honest solution? The same people get elected each time and work to protect their legacies. If a bankruptcy is an option then the legislators who created the problem should be eliminated from getting their mitts on ant solution. - Rich Miller - Monday, Dec 20, 10 @ 11:26 am: ===the legislators who created the problem should be eliminated from getting their mitts on ant solution. === So, you prefer a dictatorship of the proletariat or something? - wordslinger - Monday, Dec 20, 10 @ 11:29 am: The idea that state’s will whack municipalities makes a lot of sense. The munis will declare bankruptcy and seek to walk away from their pensions, a la our heroic corporate citizens of recent years. –another black mark on the awful dying chicago msm– Shore, that’s just willfully ignorant. The Chicago MSM is the fourth largest regional economy in the world, behind Tokyo, New York and LA. Look it up. You want to know where the REAL tough times are in Illinois and America? Check out the rural areas. Depopulation (farming continues the march to be being more capital intensive, less labor) plus this country’s headlong global-free-trader rush to kill it’s manufacturing base has devastated it. - Cincinnatus - Monday, Dec 20, 10 @ 11:31 am: I was pilloried for suggesting the US Bankruptcy Code be changed to include a Chapter for State Defaults. Wizard of Ozzie points out one of the real, perhaps prime, difficulty of State bankruptcy. In and of itself, if a state cannot reorganize itself for fiscal responsibility, then allowing the state to renegotiate with its shareholders outweighs this problem. Furthermore, I think the bond hit provides two BENEFITS: 1.) The high bond rates would force the state to align its revenue with its spending since the bonds would be difficult to obtain. 2.) In order to access the bond market in the future, the state would need to rehabilitate its approach to fiscal governance, now and in the future. Reorganization is indeed a bitter pill to swallow. Many of us were against the use of TARP to bail out Ford and Chrysler, and we thing they should have been forced into a traditional bankruptcy managed by the courts. However, even the bailout that was done required existing bondholders take a haircut (even though they would have been at the front of the line in traditional bankruptcy), and pension deals were struck with the unions to relieve the companies of these obligations. Illinois, California and many other states need a system whereby existing obligations can be negotiated, even if that means at the point of a gun. Illinois cannot print its own money, like the Feds. Illinois cannot expect a bailout from the Feds, especially now that Republicans are in charge of spending in DC. Illinois cannot expect unions to provide the concessions necessary to provide balance. Illinois taxpayers cannot expect leadership from their elected officials. What else is left? - RetiredStateEmployee - Monday, Dec 20, 10 @ 11:34 am: It continues to be a little sad that the pension systems continue to be blamed for the deficits when it has been the spending priorities of the legislature that has underfunded the systems for decades. Although I believe that the legislature is required to pass a balanced budget, that hasn’t happened. If you eliminate pensions, they will still spend more than the revenue because they can get away with it and buy votes to get re-elected. - zatoichi - Monday, Dec 20, 10 @ 11:37 am: “But in the face of $80 billion in unfunded pension benefits, a state budget deficit somewhere more than $13 billion, and a six-month, $6 billion, backlog of overdue payables to state vendors, Illinois certainly fits the criteria for bankruptcy.” Stick with that concept for awhile. Nice outcome for the state and shear catastrophe for those vendors and anyone else who does any business with the state. How many business closings (with the increased unemployment payments, job losses, and individual bankruptcies) would cycle down from that and where would that put the state in terms of tax collection? Just had the stories of non-profits laying off 13% of their staff = 52,000 people. Let a state bankruptcy bump that to 75% laid off. That’s talking 300,000 people. Not to mention the million some people who got services of some kind who no longer get them. Slippery slope? - just sayin' - Monday, Dec 20, 10 @ 11:38 am: Good job by 60 Minutes. I think the bankruptcy talk is ridiculous. States like IL really haven’t even begun putting the screws on taxpayers for more revenue. Not saying it’s painless or that anyone wants to do it, just saying that as a legal matter it’s absurd to say the states don’t have the means to meet their obligations. The revenue source is there, and they also know there are a lot of cuts that could be made. Our public officials simply don’t want to do their jobs. A bankruptcy court is going to have zero sympathy for that. If we were talking about bankruptcy in brains or political will, it might be different. - He Makes Ryan Look Like a Saint - Monday, Dec 20, 10 @ 11:39 am: New Jersey like Illinois have very lucritive Legislative pensions, much more than the common state employee. Is Cristie going to do something about that? Everyone keeps talking about the unfunded liability for the Employee pension, the LEGISLATURE put us in that position (although their pension is funded annually) What would have happened to the state if they didnt have the pensions to “Borrow” from? I would gladly take my money and put in a 401k if they can also give me the interest I was suppose to earn on it plus what they were contracted to put in at 100%. - wordslinger - Monday, Dec 20, 10 @ 11:43 am: Yeah, Brady had a brilliant financial plan (didn’t he?). He’s a state senator; he’s free to introduce it any time. - anon - Monday, Dec 20, 10 @ 11:46 am: I just tried watching the segment, both your imbedded video, and from the link. Neither worked. Has it been taken down, or do I have a problem with my computer? - Seriously??? - Monday, Dec 20, 10 @ 11:47 am: We’ll see how happy voters are with legislators who allowed the entire social services system in Illinois to collapse. Rebuilding that system will take a lot more money than funding it now. And the collapse of the system will have long lasting implications for the citizens of this state, even if they aren’t utiliziing those services. No social services means increased crime rates, subpar educational outcomes, and reduced housing options for low income individuals and families (among other things). The impact of defunding these services because the legislature doesn’t have the testicular fortitude to do their jobs rather than just trying to keep thier jobs, will be far reaching if they don’t get off their keesters and do something. - Cincinnatus - Monday, Dec 20, 10 @ 11:52 am: - He Makes Ryan Look Like a Saint - Monday, Dec 20, 10 @ 11:39 am: “I would gladly take my money and put in a 401k if they can also give me the interest I was suppose to earn on it plus what they were contracted to put in at 100%.” And you are pointing out both a problem and a solution in one sentence! If the state paid into a fixed contribution system (read 401k) the money would be yours, and your heirs. Forever. The pension systems, in addition to being under funded (Disclaimer: The state should live up to its previously stated obligations, unless renegotiated either voluntarily or involuntarily through the courts). However, not only do we have a funding problem, the state has compounded the error by guaranteeing return rates). Oftentimes, people here on CapFax say that Social Security + 401k contributions would cost more overall than the current system. Is that true when we include indirect costs like borrowing to fulfill obligations and intangibles like an underfunded system? - Honest Abe - Monday, Dec 20, 10 @ 11:54 am: This financial scenario is damn frightening to contemplate. Is there anything that the General Assembly can do other than raising taxes and fees? It is a mere drop in the bucket, but my first choice for a cut is the “Member Initiatives” which permit legislators to buy votes from favored organizations within their districts. How in the hell was this ever permitted? - CircularFiringSquad - Monday, Dec 20, 10 @ 12:15 pm: Can someone wake these people up…how can 60 Minutes put that “respected Wall Street ….” on the air when it was Wall Street, predatory lenders, Bush era regulators and all their allies at the driver’s seat at the fiscal disaster states are now facing. We are shocked that Hynes did not try to set them straight. Let us pray the new Tea Party express doesn’t start the push to privatize Social Security like Bush failed to do. BTW a big part of Christy’s magic was skipping the pension payment. Imagine what would be left if everyone depended on Wall Street after than last three years. Wipe Out! 60 Minutes should stick to an area they know something about — failing network news for instance. - Give Me A Break - Monday, Dec 20, 10 @ 12:18 pm: Just watch the GA this year as they introduce countless bill that costs the Departments more money. Then the legislative staffs from those Departments will go to work in committee and behind the scenes to educate the members on what those bill cost and why they oppose them. Then the members of the various committees will trash the legislative staffs for opposing their good ideas that help people. GA members want it both ways, their pet projects and cover for opposing taxes. God forbid they actually face reality and raise revenue but it is easier to play the hero in committee and blast away at department liaisons when they point out the costs of their bill to the committee. - DoubleD - Monday, Dec 20, 10 @ 12:27 pm: It is sad, so sad that a state of our means has come to this point. What is our recourse to the irresponsibility of our legislatures and governors from BOTH parties for this mess. Are we allowed as citizens to cease all of their campaign funds, personal wealth, and property before they are allowed to declare bankruptcy? This trickle down economic theory and deregulation seems so good in theory but in actual practice? - Secret Square - Monday, Dec 20, 10 @ 12:44 pm: Not too long ago, I believe it was Rep. Chapin Rose who posted something over at Illinois Review regarding a two-pronged plan for attacking the budget shortfall. It made sense to me. Rose said that first you have to separate the state’s deficit (the gap between current revenues and current expenditures) from its debt (past unpaid obligations, including pensions), come up with a plan to eliminate the deficit, and finally, come up with a plan for whittling down the debt over time. Obviously we can’t cut or raise $15 billion all at once but we can certainly try to get a grip on the $6 billion + deficit, then move on to paying off the $7 billion + debt, even if that takes 10 or 20 years or longer to do. This way, we have two extremely difficult fiscal problems rather than one utterly impossible problem. And if we’re going to raise taxes… this may be heresy to fiscal conservatives but why not raise them high enough or expand them to services, etc. enough so that we don’t have to tinker with the tax rates again for at least 20 years? That way, any business starting up or moving into Illinois KNOWS what to expect from here on out… isn’t it the uncertainty about taxes, rather than the amount, that is really keeping business away? - Pelon - Monday, Dec 20, 10 @ 12:48 pm: There is no easy answer to the budget mess. Even a 2% income tax rate increase and a 10% reduction in spending will not make up for the lost investment returns on the pension payments that were never made. I don’t see how we avoid a default on our obligations. The only question I have is when? My guess is when the pension funds run out of assets which should be around 2016-2020. - Justice - Monday, Dec 20, 10 @ 12:50 pm: This has been a long time coming. I think the complacency referred to is that of both the legislature and the general public. The mindset in the legislature appears to have been to protect oneself first, contributors second, and kick the debt obligation can down the road as long as possible, i.e let the next guys handle it. Based upon our voting history, the general public could care less about state debt or borrowing, as long as it doesn’t affect me. Well, that blind eye attitude is getting ready to bite all of us. I dare not guess what is in store for us but my guess is that we will see a new era of the public paying close attention and a new accountability, for everyone. - steve schnorf - Monday, Dec 20, 10 @ 1:09 pm: Bankruptcy laws have allowed major US corporations to engage in some of the most immoral behavior imaginable; voiding their contractual obligations to people, vaporizing the assets of shareholders, effectively stealing from vendors,etc. And some people think allowing states to do the same represents a GOOD SOLUTION? Shame on you! - Way Way Down Here - Monday, Dec 20, 10 @ 1:58 pm: I’m with Steve. I have friends and relatives from pilots to paper mill workers who have gone to work one morning and found that the pension they had worked toward the past 30 years was gone. Sorry folks, we spent it. . .or the court has it now. Criminal to my mind. - lbk - Monday, Dec 20, 10 @ 2:03 pm: I watched the sixty minutes segment last night. Dan Hynes did a nice job, but had no real answers. New Jersey Governor Corzine was the most realistic, saying major cut backs in spending, major pension reform (even compromise on existing pension plans) and revenue increases through economic growth are all needed and than it will still be a decade of true fiscal responsibility to solve New Jersey’s problems which are similar to Illinois. He seemed to be the only one to grasp the true enormity of the problem. - LisleMike - Monday, Dec 20, 10 @ 2:03 pm: Seems to me that we are all whistling in the wind about pensions. We’ve got to face up to responsibilities. People who were employed by anyone promising a pension did not put other monies away for retirement. Not their fault. However,done is done. What needs done is to begin in 2011. All new employees will have to invest in 401k or someother retirement vehicle. ALL new employees. Just the way it is. It will still take 30 years plus for the problem to dissolve, but it will. I am a strong Republican (who would have guessed based on my earlier postings, huh?) but I would support a tax increase that went soley to the pension problem. State Rep Michael Connelly has a bill tied up which would address this issue nicely. All surplus funds received over and above the budget would be solely used for purposes paying those to whom the state owes money for services and products provided, and the other 50% goes to pension shore up. When the state gets down to paying vendors within 30 days, the whole balance goes to paying vendors. Think this bill will ever get out of committee? We’ll see. Christie recognizes the problem, why can’t/won’t Quinn, Madigan, Cullerton, and those who can make a difference? - Jake From Elwood - Monday, Dec 20, 10 @ 2:18 pm: Well said, Mr. Schnorf. A promise has been made to these public employees and that promise must be kept. If new employees are offered a less generous promise and they agree to work under those terms, that too is fair. Thanks for posting the 60 minutes piece. Very interesting. - cassandra - Monday, Dec 20, 10 @ 2:36 pm: I don’t care if the state switches to 401k plans for current state employees but I can’t understand why people keep bringing it up because it is simply not a remotely likely scenario. And not just because employee unions own the current governor (and Illinois Democrats in general). Legislators, after all, are state employees. You think they’d sign on to a 401k replacement? Wanna buy my island in the Caribbean? The change would be cumbersome, would result in lengthy litigation, and would take far more energy to battle through than any of our political leaders have. As long as we are talking about budget fairytales how about a federal bailout when the current federal largesse runs out, as Ms. Whitney pointed out, this spring. That is far more likely to happen than a switch to defined contribution pensions in the Illinois state systems. But maybe that is the miracle our Democratic leaders are currently waiting for. - Jim - Monday, Dec 20, 10 @ 2:53 pm: And yet there is no urgency to balance the budget, disgusting. - reformer - Monday, Dec 20, 10 @ 3:34 pm: On Dec. 14th, Mother Trib advocated a federal law allowing states to declare bankruptcy. If such a law were enacted, and Illinois declared bankruptcy, there would be a huge loss of pension benefits for every retiree and current employee. If the private sector model were followed, then state pensioneers would receive pennies on the dollar they were promised. It would be hard to conceive of legislators taking money out of their own pockets by approving bankruptcy. - Commonsense in Illinois - Monday, Dec 20, 10 @ 3:40 pm: @Jim I’m at the point where I don’t think anyone knows how to balance the budget. As of now, our revenue shortfalls are around 49 percent, hence the $13 billion debt on bills currently due and owing. To cut nearly half the budget (and there are some who think cutting spending is the sole answer) is undoable without serious harm to non-human services activities. There are others who believe just increasing taxes to the amount needed to balance doesn’t take into account inflationary pressures to keep on funding everything at current programmatic levels. Even those who favor a mixed approach don’t know where to begin. Many of these issues have been simmering for decades (I can recall pension funding battles in the 1970s, as an example) so those who want to blame Blago or Quinn are short-selling the problem. I can even recall Mr. Schnorf calling attention to problems that unchecked spending would grow to create bigger problems, but he was ignored as were several of his predecessor and successors. “It isn’t pretty”? Huge understatement! - Michelle Flaherty - Monday, Dec 20, 10 @ 3:53 pm: regarding Illinois, I saw nothing on the 60 minutes piece that hasn’t been reported and re-reported time and again here. And, as mentioned above, Gov. Christie’s “tough” call on his budget was to skip the pension payments. Illinois actually imposed a new pension system for new hires. It starts in just a few days. None of this is a solution on its own. The miracle memory people segment was far more interesting and new. I’ll bet they could remember all those IL GOP gov’s deciding to not fully fund the pension systems because they wanted shiny new political projects instead. - steve schnorf - Monday, Dec 20, 10 @ 4:03 pm: One possible area of federal assistance would be for the feds to allow states to issue POBs tax free, rather than the current requirement they be taxable, at least for 5 years or so. That would allow states with pension problems (most) to address the problem less expensively. - Logic not emotion - Monday, Dec 20, 10 @ 5:42 pm: Small potatoes; but a huge pet peeve of mine has been pictures of elected officials in governmental offices and elected officials’ names on public signs, etc. I don’t need Rod to welcome me to Illinois or to see someone’s picture when I get my driver’s license. Especially during this time of fiscal constraint, wouldn’t it be nice if that practice were banned? - Honest Abe - Monday, Dec 20, 10 @ 6:47 pm: We can rail against Wall Street as much as we want, but the truth is that Illinois has been in bad fiscal shape for a long time and the problems predated the housing bubble bursting. - wordslinger - Monday, Dec 20, 10 @ 7:48 pm: –Bankruptcy laws have allowed major US corporations to engage in some of the most immoral behavior imaginable; voiding their contractual obligations to people, vaporizing the assets of shareholders, effectively stealing from vendors,etc. And some people think allowing states to do the same represents a GOOD SOLUTION? Shame on you!– Amen, Schnorf. Splendid behavior. Here’s a real GOP leader, like Lugar and Simpson. The State of Illinois will not declare bankruptcy, nor even consider it. Disabuse yourself of that notion. We’ll leave that hillbilly idea to the states of the old CSA — they went bankrupt before and after the war. Here in the Midwest, we roll differently. We’re the bedrock of civilization. The United States, and the State of Illinois, are going concerns. They’re the last, best hope of Earth, like the man from Springfield said. Or at least that’s what they said when folks had some guts. Deficits? Boo hoo. Cowboy up. There are teenagers, fathers and mothers in harm’s way in Asia fighting for their country — remember Iraq and Afghanistan? — and we’re crying a river about deficits? For shame. I’m first-generation, post WWII. My folks went from being peasants, to the Depression, to Occupation, to Immigrating, to working their butts off to make a life in this country. I, and my family, are lucky people. Let’s see if we can harness the guts those folks had to get through this problem, which ain’t chi-chi beans, but just arithmetic. - American Guts - Monday, Dec 20, 10 @ 10:14 pm: Wordslinger, you are my hero tonight! - Rich Miller - Monday, Dec 20, 10 @ 11:56 pm: ===I, and my family, are lucky people. Let’s see ===if we can harness the guts those folks had to get through this problem,=== You ain’t alone, man. My family has been here since before the Revolution. Talk is cheap, however. Sorry, comments for this post are now closed.