It looks like our media continues to slavishly report what comes out of these credit rating “agencies” (paid by governments, for the “ratings”) as authorities, even after their contribution to the greatest financial and economic crisis since (at least) the Great Depression.
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Political will is a precondition of political action. And so it's distressing to see what's happened to political will when it comes to public employee pensions, the biggest part of Illinois' fiscal plight.
Five years ago this month the Securities & Exchange Commission issued an order finding Illinois guilty of state-sponsored fraud. The state didn't disclose the severity of its pension problems to bond purchasers, the SEC charged, and the state agreed to the order.
One of the state's own pension consultants wrote in August 2009 that "the Illinois pension system is now so underfunded that the state likely (would) never be able to afford the level of contributions required to ever reach 90 percent funding." Failure to disclose that was among the items expressly called out in the order as fraudulent.
You'd think that would get some attention—that the state's own expert thought the pension problem likely could never be fixed, and that failing to say so was fraudulent. And it did initially get attention. Sort of. The General Assembly later that year produced SB 1, a pension reform bill. In truth, it would not have solved much and was probably designed to be struck down by the Illinois Supreme Court, which happened in 2015.
Today, the state's unfunded liabilities are more than double what they were in 2009 when that expert said pensions were probably unfixable. Unfunded liabilities then stood officially at $62 billion; today, they're $129 billion. More realistic calculations put the debt much higher. Moody's, for example, says the state's unfunded liabilities total $250 billion.
What happened to political will to fix it? The race for governor tells us.
On the Democratic side, we've had the spectacle of Sen. Daniel Biss groveling in apology for having supported SB 1, and J.B. Pritzker slamming Biss for that support. Pritzker says we just have to pay the pensions—no meaningful reforms. Biss emphasizes consolidating some pensions, which should have been done long ago, but that would do nothing to reduce unfunded liabilities, and savings would be marginal. Chris Kennedy supports only what unions will agree to, which we know means nothing. Each looks primarily to tax increases to solve the pension crisis, but none say how much that would be.
On the Republican side, Gov. Bruce Rauner clings to the "consideration" model and calls it "comprehensive pension reform." By definition, it means an equal swap of one benefit for another, so it can't truly save much. He has never documented its supposed saving of $900 million per year. Even if it did, that would only reduce the annual taxpayer contribution to where it was in 2017. Rauner does support state authorization for municipal bankruptcy and earlier made some noise about getting federal authorization of bankruptcy for states, but he has never really made the case for either.
His rival, Rep. Jeanne Ives, undoubtedly would take an ax to pension benefits any way she could. She supports both municipal bankruptcy authorization and a constitutional amendment to delete the pension protection clause. Those are the only two meaningful ways on the table to reduce unfunded liabilities, but perhaps because they're long shots, neither Ives nor those proposals have gotten much attention.
So where have we gone? Backward. Taken as a whole, this election shows loss of even the earlier, meager political will to address pensions. Five years ago we at least could laugh at Squeezy the Pension Python, then-Gov. Pat Quinn's attempt to call attention to the crisis. Squeezy, we hardly knew ye.