“Pension reform”? Or is it fairer to think of it as a lien on all state cash to ensure it will be spent on pensions ahead of other things. The Illinois Senate today approved  SB 2404 sponsored by Senate President Cullerton and municipal unions.  The proposal would cut pension obligations only a bit.  Greg Hinz of Crain’s, who is hardly a pension hawk, says of the bill: “over the next 32 years, taxpayers still would have to put in $336 billion — not much below the $381 billion they’d be on the hook for without Mr. Cullerton’s proposal. And those numbers may be optimistic.”

 

 

Far worse, it contains the “guaranty” provision that directs courts to intercept state cash and redirect it to the pensions ahead of all other obligations except certain state bonds.  See for yourself if you don’t think this is akin to slapping a lien on all state cash to ensure priority for the pensions.  The bill is linked here.  Search “mandamus” to find the provisions.  The pensions could go straight to court to get a mandamus to intercept cash and redirect it to themselves.

 

In all insolvencies the assets go to the claimants who are first to get their liens, mortgages and payment priorities in place first. It seems only the unions have figured this out, other than bondholders who were there long ago. All other state spending would be subordinated, and the priority would be overturned only if the Illinois Senate, House and Governor’s office turned over to folks who would spurn the unions and vote against their own pension interests.

 

Mark Glennon

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Mark Glennon

Totally agree. One problem is that those other groups are not represented. In a proper insolvency proceeding a committee would be appointed to represent them and they would have their representation paid for by the estate.

anono

I did look at those guaranty provisions. As I lawyer, I would say that if this was done in the private sector they would likely be invalidated as fraudulent conveyances or preferential transfers. With no state bankruptcy possible that cannot happen through the normal process, but perhaps there is a common law notion of fraudulent conveyance that should apply. Other creditors should be screaming.

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