By: Mark Glennon*
Illinois and many of its municipalities, including Chicago, are bleeding red with no end in sight. It doesn’t matter whether one side or the other capitulates or compromises in the state’s budget negotiations because nothing approaching a truly balanced budget is being considered. There is no such budget solution to be had.
We began writing here four years ago by warning that a humanitarian crisis will come, the cost of which would exceed the combined damages of Hurricanes Katrina and Sandy, all concentrated on Illinois, though hitting slowly. That crisis is already here for some, and it’s growing. The majority controlling the General Assembly offers just one solution to both the fiscal crisis and the struggling state economy — tax increases, despite already accelerating flight of people and employers from the state.
We repeat our hope that attention will turn to the place that offers a solution, the United States Bankruptcy Code. The primary focus of our Congressional delegation should be amendments to the Code to make it a fast, efficient and predictable means to a fresh start for insolvent municipalities, and perhaps expanding it to offer an option to the state itself. The new administration and a Congress with more fiscal realists should be receptive to those efforts. Those efforts must prioritized.
A broad amendment to the Illinois Constitution deleting the pension protection clause is also long overdue, though the General Assembly remains steadfastly opposed. Bankruptcy and that amendment offer the only constitutional means by which pensions can be seriously reformed in Illinois, and pensions are the primary cause of our fiscal crisis. (The state constitutional amendment, however, would still be subject to challenge for federal constitutional reasons.)
Time is our enemy. More debt accumulates each day, deepening the pain that will come no matter how the crisis eventually resolves.
*Mark Glennon is founder of WirePoints. Opinions expressed are his own.
Expect no retraction or apology. This what they do.
The state’s existing buyout program for its own pensions is the precedent for Chicago, which should be a warning: Look out for similar exaggerated claims and shoddy analysis.
Is there any national legislation even in the works?
Seems the Rep have realistically two years to push some kind of State bankruptcy legislation thru congress that would benefit average folks, but will it even be on their radar? Or will they be to preoccupied with passing legislation adding trillions to national debit via massive tax breaks for the well to do. Unfortunately I’m betting on the later.
I doubt if the Feds want to have the states filling bankruptcy. Then they government pensions would evaporate and calls for Federal bailouts would be clamoring.
I think the municipal bond holders are the bigger issue. Or can you increase the national by $ trillions in debit with giant tax breaks (thats what Trump says he’s going to do) while telling states and municipalities its ok to declare bankruptcy? that would seem an incredible contradiction.