For Illinois towns and cities to file for bankruptcy under Chapter 9 of the United States Bankruptcy Code, authorization must first come from the state. To date, the General Assembly hasn’t given serious consideration to that but things may change soon, for two reasons.

First, things that can’t go on forever don’t, and the day of reckoning can’t be denied much longer. That’s mainly because there’s simply no additional revenue source available for the most stressed towns and cities. Property and sales taxes comprise most of their revenue and they are already at or close to the nation’s highest.

Some towns are already beyond desperate, like Harvey, Cairo and East St. Louis, which should have gone through bankruptcy reorganization long ago. You can expect at least some of those to start asking for help from Springfield. Cash, however, almost certainly won’t be offered.

Seemingly middling cities are falling over the edge, too.

Consider Rockford. It has some things working. Parts of its traditional manufacturing sector survives including an aerospace manufacturing sector that’s growing nicely. It managed to make a small cut in property tax rates earlier this year.

But look at the article we posted this about Rockford by the Register Star. Post-recession revenues are growing about 2% per year but expenses at 3%. The state is sharing less money that Rockford had relied on. One-time revenue sources are depleted. With effective property tax rates still around 3%, there’s just nothing to tax more.

However, that article doesn’t detail the pension problem. On it’s face, Rockford appears typical of Illinois municipalities. Its police and firefighter pensions are about 50% funded — about average in Illinois.

But unfunded pension debt continues to grow. The combined police and firefighter pensions have unfunded liabilities of $295 million, and increase of about $13 million over last year, yet the city population is only 150,000.

Rockford’s former mayor long ago asked for bankruptcy authorization. That wasn’t necessarily because he was certain to file, but he at least needed that threat to renegotiate some of the city’s obligations.

Wirepoints will be profiling various towns and cities across Illinois in coming months. Rockford is not unusual. Many are insolvent and their insolvency worsens each day, with no revenue solution at hand. Cutting legacy debt will become unavoidable.

There’s another reason why the debate about bankruptcy authorization will start getting press: Jeanne Ives.

The Wheaton member of the Illinois House is running in the Republican primary against Governor Rauner. She is among only a handful of Illinois lawmakers who understand bankruptcy and she is the sponsor of the bill for it that has been ignored. Rauner wants municipal bankruptcy authorization, too, though he hasn’t stressed it.

Ives, however, is particularly candid and has never sugarcoated our financial crisis. You may or may not think much of her or her chances of winning, but she’ll get press coverage and you can expect her to be talking about municipal bankruptcy.

-Mark Glennon is founder of Wirepoints. Opinions expressed are his own.


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Bruce ross
2 years ago

I think the conservative side of Illinois will surprise many.