New Report: Illinois Is Greece

Yesterday, the Daily Northwestern published a story about a proposed change in the Illinois State Constitution. On Election Day, residents will be able to vote on whether or not to enlarge the majority in the legislature required for increasing the pension benefits for public employees. Right now it only requires a bare majority in the Illinois General Assembly. The amendment would require a three-fifths majority in both chambers. The story does not give readers any idea of how bad their situation really is.

Right now, at this point in the state’s history, this amendment is like proposing a slight improvement in the Titanic’s navigation system after it has already hit the ice berg. The legislators behind the state referendum call it “a modest step in what is going to be a very long march to try and get pensions systems in Illinois to a point where they can be sustained.” That isn’t realistic. Illinois has already gone off the edge of the cliff.

By all means, voters need to pass the amendment. But even if the amendment fails, pensioners are going to see their benefits reduced not increased. Here are the five state pensions and how much each is funded right now, according to a recent state task force report:

  • Teachers Retirement System (TRS) – 46.1%
  • State University Employees Retirement System (SURS) – 45.3%
  • State Employees Retirement System (SERS) – 34.9%
  • General Assembly Retirement System (GARS) – 20.2%
  • Judicial Retirement System (JRS) – 31.0%

Does that look bad? It is actually much worse. These calculations are based on the expectation that the pensions can get an average annual return of eight percent on their investments. Last year, America’s largest pension fund managed to get a one percent return. Eight percent is a fantasy. These pensions are far less funded than those number say.

In the meantime, Illinois’ infrastructure needs drastic improvements. According to the report, “Illinois’ aging and deteriorating infrastructure is in urgent need of immediate repairs to meet basic standards of public safety.”

Governor Pat Quinn’s strategy is to raise taxes, but he can’t bring in enough revenue to actually fund the pensions and he can’t afford to drive business away from the state. He’s already made it clear he is, in his own words, “seeking a federal guarantee of the debt.”

The Federal government already has many trillions of dollars of debt and many multiples of that in unfunded liabilities. There is no possible way that the nation can assume responsibility for every state’s false promises.

Illinois needs to immediately end collective bargaining, “prevailing wage” laws, and all pensions. It needs cap pension benefits by instituting a hundred percent tax above a certain amount. Only then can it hope to repair infrastructure and survive. Otherwise, the state will simply die as everyone who produces anything flees elsewhere. Chicago is going to make Detroit look healthy if the government doesn’t move fast.

The EU is going either dissolve or splinter because of insolvent nations. Americans need to realize we are looking at the same possible disaster. Illinois is our Greece. We need to stop polishing brass on a sinking ship and figure out the best default procedure possible.