Thursday, February 2, 2012

Everyone likes to be fiscally responsible.

Any discussion of Illinois' financial problems has to touch on the pension system. A plan passed in 1994 was supposed to establish a payment schedule to put the state on solid footing. But...

While the plan required annual contributions to the pension funds, it allowed the state to put off starting to pay down the pension debt until fiscal year 2010, 15 years after the plan took effect. It's similar to a balloon mortgage, where steep increases in payments kick in over time.
Now the bill is coming due just when the state can least afford to pay.
Meanwhile, lawmakers haven't even met the minimum payments specified in the original plan. Instead they have tinkered repeatedly with the formula
In 2003, Gov. Rod Blagojevich pushed lawmakers to issue $10 billon in pension obligation bonds...
But like several of his predecessors, Blagojevich also used the pension system to solve the state's financial problems. 
 In 2005, with an election season looming and the state running another budget shortfall, Blagojevich cut another pension deal...Rather than pay the amount required by the 1994 funding plan, the Legislature simply rewrote the pension code to lower its payment over two years...Those slight changes ended up costing the system $2.3 billion, while the long-term cost added billions more.
The state's leadership tried to keep this devil way down in the hole, but they buried the state and pension holders along the way.

Austerity seems to be all the rage these days. What's often lost is the real world consequences. Budget cuts and constitutionally questionable pension alterations will hurt people. Madigan's been at this game since the 1980's and it's clear he's calling the shots in Springfield now. Since he's had a hand on the wheel for thirty years and he's firmly in the driver's seat now, I don't get too upset when the governor presents a plan other than austerity:

Pat Quinn might strike some as out of touch or irresponsible, but Madigan will get what he wants. Including harsh cuts to Medicaid and other programs to clean up the mess from his own mismanagment. Given his political constraints and pain of the impending cuts, I don't think Pat Quinn should be faulted for saying people deserve more rather than less. Illinois will chug along regardless.

No comments:

Post a Comment