Yesterday we mentioned the challenges which the new Governor of Illinois will face as he attempts to confront the unions in his state – particularly the public workers unions. Even the relatively mild move of preventing the state from extorting union dues from non-members will be faced with fierce opposition. But beyond that, the Land of Lincoln has much bigger problems – both short term and long term – which will require a fundamental transition in how the government keeps itself afloat. This editorial from the Washington Examiner is a good one and it explains how the crippling weight of union pensions are dragging the state underwater to the point where no amount of minor reforms will save them.
Thanks to years of poor and corrupt rule and an equally corrupt judicial branch, Illinois has become nearly ungovernable. Its revenues are now insufficient to cover its operating expenses, and so the state was forced last year to pay $7 billion in IOUs instead of cash to its vendors. Yet Illinois tax rates — ratcheted up in 2011 in a futile effort to end the state’s status as a deadbeat — are already so high that businesses are fleeing to neighboring Indiana and Wisconsin.
If the Prairie State’s short-term finances sound bad, its long-term situation is far worse. Thanks to years of over-generous concessions to the state’s public employee unions, Illinois’ pension and healthcare obligations have ballooned to $167 billion. Every landowner and business operator unfortunate enough to reside within Illinois stands to inherit a piece of this crushing debt — as Gerald Skoning recently noted in the Wall Street Journal, they are lucky this obligation does not show up on their credit reports. At this point, a state default — the first in more than 170 years — is very much on the cards. To make matters worse, the state’s extremely liberal supreme court has repeatedly struck down even modest legislative efforts by Democrats to ease the burden.
Illinois should look to their neighbors and the experience of the City of Detroit on this matter. The Motor City was actually plunged into bankruptcy court largely under the burden of their bloated pension system, and upon emerging there was still doubt as to whether or not the modest cuts to those bills could withstand challenge. But rather than a single, decaying city, we’re looking at the very real possibility that the entire state of Illinois could wind up facing a similar day in court. They’ve already raised taxes to the point where both citizens and businesses are fleeing Illinois, further cutting their revenue and accelerating the spiral of decay. Even higher taxes and further concessions to the unions are not going to solve this.
The problem with burying your head in the sand is that the longer you wait, the worse the hammer blow is when it finally comes. In that way, Greece could serve as a tragic, negative role model. Most analysts agree that if the Greeks had curbed their socialist appetites a couple of decades ago they wouldn’t be facing imminent collapse now. A little bit of bad tasting medicine today is still better than an amputation next month. And if Illinois doesn’t figure that out soon the end will arrive. And when it does, it won’t be pretty.