DTN.ORG Home DTN.ORG User's Guide Search DTN.ORG Complete Database Contact DTN.ORG Officials Moonbat Central

ILLINOIS' ECONOMIC DECLINE

For about two decades, the Illinois state government failed to put aside sufficient funds to cover the ever-increasing future pension benefits of its public-sector workers. It used the money instead to pay for expanded government services. As a result, the state has a $9,624 public debt per capita, second only to New York's $13,840. Largely as a consequence of this runaway debt, Illinois has the lowest credit rating of any state in the Union.



Two decades of egregious financial mismanagement have plunged the once-thriving economy of Illinois into financial ruin. The state's job-creation rate ranks a lowly 48th in the U.S., outpacing only Ohio and Michigan in that regard. With lawmakers raising state spending at twice the rate of inflation in recent years, Illinois' $9,624 public debt per capita is second only to New York's $13,840. Largely as a consequence of this runaway debt, two of the nation's major credit-rating corporations, Moody's and Standard & Poor's, currently give Illinois the lowest credit rating of any state in the Union. When S&P downgraded Illinois' rating in August 2012, the agency specifically cited concerns over the state's “weak pension funding levels and lack of action on reform measures,” which means “Illinois is bankrupt, and the public unions aren’t going to budge an inch on their pension demands.”

Indeed, Illinois' pension obligations to its public-sector workers rank as the major cause of the state's financial woes. Almost two-thirds of the Illinois state government’s debt consists of bonds the government has issued to cover those obligations, which are unaffected by recently enacted policies raising the retirement age for new workers and limiting the pensions that future workers can earn. As of October 2012, Illinois' total pension shortfall was conservatively estimated at $85 billion.

In October 2012 a State Budget Crisis Task Force (SBCTF), led by former Federal Reserve chairman Paul Volcker and former New York lieutenant governor Richard Ravitch, concluded that Illinois' fiscal mess developed because “budget gimmicks became a standard practice.” During the 2001 recession, for instance, the state began issuing a type of short-term debt permissible only during emergencies and within certain limits. But even after the recession had passed, the same “emergency” borrowing practices continued, in order to raise revenues for the payment of overdue bills.

Moreover, for decades Illinois has “balanced” its annual cash budget by not putting aside sufficient funds to cover the increase in future pension benefits. This practice continued even during the economic prosperity of the late 1990s to mid-2000s, when money that could have been applied to those benefits was used instead to pay for expanded government services. The net result, according to SBCTF, was that the state made “even smaller payments to the pension systems, borrowing heavily, sweeping special funds, and putting off paying Medicaid and employee healthcare bills until the following budget year.” “This chronic shortsightedness and avoidance of tough choices,” said the Task Force, “has accumulated to a significant structural deficit for Illinois.” As a result of this financial irresponsibility, said SBCTF, “Retirees may lose their pensions as the funds dwindle, low-income and disabled people may lose their health care as costs escalate, and citizens and businesses seeking a stable environment may face steep and sudden tax increases.”

In 2011, Democratic Governor Pat Quinn, who succeeded the notoriously corrupt Rod Blagojevich in 2009, passed the largest tax hikes in Illinois history—raising personal income taxes by 67% and corporate taxes by 46%. The result was not what the governor had banked on. Many businesses fled the state, an even greater number threatened to leave (forcing Quinn to respond with some concessions), and Illinois pension plans remained the worst-funded in the nation.

In January 2013, Standard & Poor's downgraded the Illinois state government's credit rating from "A+" to "A" -- worse than any other state in the Union -- citing a "lack of action" on changes aimed at decreasing the state pension system's unfunded liabilities, which were expected to reach $93 billion by the summer unless action was taken. Moreover, S&P gave Illinois a "negative outlook," saying the state's budget future remained uncertain.

In June 2013, Fitch Ratings -- citing Illinois' continued failure to make progress toward solving its public-employee pension crisis -- downgraded the state's credit rating yet again, from "A" to "A-minus." At the time, the state’s five employee retirement systems owed $97 billion worth of unfunded future liabilities. 

Click here to view a sample Profile.

Since Feb 14, 2005 --Hits: 61,630,061 --Visitors: 7,024,052

Copyright 2003-2012 : DiscoverTheNetworks.org