Institute in Investor’s Business Daily: Obama’s Illinois Downgrade Makes It America’s Greece
State Budgets: Inability or unwillingness to fix the state's hemorrhaging pension system and curb union power has led a major credit rating service to downgrade the Land of Lincoln's rating to the lowest in the nation.
The Institute is quoted in the following Investor’s Business Daily editorial:
State Budgets: Inability or unwillingness to fix the state’s hemorrhaging pension system and curb union power has led a major credit rating service to downgrade the Land of Lincoln’s rating to the lowest in the nation.
On Friday, the bond rating agency Standard & Poor’s downgraded the state’s credit level again, to A-, putting Illinois’ on par with California. No, actually below California, for S&P gives California a positive outlook.
Illinois’ fragile overall financial status netted it a negative outlook, putting it behind California overall. The ratings came out now because Illinois plans to issue $500 million in bonds within days.
Moody’s already ranks Illinois 50th among the states, and Fitch ranks the state 49th but warns of a negative watch.
Moody’s A2 ranking places it even with Botswana, a southern African nation that is 70% desert, in what is the latest fallout over the $96.8 billion unfunded debt to five state pension systems.
The news comes after failed attempts at even modest pension reform failed in a lame duck state legislative session.
A recent release by the Illinois Policy Institute shows this is only the tip of the iceberg and when you add in other liabilities such as $54 billion in unfunded liabilities for retiree health insurance and $15 billion in pension bonds that Gov. Pat Quinn and his immediate predecessor, former Gov. Rod Blagojevich, issued to avoid pension reform, Illinois’ total unfunded liabilities amount to $275 billion, or $58,000 in debt for each and every household in the state.
While neighbors like Wisconsin, Indiana and Michigan have either challenged the unions on pension reform or embraced right-to-work to encourage the economic growth to fund them, Illinois remains in thrall to big labor.
A major stumbling block on the path to reform has been the state’s powerful public employee unions.
We Are One Illinois (WAOI), a group that represents more than 1 million state workers, has formed to fight any reforms, even while the state’s pension costs rise at a rate of $17 million per day.
The state will spend $5.9 billion on the pension system in fiscal year 2013, which ends in July 2013, and will spend nearly $7 billion in FY 2014.
The Standard & Poor’s report warns that further inaction could lead to downgrading Illinois to “BBB,” an “unusual” low rating for any state.
The agency noted a “lack of action on pension reform and upcoming budget challenges could result in further credit deterioration.”
Sadly, the same could be said of the United States.
Illinois is the bluest of blue states which for the last decade has had a Democratic governor, first the disgraced and now incarcerated Blagojevich, followed by the current governor, Quinn, who campaigned on a platform of a punitive increase in the state’s income tax and won anyway.
It is a poster child for progressive socialism and an example of what can happen when government runs out of other people’s money.
Chicago is the state’s major city, a one-party town that last had a Republican mayor, William “Big Bill” Thompson, in 1931.
The Windy City, dubbed so for its politicians as much as its climate, lost 200,000 people in this century’s first decade, as they fled a city of increasingly oppressive taxation and regulation.
It is now run by Mayor Rahm Emanuel, former chief of staff to President Obama, who cut his political teeth in the City of Big Shoulders that can now only shrug at its fate and that of Illinois.
The only difference between Illinois and Washington, D.C. is that Illinois cannot print money or borrow it as the president it gave us can.
We can see what America’s future will be unless the entitlement state is reined in. It is Obama’s Illinois.