Due to its poor financial health and lagging economy, Illinois carries unique economic and fiscal risks from a prolonged market downturn or recession. The state must act now to mitigate harm from COVID-19.View Report
As Illinois teeters on the edge of a junk credit rating, one key policymaker is floating bankruptcy as a solution.
The village of Hoffman Estates penned a $1.8 million deal to extend the arena’s naming rights just days before Sears’ bankruptcy filing.
Sears, a long-time beneficiary of Illinois tax credit programs, has filed for Chapter 11 bankruptcy.
If lawmakers continue to balk at building the tools necessary to reform pensions, bankruptcy will be the only way out for communities across the state.
Avenues for state oversight for cities with financial difficulties have limited utility in the face of massive pension debt and have almost never been invoked since Springfield passed them into law in 1990.
Illinois’ pension laws are forcing the city of Harvey to pay its creditors through short-term negotiated agreements just to meet payroll.
Central Falls, Rhode Island, filed for bankruptcy largely because of pension debt. If Illinois municipalities can’t meet or lower their pension obligations, they too could face fiscal collapse.
Pension funds aren’t immune to the volatility of the stock market. Even before Brexit, Moody’s warned that low investment returns are already putting Chicago’s pension funds at risk. A major stock market correction or another recession just might put Chicago and CPS over the edge if their already-underfunded pension systems collapse.
The state must get its financial affairs in order by allowing municipal bankruptcy and enacting real pension reforms.
Gov. Bruce Rauner and Republican state lawmakers have proposed bankruptcy for Chicago Public Schools; Mayor Rahm Emanuel has rejected the idea of bankruptcy, repeating his demand that Illinois taxpayers bail out the struggling school district.