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.
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.
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.