
07-03-2010, 08:05 AM
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Mary Pat Campbell
SOA
AAA
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Join Date: Nov 2003
Location: NY
Studying for duolingo and coursera
Favorite beer: Murphy's Irish Stout
Posts: 86,007
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well, here comes their chance to bail out!
http://www.nytimes.com/2010/07/03/bu...2&pagewanted=1
Quote:
ven by the standards of this deficit-ridden state, Illinois’s comptroller, Daniel W. Hynes, faces an ugly balance sheet. Precisely how ugly becomes clear when he beckons you into his office to examine his daily briefing memo.
He picks the papers off his desk and points to a figure in red: $5.01 billion.
“This is what the state owes right now to schools, rehabilitation centers, child care, the state university — and it’s getting worse every single day,” he says in his downtown office.
Mr. Hynes shakes his head. “This is not some esoteric budget issue; we are not paying bills for absolutely essential services,” he says. “That is obscene.”
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Then there is the spectacularly mismanaged pension system, which is at least 50 percent underfunded and, analysts warn, could push Illinois into insolvency if the economy fails to pick up.
States cannot go bankrupt, technically, but signs of fiscal crackup are easy to see. Legislators left the capital this month without deciding how to pay 26 percent of the state budget. The governor proposes to borrow $3.5 billion to cover a year’s worth of pension payments, a step that would cost about $1 billion in interest. And every major rating agency has downgraded the state; Illinois now pays millions of dollars more to insure its debt than any other state in the nation.
“Their pension is the most underfunded in the nation,” said Karen S. Krop, a senior director at Fitch Ratings. “They have not made significant cuts or raised revenues. There’s no state out there like this. They can’t grow their way out of this.”
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“The pension move was Enron-esque,” said Mike Lawrence, a press secretary to the former Republican governor Jim Edgar, who was the last governor to sign an income tax increase. “Blagojevich was not a tax-and-spend governor; he was a spend-and-borrow governor.”
The state’s income tax burden is not terribly high — Illinois ranks in the bottom half of states — and its government is not terribly large. (The budgets in New York and California, per capita, are much larger). Even if the state cut out all family and human services spending, more than half of the budget deficit would remain.
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Yes, I will be cross-posting this in my pensions thread.
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