Monday, January 25, 2010

In a word, Illinois is...basically bankrupt. What do we do?

For all intents and purposes, that is what this excellent story in Crain's, captioned "Illinois enters a state of insolvency," is telling us.  I think most of us already know it and just do not want to say it. California is in worse shape in terms of numbers but on a per capita basis I think Illinois takes the cake.  And we have the worst negative net worth too.  We are about $1,000 per person in the hole -- or $12.8 billion.

Hoo boy. "According to Jim Nowlan, senior fellow at the University of Illinois' Institute of Government and Public Affairs[,] 'We're close to de facto bankruptcy, if not de jure bankruptcy.'" (Full disclosure: Jim was teaching at my undergrad during part of my tenure there, but I was not his student as I recall. I do remember Jim being a good, smart guy with a tennis game to boot.)  The problem? Chapter 9 probably does not apply to states, so how does a state go bankrupt?

Some very hard choices are going to have to be made. And I have a feeling this is going to be painful. Where do we start? Here is my manifesto, even though I am not running for office. (N.B.: I am, however, an elected, non-partisan and unpaid library board member.)

Caps on pensions and cuts to high-earning multiple pension dippers. Period. We and other states have let pensions get completely out of control. Unfortunately, the 1970 Constitution guarantees pension benefits for government employees and politicians. And you wonder why I was part of the 20% who said we needed to call a constitutional convention in 2008?

Salary cuts, starting at the constitutional officer and legislator level. How did we get to the place where the average government employee (at least at the federal level) makes more than a counterpart in the private sector? The tradeoff is job security for money and the added benefit of government service.

So let's eliminate job security. That hurts but we're going to have to cut to the bone. Man, that hurts.

I also don't know how we cut entitlements without causing a lot of pain. Take Medicaid, for instance. Doctors already do not want to see patients on Medicaid. Imagine if the state stops paying altogether! One way to cut expenses is to get rid of fraud and teach people when and how to use primary care doctors. But that only goes so far.

I feel like Chicken Little today. And I am sure I will get over it. But when you look at the numbers and the stark reality you have to wonder how sometimes.