Another way in which the federal budget vote and the state-level battle over public-sector unions are related:
Illinois, which plans to sell $3.7bn of pension bonds next week, may seek a federal guarantee on retirement-system debts if its unfunded liabilities can’t be eliminated, according to budget documents.
Illinois's pension plans have an unfunded liability estimated at over 60%, the documents show. Governor Pat Quinn disclosed the potential need for a federal guarantee of pension debt in his $35.3bn general-fund budget on February 16, without going into specifics.
Significant long-term improvements will come only from additional pension reforms, refinancing the liability and seeking a federal guarantee of the debt,” the document said.
So as Congress discusses austerity, the Democratic governor of Illinois is banking on Obama to push through a bailout at your expense. Sure, they'll argue it isn't really a bailout — it's a “guarantee” — effectively another way of saying “bailout.” It will be a tough sell in Congress, but Obama has already proven that he doesn't need Congress to do bailouts. (I wonder whether Illinois could fall under TARP's definition of a “financial institution?”)
The other option that Gov. Quinn mentions, to have Illinois raise its annual pension contributions, is unrealistic. Illinois is already a deadbeat state that fails to pay its vendors, and Democrats there just raised taxes in a midnight vote (literally) during its legislative lameduck session. They've already fired all the bullets in their gun, and it will only get worse as businesses flee to neighboring Wisconsin and Indiana.
If Congress does create a state bankruptcy process, Illinois, Land of Obama, may be first in line.Barack ObamaBeltway ConfidentialilUS