Detroit sets negative example

Detroit sets negative example

Illinois can't file for bankruptcy protection, but it can learn valuable lessons from Detroit's financial collapse.

Detroit, once among the greatest of American cities and an industrial powerhouse, is eligible for bankruptcy protection, and municipal retirees living on pensions will be among the hardest hit by the city's failure to meet its obligations.

With 100,000 creditors and long-term debt of $18 billion, the city of Detroit has been among the walking dead for years. Finally, the inevitable collapse came, proving that it's possible to forestall disaster but not avoid it forever.

Among the worst governed cities in America, Detroit combined corruption, incompetence and years of borrowing with the kind of social problems that make life tough for urban areas. Disaster ensued.

To the surprise of hardly anyone, U.S. Bankruptcy Judge Steven Rhodes ruled this week that Detroit can reorganize under federal bankruptcy laws, essentially clearing the deck of its debts and starting over.

To the surprise of some and the dismay of many, Rhodes also ruled that the Michigan state constitution that guarantees public pension rights does not protect pensioners from reductions in payments. Rhodes acknowledged the contractual relationship between the state and public pensioners, but he ruled that contracts can be altered under federal bankruptcy law.

It's doubtful that Rhodes' decision sets much of a precedent for Illinois pensioners who are worried the state intends to welch on its obligations to them. Unlike municipalities, states cannot file for bankruptcy.

Nonetheless, Detroit should stand as a reminder that what can't last forever won't. Illinois is staggering under the financial weight built up by many years of disastrous spending decisions. Its public pension problems are just a part of the overall problem.

Detroit's disaster, as well as those of other bankrupt municipalities across the country, should be sounding alarm bells about the importance of prudent financial management in government. It's time for Illinois politicians to heed that warning.

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Sid Saltfork wrote on December 06, 2013 at 8:12 am

Recapping the article by the News Gazette.  Public employers, states, cannot file for bankruptcy.  They can avoid making employer payments into their pension systems while the employees are required to make payments.  Once the debt becomes unsustainable due to corporate tax breaks, pork barrel spending, and lavish state grants; the employer can reduce the pensions of it's employees even when the money being reduced is the employees money since the employer did not make it's payments. 

Makes sense in Illinois.  Makes sense to the corporations.  Makes sense to the howling mob.  Makes sense to the right wing media protecting their expiring tax breaks.  If it makes sense to the rich, and the ignorant; why let something like a constitution stand in the way.  Just ignore it.  It's Illinois where laws are meant to be broken, and ignored.

nick wrote on December 06, 2013 at 12:12 pm

It would be outstanding if the News-Gazette would actuually investigate the facts and conditions concerning the theft of the Illinois pension funds. The money went to corporations,bankers,hedge fund con artists and wealthy tycoons.The gazette could even begin right here in Champaign -Urbana with the consultant who was paid millions by the state in property ''development''.It's a great opportunity for a real newspaper.

 

Sid Saltfork wrote on December 06, 2013 at 12:12 pm

Hi nick; your right with your comment.  The newpaper tax breaks are scheduled to be renewed next year I believe.  The News-Gazette has no problems advocating the theft of others money; but it is reluctant to admit to the tax breaks that newspapers receive.  86 Ill. Admin. Code Section 130.2105 (a) (2)  ( see "tax exemptions", and "graphic arts" )  Imagine a politically partisan newspaper howling for pension theft while it receives state corporate welfare?

Dan Corkery wrote on December 06, 2013 at 2:12 pm
Profile Picture

Sid,

This "tax break" you are referring to is a benefit to readers such as yourself. If there were a sales tax on newspapers, you and other readers would be paying the tax. 

Sincerely,

Dan Corkery

managing editor for administration

Sid Saltfork wrote on December 06, 2013 at 5:12 pm

Is it to the "benefit" of the hundreds of thousands of state employees, and retirees that the multitude of News Gazette editorials, and opinions supported the pension theft?  That is hypocritical.  I would rather pay a tax than have one sided pontifications made by the one, and only newspaper in town.  What about the "ink and paper" exemption?  That is for the "benefit to the readers" also? 

What is next a tax for unbiased journalism?