Editorial | State's financial woes can't be ignored

Editorial | State's financial woes can't be ignored

Illinois isn't the only state in financial trouble.

Illinois' gubernatorial election is about four months away, and the campaign debate between Republican Gov. Bruce Rauner and Democratic challenger J.B. Pritzker has been considerably less than scintillating.

Rauner, a multi-millionaire, keeps attacking Pritzer's successful effort to cut his property taxes by disconnecting the toilets in a mansion the multi-billionaire owned. Pritzker counterattacks with equally emotional, but otherwise vapid, assaults on Rauner's tenure as a "failed governor" — you name it, Rauner has failed.

Both, obviously, know that the state is effectively bankrupt. But is the public hearing anything substantive about how the state is going to dig its way out of this hole, particularly Grand Canyon-size deficits represented by pension underfunding at the state and local levels?

Unfortunately, there's nary a peep to be heard from either of them because, in campaign season, the goal is to win votes by any means possible. That, too often, does not include leveling with the public about issues that are disturbing, complicated and not particularly interesting.

But if Rauner, Pritzker and other candidates for state office are ignoring the state's myriad financial issues, other people are not.

Financial problems swirling around state and local pension systems across the country will be coming to a head in the next few years, and financial experts contend that Congress and the states must be prepared to address the problem.

That's why James Spiotto, managing director at Chapman Strategic Advisors, is urging Congress to create a special federal bankruptcy court to deal with these impending bankruptcies.

In an address delivered to the Brookings Institution's seventh annual Municipal Finance Conference, Spiotto said it's imperative for Congress to act because states and localities won't be able to continue to ignore the problem.

"If you do that and crowd out essential services and infrastructure, you are going to wind up losing population, corporations and losing your tax base," he said.

Illinois is Exhibit A for the losses Spiotto cited, but it's hardly alone among the states. Among the states in Illinois' sinking pension boat are Connecticut, Kentucky, Colorado and New Jersey.

Others in deep trouble are Pennsylvania, Rhode Island, Massachusetts and Minnesota.

Then, of course, there are the hundreds of local pension systems for government workers spread across the country.

With special bankruptcy courts in place and staff with judges who understand government finances, Spiotto said states and local units of government could file "pre-packaged" plans similar to conventional bankruptcy reorganizations and be in and out of the courts in 45 to 90 days.

Under current law, states are not eligible to file for bankruptcy, although special legislation passed by Congress allowed Puerto Rico to go that route. Less than half the states, not including Illinois, allow municipalities to file for bankruptcy.

Spiotto has two other proposals that he said will come in handy when the various states decide they have no choice but to take action.

He's suggesting drafting model state constitutional amendments for states that are in way over their financial heads but face constitutional impediments to making changes in public pension rules. He also proposes establishing government financial oversight commissions to assist in states where public pension reform is legally or practically impossible.

This is drastic stuff. But the longer problems are ignored, the tougher the medicine is to fix them.

Illinois is in a state of denial. The public realizes there are grave problems with government finance in Illinois but is largely unaware of the extent of those problems. At the same time, elected officials, at least most of them, recognize the bleak circumstances but are too concerned about the November elections to level with the voters.

Unfortunately, problems that are studiously ignored do not disappear. They only grow worse.

Spiotto recognizes that reality. That's why he and others are trying to lay the groundwork that will allow public officials to act swiftly when and if they decide they have no choice but to take firm action.

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