Bankruptcy or Bailout? McConnell and Pritzker Give Their Answers for Illinois Pensions
Illinois' pension crisis is one of the worst in the country. The state's unfunded pension liability is over $130 billion, and its annual pension payments are set to grow by more than 50% over the next decade.
The state has tried a number of different approaches to address the crisis, but none have been successful. In 2017, Governor Bruce Rauner signed a law that increased the state's contribution to its pension funds, but this has only served to exacerbate the state's budget problems.
In recent months, two new proposals have been put forward to address the crisis. One proposal, from Senate Majority Leader Mitch McConnell, would allow states to declare bankruptcy in order to restructure their pension obligations. The other proposal, from Governor JB Pritzker, would provide a bailout to Illinois' pension funds in exchange for reforms to the state's pension system.
Bankruptcy
McConnell's proposal would allow states to declare bankruptcy in order to restructure their pension obligations. This would allow states to reduce the amount of money they owe to their pensioners, and it would also allow them to avoid making large, unsustainable pension payments.
However, there are a number of problems with McConnell's proposal. First, it is not clear that the federal government has the authority to allow states to declare bankruptcy. Second, even if the federal government did have the authority to allow states to declare bankruptcy, it is not clear that it would be a good idea. Bankruptcy would likely have a negative impact on the state's economy, and it could also lead to a decrease in the value of pensioners' retirement savings.
Bailout
Pritzker's proposal would provide a bailout to Illinois' pension funds in exchange for reforms to the state's pension system. The bailout would provide the state with enough money to make its pension payments for the next few years. This would allow the state to avoid defaulting on its pension obligations, and it would also give the state time to implement reforms to its pension system.
However, there are a number of problems with Pritzker's proposal. First, the bailout would be very expensive. It is estimated that the bailout would cost the state over $100 billion. Second, the bailout would not solve the underlying problem of Illinois' pension crisis. The state would still need to make large, unsustainable pension payments in the future.
The Way Forward
Neither McConnell's nor Pritzker's proposal is a perfect solution to Illinois' pension crisis. However, both proposals offer some potential solutions. McConnell's proposal could provide states with a way to restructure their pension obligations, and Pritzker's proposal could provide the state with the time it needs to implement reforms to its pension system.
Ultimately, the best way to address Illinois' pension crisis is through a combination of reforms. The state needs to make changes to its pension system, and it also needs to find ways to reduce the amount of money it owes to its pensioners. By working together, the state and its pensioners can find a solution that is fair to both sides.