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The Illinois Debt Crisis Has Gotten Worse

by Ava Hudson

A new year began with the Illinois debt burden problem remaining unresolved. Lawmakers continue to be bedeviled by its challenge. They remain unable to agree on how to solve a mounting crisis. By the dawn of 2013, vendors, agencies and contractors were owed almost 7 billion in unpaid payments.

These bills had grown to an amount exceeding 210,000 in number by January of 2013. The House and Senate returned on January 30 and February 5, respectively facing a challenge left unmet by their predecessors. All eyes face a huge challenge in dealing first and foremost with a grotesquely unfunded pension system. No other state faces a bigger hole.

According to data compiled by Bloomberg, by 2011 the plans had about 43 percent of assets needed to cover obligations. This system had the lowest ratio nationally. By the beginning of 2013 there was 96 billion dollars worth of unfunded liabilities. If the problem is not fixed before legislative session ends at the end of May, the unfunded pension liability amount is expected to have ballooned by an additional 2.45 billion. The chickens have come home to roost. This shortfall is a combination of workers living longer, decades of shorted or skipped payments and economic downturns bringing investment losses.

The annual pension fund payment is due to rise by almost 1 billion to almost 7 billion in the upcoming fiscal year in July. This sum is now over 16 percent of the general funds budget. It has been a steep rise, as in 2008 the amount was 6 percent.

Options under consideration that unions oppose are not adjusting for changes in the cost of living, raising employee contributions and raising the retirement age. Top Democrats and the Governor support school districts getting the responsibility for teacher pension expenses. This measure is resisted by members of both parties who think his will increase taxes.

While a resolution remains elusive, pension payments have cut into other program funding. As the share for pensions has expanded, other areas have seen reductions. For instance, in 2008, education got 30 percent and health care received 28 percent from general funds budget. This year, both beneficiaries saw a reduction in their percentage of budgetary funding.

Some local governments have turned to interlocal cooperation agreements to deal with their funding constraints. An example is DuPage County which closed its juvenile detention center and contracted with Kane County nearby to keep its juveniles. Problems at state level have also impacted municipal bond issuers. For instance DuPage County despite its AAA credit rating was required to pay an interest rate premium for bonds issued to finance its storm water project. Municipal bond investors are unwilling to purchase local issues at lower rates. Local governments are well aware they are cast in a disadvantageous light by failure of legislators in Springfield to address this situation.

Many causes lie beneath the <A href="http://www.rebootillinois.com">Illinois debt</A> mess. A pension pickle fix will not get this state out of its fiscal bind. It must expand its restricted tax base. In a service economy only 17 services are taxed. Only 3 other states are in this range. Normally many more are taxed. The national norm is 56 services. Nearby Iowa exceeds this norm by extending its net to encompass 94 services. Another unaddressed issue is the huge number of local governments in this national leader of fragmented governance. Springfield lawmakers must untangle a mess their predecessors have created if they have the will to devise a healthy fiscal situation.



<a href="http://www.rebootillinois.com">Read more about</a> The Illinois Debt Crisis Has Gotten Worse visiting our website.

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Title: The Illinois Debt Crisis Has Gotten Worse
Author: Ava Hudson
Email: nathanwebster335@live.com
Keywords: blog, blogging, wordpress, internet business, web business, home based business, wealth from home
Word Count: 565
Category: Blogging
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