No Play, No Pay
From The Economist
August 1st was a typically sunny morning in Springfield, the capital of Illinois—but not for the 176 members of the General Assembly, who, for the first time ever, did not get paid. They are being punished by the governor, Pat Quinn, for failing over several years to tackle the state’s “worst-in-the-nation” pension woes. So with a stroke of his pen Mr. Quinn, a Democrat, eliminated their salaries from an appropriations bill.
Residents are fed up with the state’s enormous unfunded pension liability, which was recently estimated at $133 billion and which is growing by millions of dollars every day. The problem comes from many decades of underfunding of generous public-sector retirement schemes. Today these promises are gutting the state budget, and will do so at an increasing rate. This budgetary squeeze is, in turn, leading to reductions in services to citizens, a situation that is all too familiar to the remaining residents of Detroit.
This lack of legislation is also starting to hurt Chicago, the state’s biggest city. By 2015 the payments the city must make will spike dramatically—a forecast that caused Moody’s to downgrade its rating by three notches, to A3, last month. On July 31st the mayor, Rahm Emanuel, warned that next year’s $339m budget deficit will yawn to $995m in 2015 and to $1.15 billion by 2016. Revenues are around $3 billion annually.
The prospect of legislative action on pensions remains uncertain. In June Mr. Quinn spoke of “powerful interests that don’t want reform”, which many will take to mean the unions. Moreover, the impasse over pay looks likely to drag on; even though legislators could easily override Mr. Quinn’s pay freeze, the two Democratic leaders of the legislature, Michael Madigan, the House Speaker, and John Cullerton, the Senate president, are instead suing in court for their salaries. Plus interest.
Read more in our daily News Update...
From The Economist
August 1st was a typically sunny morning in Springfield, the capital of Illinois—but not for the 176 members of the General Assembly, who, for the first time ever, did not get paid. They are being punished by the governor, Pat Quinn, for failing over several years to tackle the state’s “worst-in-the-nation” pension woes. So with a stroke of his pen Mr. Quinn, a Democrat, eliminated their salaries from an appropriations bill.
Residents are fed up with the state’s enormous unfunded pension liability, which was recently estimated at $133 billion and which is growing by millions of dollars every day. The problem comes from many decades of underfunding of generous public-sector retirement schemes. Today these promises are gutting the state budget, and will do so at an increasing rate. This budgetary squeeze is, in turn, leading to reductions in services to citizens, a situation that is all too familiar to the remaining residents of Detroit.
This lack of legislation is also starting to hurt Chicago, the state’s biggest city. By 2015 the payments the city must make will spike dramatically—a forecast that caused Moody’s to downgrade its rating by three notches, to A3, last month. On July 31st the mayor, Rahm Emanuel, warned that next year’s $339m budget deficit will yawn to $995m in 2015 and to $1.15 billion by 2016. Revenues are around $3 billion annually.
The prospect of legislative action on pensions remains uncertain. In June Mr. Quinn spoke of “powerful interests that don’t want reform”, which many will take to mean the unions. Moreover, the impasse over pay looks likely to drag on; even though legislators could easily override Mr. Quinn’s pay freeze, the two Democratic leaders of the legislature, Michael Madigan, the House Speaker, and John Cullerton, the Senate president, are instead suing in court for their salaries. Plus interest.
Read more in our daily News Update...