Last week the voters decisively vindicated Gov. Scott Walker. America also saw overwhelming referenda victories over runaway public pension costs in San Diego and San Jose. America, finally, may be seeing daylight at the end of the tunnel of $3 trillion in unfunded state and local pension liabilities.
The daylight at the end of our tunnel also points a way for Europe to emerge from its own fiscal trauma. America has its own version of the eurozone crisis going on. A number of states rapidly are approaching insolvency. Illinois might be our very own Greece.
The Illinois state government is staggering under $83 billion in unfunded pension liabilities. Illinois holds the position of Pluto in the solar system of red ink graphed out by Illinois state senator Chris Lauzen and shared with legislators assembled at the American Legislative Exchange Council last year. According to Lauzen, Illinois has more than four times the combined general obligation debt + underfunded pension liabilities compared to its state general revenues.
Yet Illinois might help lead the way out. Why Illinois? As economist Herb Stein once observed, “If something cannot go on forever, it will stop.” Illinois is at the end of its rope. It has raised its income tax rates as high as they can go. The tax structure now is driving out two residents for every new one who moves in, earning the taunt “Land of Leavin’.” It has cut spending on essential government services. Now … it must confront the $83 billion rogue elephant in the room.
In Hunter Thompson’s immortal words, When the going gets weird, the weird turn pro. Illinois’s legislators have taken “the weird turn pro” to heart. Illinois’s lurch toward solvency recently crept in on miniature horses’ hooves. The Illinois state legislature had positioned public employee pension reform as a centerpiece 2012 legislative issue. Then, instead, it spent the waning hours enacting legislation … to allow the disabled to use miniature horses as service animals.
What was really going on? The elite state politicos (Democrats, alas) wished to dodge the job of restoring solvency by responsibly reducing unsustainable obligations. Instead, there was a sneaky plan to fob the state’s staggering costs off on the local governments — and, thus, onto the property taxpayers — deflecting blame from state to local officials.