Illinois State Senator Don Harmon (D), who serves as president of the senate, has requested a $40 billion bailout from Congress, citing the economic burden of the coronavirus pandemic on the state’s ability to raise revenue.
According to The New York Times, Harmon sent the letter to Congress this week, acknowledging that he realizes he’s “asked for a lot, but this is an unprecedented situation.”
Furthermore, Harmon told the state’s Congressional delegation in a letter earlier this week that Illinois expects to lose approximately $14.1 billion in revenue as a result of the coronavirus pandemic, reported The Center Square.
“This loss would deplete approximately one-third of Illinois’ general funds in one fiscal year, significantly impacting state services and long-term obligations,” said the letter, which provided a preliminary assessment of how much funding the state would need.
According to the assessment, the state’s largest request was a generic $15 billion grant to address the unbalanced budget, followed by a $10 billion request for the state’s notoriously expensive public pension system.
The assessment also includes $6 billion for unemployment insurance trusts, $9.6 billion for individual municipalities and an additional $1 billion for areas disproportionately affected by the coronavirus, reports the news agency.
The Times noted that the National Governors Association, a group made of the country’s governors, estimated that states, in total, would need $500 billion of “unrestricted fiscal support.”
While Illinois’ expected budget shortfall is in line with the association’s projection — once adjusted for population — the addition of other factors into the federal bailout plea blows the request significantly out of proportion.
The Times noted that state’s pension problems “far predate the coronavirus,” noting that the unfunded liabilities are one reason credit rating firms place the state “one notch above junk territory.”
According to Reuters, Illinois unfunded pension liabilities reached $137 billion in December of 2019, and experts expect it to continue to grow at an unsustainable rate as long “contributions lag actuarial requirements” and the state’s constitutional protection of pension benefits remains intact.
In 2015, the state supreme court struck down a law that sought to reign in the public pension systems — which had accrued over $100 billion in unfunded liabilities as of 2013 — in light of a section of the Illinois constitution that prohibits the state’s pension or retirement benefits from being “diminished or impaired.”
In the opinion, however, the court placed the problem at the steps of the state assembly, arguing that it did not properly anticipate that the pension system would become unmanageable, and was aware of the constitutional provision barring pensions from being cut.
“The General Assembly had available to it all the information it needed to estimate the long-term costs of those provisions, including the costs of annual annuity increases, and the provisions have operated as designed.13 The General Assembly understood that the provisions would be subject to the pension protection clause,” said the court.
“The funding problems which developed were entirely foreseeable. The General Assembly may find itself in crisis, but it is a crisis which other public pension systems managed to avoid and, as reflected in the SEC order, it is a crisis for which the General Assembly itself is largely responsible,” said the court.
According to the think tank Illinois Policy, approximately 129,000 public employees in the state will retire with more than $1 million from the pension system.
No comments:
Post a Comment