Senator Schoenberg is sponsoring Senate Bill # 3514 which will allow the State of Illinois to borrow $4 BILLION to finance state employee pension funds. This additional debt exacerbates an already weak state financial position and will jeopardize the future of Illinois and its citizens. We need responsible leaders who are willing to address the difficult structural issues underlying our state’s financial predicament rather than kicking the can down the road and burdening future generations.
The State of Illinois has the LOWEST bond rating in the United States. Due to high debt levels, poor budgeting and concerns about political corruption, Illinois is required to pay the highest interest rate to holders of state debt of any state in the country. In fact, Illinois pays a higher rate of interest on its debt than countries such as Portugal and Mexico. More debt is not the solution to shoring up state pension funds. Injecting debt into the pension funds is just investing on margin – a very risky proposition. When the State of Illinois issued $10 Billion of pension obligation bonds in 2003 during the Blagojevich administration, taxpayers lost millions of dollars.
The State debt burden is $15,000 per Illinois resident. In addition, debt is held at the County and Municipal level($6,000 per Evanston resident), and of course, at the Federal level making the total debt burden per state resident considerably higher. Why should we be concerned by these debt levels? Debt is a legal liability that must be paid regardless of other obligations. In a period of very low economic growth and inflation, it will be extremely difficult for Illinois to grow its way out of its current financial situation. Charles Evans, President of the Federal Reserve Bank of Chicago, forecast a subdued economic outlook during his talk in Evanston on October 19th. In addition, our state debt is increasingly held by foreign investors, whose investment goals and time frames may be quite different than U.S. residents. In the future, more money will be needed to pay for increasing interest payments and principal when the debt comes due. As a result, taxes will likely rise and essential services such as food stamps for the poor, education for our children, healthcare for the elderly, etc. will be cut. The higher debt levels thus crowd out spending on long-term investments and essential services.
The economic challenges confronting our state and country are the result of multiple issues that have evolved over several decades. The solutions will require thoughtful leadership, well developed long term plans and a “shared sacrifice” to provide our children and grandchildren an opportunity to enjoy a standard of living comparable to, or better than our own. Providing a better opportunity for future generations has been one of the hallmarks of our country.
As our state begins to slowly recover from one of the worst economic crisis in our history, prudent and thoughtful policies need to be implemented. Adding massive amounts of debt like Senate Bill # 3514 suggests, will jeopardize our state’s fiscal situation, the value of your home and possibly your job and retirement. This risky strategy is akin to giving your teenage children your credit card, keys to the car, and leaving them home alone for the weekend with their assurance that everything will be OK. Are we so irresponsible? Have our leaders learned nothing from the near financial melt-down in late 2008 and subsequent painful recession? Have our leaders learned nothing from the grim economic situation confronting Japan today. Only 20 years ago, many people thought Japan was going to become the preeminent superpower in the world. Consider the recent riots in Greece and the labor strikes in France. Our state is going down the same path as these debt laden countries and our children will bear the consequences. We need sound and prudent policies that can deliver sustainable economic growth and provide secure and appropriate pensions for our hard working state employees.
Illinois residents deserve more mature and responsible leadership from Springfield. If Senator Schoenberg and other legislators want to go to Las Vegas and roll the dice, let them do that with their own money. We should not allow this risky strategy to jeopardize the future of Illinois. We know that lead in paint is bad for our health and asbestos causes cancer. This debt laden strategy is as harmful to our health as those examples.
Contact your State Senator and demand he/she VOTE NO for Senate Bill # 3514. And remember, all State Senators come up for re-election in 2012.
Mr. Young is an Evanston resident and served on the City’s Blue Ribbon Pension Committee in 2008