 Brie Callahan, spokeswoman for the governor's office, said Quinn
would turn down all offers of federal bailout if the state finds
itself out of cash."We believe that the states have an obligation
to pay their bills and to meet the demands they have put upon
themselves," she said. "We don't want any federal assistance in
terms of bankruptcy."
Republicans in the U.S. Senate are considering several proposals
that would allow state governments to declare bankruptcy in the
event of fiscal collapse.
States, unlike local governments and corporations, are unable to
declare bankruptcy. This could pose problems for state governments
trying to maintain current services while paying vendors for
services already rendered and making pension payments for retirees.
Illinois fell behind on each in 2010.
In June, the state's five pension systems began liquidating about
10 percent of assets per month to make payments to retirees. These
checks generally come from current tax revenue, rather than the
funds, which are meant to cover long-term costs. Bill Atwood,
executive director of the State Board of Investments, which oversees
three of the pension systems, said the state's inability to pay cost
the funds dearly in 2010.
"You're going to have lost opportunity costs. We transferred out
$340, $350 million (in 2010) and the market's been very favorable,"
Atwood said. "So not only have we lost the $350 million, we've lost
the return potential of $350 million. It's a real drain on the
portfolio."
The state also faces $6 billion in unpaid bills since the 2011
fiscal year began in July. In December, the Quinn administration was
forced to borrow and issue bonds to help pay off several billion in
unpaid bills from the previous fiscal year.
The recently approved 67 percent personal income tax hike is
expected to generate $6.8 billion annually. But that's a drop in the
bucket in the face of a projected $15 billion budget deficit and an
unfunded pension liability of at least $80 billion.
The worst-case scenario could see Illinois defaulting on current
debts and turning to the federal government for a bailout, which is
what Republicans in the U.S. Senate, led by Minority Leader Mitch
McConnell, R-KY, are trying to avoid.
Bankruptcy measures would allow states to renegotiate contracts
protected in state constitutions, such as pension benefits to
retirees. As it stands, states cannot renege on such benefits, even
when facing fiscal uncertainty. This has produced conflict between
states and retirees. Colorado, Minnesota and South Dakota are being
sued in federal court by retirees for trying to amend the benefit
system.
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Illinois, the state Forbes Magazine dubbed the most indebted
state in the country, has a direct interest in the proposals making
rounds in the U.S. Senate.
This was news to freshman Sen. Mark Kirk, a Republican elected in
2010.
"I don't know of any bills," Kirk said, outside Chicago's Ronald
Reagan Centennial celebration on Saturday.
Kirk has been kept out of the loop by party leaders in
Washington. He serves on the Senate Appropriations Subcommittee on
Military Construction and Veterans Affairs, and on subcommittees for
Department of State and Foreign Operations; Financial Services;
Transportation, Housing and Urban Development; and Labor, Health,
Human Services and Education.
Quinn is not interested in federal help or retracting benefits.
"One thing we're pushing for right now at the state level is a
debt restructuring plan that would allow us to pay our bills right
now," Callahan said. "The plan that Gov. Quinn has been pushing for
is to get Illinois' financial house in order."
Illinois' senior Senate member, Democrat Dick Durbin, did not
return calls for comment.
[Illinois
Statehouse News; By BILL McMORRIS]
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