Illinois' Fiscal Crisis: We're No. 2!
Meredith Whitney is sounding the alarm about the dire fiscal condition of the nation’s 15 largest states. Illinois ranks second on Whitney’s list of the worst states, putting it in a tie with New Jersey and Ohio. California is the country’s biggest financial disaster, according to a recent study by Whitney’s namesake firm.
Whitney chides Illinois for its bloated deficit (nearly $14 billion) and for maintaining chronically under-funded public pension plans. Making matters worse: Lawmakers refuse to confront this reality and forge a long-term financial rescue plan, she says.
Elected officials — especially those running Illinois — would be wise to heed Whitney’s brutally honest appraisal especially since it carries significant weight with investors who buy the state’s bonds.
Investors remember that in 2008, when cock-eyed optimists said the banking and housing crisis had bottomed out and better days were coming, it was Whitney who correctly predicted the pain would linger for years and the economy would decline.
Now, Whitney contends the states’ collective deficits and other obligations are so onerous that the federal government may be forced to bail out insolvent states just as it did banks. That will really tick off people in Texas, Virginia, Washington and North Carolina — states that are in better financial shape than their counterparts, according to Whitney’s report.
>> More alarm bells...
Mark your calendars for 2019.
That’s when the City of Chicago will officially run out of money to pay its public pension obligations with its existing financial resources, according to a new study by business and economic experts at Northwestern University and the University of Rochester.
The report, “The Crisis in Local Government Pensions in the United States," says Chicago and Boston will run out of money to cover those debts by 2019. That’s a little better than Philadelphia, which could be tapped out by 2015, according to the study.
Joshua Rauh of the Kellogg School of Management at Northwestern University and Robert Novy-Marx of the University of Rochester authored the report, which sounds yet another alarm bell over the mounting public pension debt crisis at the local and state levels.
They determined that 42 cities (including Chicago, Boston and Philadelphia) are expected to suffer public pension meltdowns by 2030. That’s when those municipalities will run out of money to cover local pension obligations.
For more on this report go to: http://www.kellogg.northwestern.edu/News_Articles/2010/municipal-pension-systems.aspx
By Robert Reed, Director of Investigations