The Economist –
AUGUST 1st was a typically sunny morning in Springfield, the capital of Illinois—but not for the 176 members of the General Assembly, who, for the first time ever, did not get paid. They are being punished by the governor, Pat Quinn, for failing over several years to tackle the state’s “worst-in-the-nation” pension woes. So with a stroke of his pen Mr Quinn, a Democrat, eliminated their salaries from an appropriations bill.
Residents are fed up with the state’s enormous unfunded pension liability, which was recently estimated at $133 billion and which is growing by millions of dollars every day. The problem comes from many decades of underfunding of generous public-sector retirement schemes. Today these promises are gutting the state budget, and will do so at an increasing rate. This budgetary squeeze is, in turn, leading to reductions in services to citizens, a situation that is all too familiar to the remaining residents of Detroit.
This lack of legislation is also starting to hurt Chicago, the state’s biggest city. By 2015 the payments the city must make will spike dramatically—a forecast that caused Moody’s to downgrade its rating by three notches, to A3, last month. On July 31st the mayor, Rahm Emanuel, warned that next year’s $339m budget deficit will yawn to $995m in 2015 and to $1.15 billion by 2016. Revenues are around $3 billion annually.
The prospect of legislative action on pensions remains uncertain. In June Mr Quinn spoke of “powerful interests that don’t want reform”, which many will take to mean the unions. Moreover, the impasse over pay looks likely to drag on; even though legislators could easily override Mr Quinn’s pay freeze, the two Democratic leaders of the legislature, Michael Madigan, the House Speaker, and John Cullerton, the Senate president, are instead suing in court for their salaries. Plus interest.
They complain that Mr Quinn’s move violates the separation of powers between the legislative and executive branches, and want the courts to authorise the state comptroller to resume paying them. But since the courts move slowly, this merely guarantees that the governor, who is running for re-election in 2014, can milk the situation. After a court hearing over the pay dispute this week, Mr Quinn said that if legislators did not agree with what he was doing, they could “go down to Springfield and tell the people they think their pay is more important than pension reform.”
To win in 2014 he must fend off a Democratic primary challenge from Bill Daley: a name to conjure with in these parts. Mr Daley, like Mr Emanuel, is a former chief of staff for President Barack Obama. He is also the son of Richard J. Daley, the formidable mayor of Chicago from 1955 to 1976, and brother of Richard M. Daley, mayor from 1989 to 2011. Bill Daley’s critics say he will be just another machine politician. Yet he is marginally better than the other Democratic option: Lisa Madigan, the attorney-general, who, while popular, is also the daughter of the House Speaker. Ms Madigan recently said she would not run, because the state would “not be well served” by having a governor and a Speaker from the same family. Having resolved this conflict of interest, she turned her attention to representing the state comptroller in the pay lawsuit filed by her father.