The editors of the Wall Street Journal are worried about the state of New Jersey:
If the first step to recovering from an addiction is admitting you have a problem, at least a few Democrats in New Jersey are sobering up. Behold recommendations last week by a bipartisan legislative commission to scale back public-employee benefits.
Democratic Senate President Steve Sweeney convened the legislators and economists in February to examine changes to state spending and taxes. Mr. Sweeney worried that the new federal limit on the deductibility of state and local taxes will make it harder for Democrats to soak the wealthy to pay for unsustainable promises to workers.
Lo, the state’s pension and retirement health benefit liability is four times the size of its annual budget, and pension payments are forecast to double over the next four years. “We want to make sure that government spending is efficient and effective,†Mr. Sweeney said.
Democrats recently raised corporate and individual income taxes—again—so it’s no surprise that the commission punted on serious tax reforms. But the commission’s recommendations on pension and health benefits could save taxpayers money, though still not commensurate to the problem.
One idea is to shift new workers to hybrid pension plans that include a modest pension as well as a defined-contribution component. State employees and retirees currently receive platinum-plated health benefits with a 97% actuarial value. The commission recommends shifting all employees and retirees to “gold†plans with an actuarial value of 80% that are comparable to what the most generous private employers offer.
Whatever New Jersey’s problems, Illinois’s are worse. Illinois’s population is actually declining and per capita income is about what it was ten years ago. On average the income of those leaving Illinois is $20K higher than those staying. No reform measure that results in future public retirees receiving lower pensions can meet constitutional muster. And although New Jersey is undoubtedly corrupt, no state matches Illinois’s record of public corruption.
Consequently, unless the legislature amends the state’s constitution, something that’s all but unimaginable, fewer people earning lower incomes will need to pay the state’s increasing obligations. Illinois’s political leaders have already rejected the voters’ “Hail Mary” pass to save the state.
Illinois may be the first state but it won’t be the last. Rhode Island, Connecticut, and New Jersey all face serious problems. Pretty soon it will be half of the states. Then all of them.
No one comments because there are no solutions that will preserve pensions as they are enshrined in the constitution. I’ll offer a solution. Our Federal Government in the 1870’s signed a treaty with the Lakota Sioux allowing them ownership of most of the Black Hills of South Dakota.
Gradual encroachment by White settlers shrank that claim considerably. Then. in the early 70’s until the early 80’s, tribal activists attempted to regain control of ancestral lands. Finally in 1980, Federal courts ruled that, although the treaty was valid, the Tribe with which the treaty was signed no longer exists, only their loosely organized ancestors. But, telling, the Feds offered the Lakota $100 million for the land, which they refused, but it was put into escrow, at interest, 38 years later , no Tribal Council will take that money.
So tell the Chicago P.D., Firemen, Teachers, and the rest they no longer exist. It has precedent.
Illinois Supreme Court justices receive public pensions, too. They have always sided with the public employees. Finding solutions is one thing. Finding solutions that can get past the Illinois Supreme Court is something else again.
I was on a rant, but impossible situations necessitate out of the box solutions. Like improvised state state insolvency as opposed to bankruptcy, imposed by the legislature and interpreted as needed by the courts.
In other words, substitute language #$%^&<!@. Understood?