The foul odor making your nose wrinkle isn’t burnt Christmas cookies, it’s the new bailout on the horizon — this time for cash-strapped state pension systems.
A recent report by the U.S. Congress Joint Economic Committee has conservatively estimated the state-run retirement systems’ debt at nearly $3.5 trillion.
By the way, does anyone know what comes after a trillion?
That $3.5 trillion is nearly one-quarter of the entire federal debt and pushing some states to their own fiscal cliff. California and Illinois lead a long list of states that continue to acquire more and more debt when they should be agreeing to necessary reforms.
California has more then $370 billion in unfunded pension liabilities. Its solution began in 2009 when they laid the groundwork for a bailout during the height of the financial crisis. As a show of good intention, California has enacted some cosmetic reforms but failed to enact any changes that would turn around the troubled finances — leaving the door wide open for federal relief.
Home state of the president, Illinois is in even worse shape: It has less than 30 percent of the money needed to fund its pension obligations and some experts say Illinois’ funds already are insolvent.
Since 2009, Gov. Pat Quinn, D-Ill., has hawked the idea of a federal bailout to the White House and in his 2012 budget proposal. However, Illinois has done nothing, nor even considered any major reforms, and the governor has refused to rule out accepting a federal bailout for pensions.
Unfortunately what happens at the state level doesn’t stay at the state level, but instead trickles down to the municipalities, forcing cities into tight spots. Some are nearing crisis levels. Others already are there.
Although Detroit’s plea for $1 billion in emergency federal relief fell on deaf ears in Washington, how long will it be before the states’ wailing and gnashing of teeth will get loud enough that Washington has to pay attention?
A precedent was set with the American Recovery and Reinvestment Act, which was a bailout in all but name. Nearly a quarter of the $787-billion stimulus went to state and local governments. Did anyone use this money to enact long-lasting reforms or was it free money to continue their spendthrift ways?
A bailout for states would destroy federalism. States must be made to face and solve their own problems, and Obama and Congress need to make it very clear that state bailouts — whether direct or disguised under another name — are not up for discussion.
By the way, the answer is quadrillion — that’s what comes after a trillion. It amounts to one thousand billion and looks like this: 1,000,000,000,000,000.
Wow. What Washington wouldn’t do to get its hands on that.
Linda Brown is marketing director for The Ottawa Herald. Email her at email@example.com