As drastic as it sounds, bankruptcy may be the only way for Illinois to come to grips with its dire financial situation, according to a financial expert who supports the idea.
Mark Glennon, founder of WirePoints Illinois News, said the state is in a “catastrophic situation unfolding in full force.”
In an article posted on his site, Glennon describes the catastrophe as shrinking population, an eroding tax base, and an overall decline in state revenue. For Glennon, this boils down to “policy barriers by our own government.”
“This is self-inflicted by our own government,” he said. “It’s fiscal malfeasance run amuck. We have to do something dramatic to break the death spiral.”
According to Glennon, the biggest problem in Illinois are the multiple government pension systems which have gotten out of hand and are in need of overhaul. But previous attempts at reform have been negated by the State Supreme Court, which has sided with workers who in retirement reap many times more than they individually put into the system.
One of the methods by which Illinois could find a way out of its fiscal crisis is through a constitutional change that would allow for bankruptcy at state and local levels. Currently states are prohibited from filing bankruptcy and would need Congress to amend Chapter 9 of the U.S. Bankruptcy Code.
“It is becoming increasingly clear that some kind of bankruptcy procedure is going to be necessary for the state and that means that the primary focus should be on fixing the bankruptcy code at the federal level to make it as workable a solution as possible for towns, cities and the state,” Glennon said.
Providing bankruptcy as a solution could give Illinois the fresh start it needs and stop it from careening toward a black hole, in Glennon's view.
“Even if we get a resolution of some kind it won’t nearly eliminate the budget deficit that is in place, because they (lawmakers) are not talking about changes radical enough to fix the problems,” said Glennon. “The state will be further in debt and the economy will continue to suffer.”
The radical changes that Glennon talks about include government pay cuts, layoffs, hiring freezes, drastic consolidation of different units of government, pension reform and a reduction of power of the public-sector unions.
Glennon said reforms also include amending the Illinois Constitution and allowing state and local government bankruptcy protection.
“It’s gotten so bad for many cities and towns in Illinois, bankruptcy is essential,” he said. “Right now, the bankruptcy code doesn’t authorize states to file. It should allow states to file if necessary. There are a number of changes that could be made to make it a more powerful tool to give government entities a fresh start.”
Glennon also points to hope in an article on WirePoint through a majority turnover of the General Assembly in two years and the possible re-election of Republican Gov. Bruce Rauner.