Illinois, "the land of Lincoln" and of President Obama, and one of the biggest U.S. states is struggling with how it will pay pensions to its 372,000 people as the U.S. financial crisis deepens.
Last month, the Governor set off a furor when he said Illinois may need a "federal guarantee" of its pension funds, a statement his office has since withdrawn. For if Illinois gets a federal bailout, most of the other 50 U.S. states will quickly demand one.
Illinois has a current unfunded pension liability of a staggering $82 billion. And it has funded only 48% of its liability to the entire plan vs. the 80% most advisers would recommend. But for now, it can make its monthly or bi-monthly payments to its pension recipients.
But as bad as this scenario appears, I have hope that Illinois and the nearly all other states confronted by this severe problem, will resolve it. The best way is through candid communication with taxpayers and with the employee unions, soliciting their solutions, for money can't be paid out where it does not exist. Together we can solve this Mt. Everest sized problem, not through hard bargaining but through good faith give and take so everyone feels he was treated as fairly and respectfully as possible under the circumstances.
If you would like to know more about the Illinois pension crisis, please see "Illinois Pension Crisis Eludes Easy Solutions," Wall Street Journal, 3/16/11
http://online.wsj.com/article/SB10001424052748703566504576202893269340046.html
Dick
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