The two finalists in “Survivor: Default Island” are California Gov. Jerry Brown and Illinois Gov. Pat Quinn.
In the latest episode, Brown reached a modest pension reform deal with his state legislature, while Quinn and his polarized General Assembly were humbled by a Standard & Poor’s credit downgrade on Aug. 29.
If these were actually developments playing out in a television show, Quinn and Illinois would be terrible for viewer ratings. Our lawmakers keep doing the very things that make the other guy look good (or at least not as bad). Much of the drama has been extracted from the plot. It’s pretty clear who will be getting voted off.
What is occurring in Illinois, as well as California and other fiscally reckless states, is not part of a scripted drama. It is, however, reality. And a harsh reality at that.
A credit rating downgrade means Illinois will pay higher interest rates when borrowing. The new S&P rating came with a warning that the agency doesn’t view the state’s chronically unfunded pension liabilities as a short-term problem. S&P assigned Illinois a “negative outlook” and threatened more downgrades to come.
California, reports the Chicago Sun-Times, still is shackled by the lowest S&P rating among the 50 states but recently earned a “positive outlook” from the agency.
Along with the agency Moody’s, which is poised to make a similar downgrade decision as Illinois teeters, S&P is reacting to the state’s unfunded pension liabilities, officially pegged at $83 billion. (California’s gap is placed around $112 billion, according to The Wall Street Journal).
But the chasm between Illinois’ revenue outlook and its unpaid obligations is much worse than the oft-cited $83 billion, which makes it even more difficult to comprehend how Quinn and state lawmakers can get away with such negligence on pursuing reform.
The Illinois Policy Institute calculates that combined pension obligations plus state insurance coverage for retirees, among other things, amount to a staggering $263 billion.
Gov. Quinn rushed to make an I-told-you-so defense when the S&P downgrade was announced, insisting that legislators gathering for the special session he called earlier in August should have heeded his warnings.
But the worst kept secret across Illinois is that Quinn’s pronouncements are rarely mistaken for leadership, and certainly do not resonate with forces behind the scenes — public union bosses and supreme power broker Michael Madigan, the House Speaker for three decades.
Even California’s Brown, a defender of tax increases, bloated government and unions, concluded that hanging one foot over the edge of the default cliff is a step too far in the wrong direction. Although his state’s pension reform measure is rather tepid, capping future but not current pensions, it still infers a mood of seriousness within the halls of the capitol building.
If Illinois wants to get serious, too, lawmakers will pursue grown-up pension reforms like those put in place in Rhode Island and transition workers away from defined benefits to 401(k) retirement accounts, and imposing reforms on all five state retirement systems, including teachers.
That’s reality for Illinois in 2012. But unlike a lot of today’s inane TV programming, everybody’s watching.