by | ARTICLES, BUSINESS, ECONOMY, POLITICS, TAXES
It’s kind of funny that the AP is reporting a story that has not been “news” for years to tax professionals. The state of Illinois is running out of taxpayer money, as its obligations exceed its revenue intake. This is what happens when a state has been mismanaged for decades by incompetent Democrats: From CHICAGO (AP):
The Illinois official responsible for paying the state’s bills is warning that new court orders mean her office must pay out more each month than Illinois receives in revenue.
Comptroller Susana Mendoza must prioritize what gets paid as Illinois nears its third year without a state budget.
A mix of state law, court orders and pressure from credit rating agencies requires some items be paid first. Those include debt and pension payments, state worker paychecks and some school funding.
Mendoza says a recent court order regarding money owed for Medicaid bills means mandated payments will eat up 100 percent of Illinois’ monthly revenue.
There would be no money left for so-called “discretionary” spending – a category that in Illinois includes school buses, domestic violence shelters and some ambulance services.
Is Illinois going to be the first state to become truly insolvent? Is Illinois going to file for bankruptcy? The situation is critical enough that we need keep an eye on it in the coming weeks and months.
by | ARTICLES, BLOG, BUSINESS, ECONOMY, FREEDOM, GOVERNMENT, OBAMA, POLITICS, RETIREMENT, SOCIAL SECURITY, TAXES
Dear Governor Rauner,
You have an enormous task before you in trying to navigate pension reform. Through political duplicity, the state legislature in cahoots with the public service unions have fashioned for themselves retirement benefits far in excess of any reasonable amount. The Courts, appointed by the same players, have determined that it is not even legal to revisit the magnitude of these retirement benefits. It must be difficult to draw up a plan when your hands are legally tied from being able to make actual changes to the pension system in order to alleviate the $100 billion in debt. As such, I propose an alternative solution:
Since the courts refuse to allow you to negotiate with the workers for lower pension benefits, then take the negotiations to the worker’s base pay. Simply take the costs of the excessive retirement benefits for each employee and subtract it from the worker’s base pay in determining the new base pay under the new contract. The Courts may not allow a reduction in retirement benefits, but there is certainly no Constitutional provision preventing the negotiating of a lower base salary.
There is no rule that someone must be paid the same base pay amount as last year. If you are constrained from the pension end of the contract, then you ought to change their next offer and reduce their overall compensation from the base pay end, thereby restricting compensation and benefits to amounts no greater than what those skills would command and be realistically afforded in the private sector.
Overhauling the contract process from this end will provide an opportunity for fiscal reform. This will ensure that, going forward, no worker be paid more in any new contract then what can be actually afforded, without regard to what the prior contract provided. Once a current contract ends, there is nothing on the table; nothing prevents any new contract from offering less that the prior contract, especially where pay and benefits of the prior contract are out of line and hamstrung by ironclad guarantees.
The people of Illinois realized when they elected you, that decades of fiscal mismanagement needed to end in order to ensure that Illinois has a chance. Even though it may be politically difficult and unpalatable, anybody representing the taxpayers has an obligation to those taxpayers. Budget reform and deficit reduction will naturally follow once compensation levels have been stabilized and brought in line with realistic affordability. Contract negotiations must happen in order for long term sustainability to be achieved.
