Chicago Crisis Obscures $8.4 Billion Pension Gap in Small Towns
By Tim Jones May 18, 2014 8:11 PM ET
Larry Morrissey is mayor of the old industrial hub of Rockford, Illinois, and he says that if bankruptcy revived the U.S. auto industry, it might save his city of 151,000 from “the slow death” of pension costs.
“Bankruptcy is designed to avert that kind of a slow, perpetual indentured servitude for individuals and corporations -- why the hell should cities be treated differently?” said Morrissey.
This borders on fantasy in Illinois, where municipalities can’t file for court protection without legislative approval. Yet the discussion reveals alarm over mounting shortfalls among the 650 pensions in large and small towns outside Chicago that cover police and firefighters. Fiscal crises in the state and its biggest city have diverted attention from the $8.4 billion in liabilities those systems faced in 2012, up from $4.1 billion in 2001.
Partisan gridlock in the legislature and lawsuits have stalled attempts to stabilize them, and costs are mounting in tandem with mayor’s frustration.
“In the next three to five years, you’re going to find communities in situations they cannot financially recover from,” said Scott Eisenhauer, mayor of the central Illinois town of Danville, with a population of 32,000. “Pension debt is now factored into bond ratings, and you’ll find that some of them won’t be able to borrow like they once did because of pension debt.”
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http://www.bloomberg.com/news/2014-05-19/chicago-crisis-obscures-8-4-billion-pension-gap-in-small-towns.html