[bartart]

Pensions are going to become a hot political issue as they become more and more unsustainable. Even Illinois, one of the most liberal states in the US, elected a republican governor four years ago in large part because he promised to tackle the state's pension crisis.

[toomuchtodo]

It should be noted that Illinois’ republican govenor ran on pension reform, then to everyone’s shagrin, attempted to break unions. He made no headway on either issue, and is now running against a billionaire Democratic challenger who is expected to win.

[travoc]

It’s impossible to reform pensions without reducing government union power in states like California and Illinois.

[ubernostrum]

It's impossible to reform pensions without paying private-sector market rate to state and local employees.

"Unsustainable" pensions are a politician's way of punting the issue -- rather than hit the budget today by paying market rate, they promise far above market rate later on when some other sucker is in office. And everybody -- including the people whose taxes will end up paying for it -- falls for this over and over and over.

[gbacon]

Compensation is a vector. Government employees are much more difficult to terminate than their counterparts in the private sector. That is, government employees are compensated in part in strong job security.

[toomuchtodo]

That's a problem with at-will employment law though, not government jobs. Government job security should not be considered compensation.

[humanrebar]

> And everybody... falls for this over and over and over.

I don't know about everybody. Lots of people benefited from lower-than-possible taxes over the years, sold their houses for large piles of cash, then move to Arizona or Florida or something where taxes are lower, houses are cheap, and there's no snow.

[MrMember]

Illinois is also a special case in that pensions are written into the state Constitution. Pension reform requires changing the Constitution.

[nugget]

Changing the Constituion...or Bankruptcy.

[toomuchtodo]

A state can’t go bankrupt. The pensions will end up being paid by the federal government.

[nugget]

If you define bankruptcy as the literal inability to pay employees, vendors, and creditors, then states certainly can go bankrupt.

A Federal bailout of state pension obligations becomes a political (not financial) problem. Why would states that are 80%+ funded agree to bail out states that are only 50% funded? Do the states that are 100% funded receive a credit to use in other ways? There's also substantial moral hazard; if the Feds backstop state pensions as-is, they would be rewarding numerous instances of local self-dealing. This would be an order of magnitude more expensive and more contentious than TARP, which barely passed even as the economy was (supposedly) near death.

I think it's more likely that we see what happened in Greece: significant property tax hikes. You can siphon a huge amount of value out of the real estate markets through gradual but steady increases in taxes and fees, if you're willing to sacrifice appreciation (see Chicago). Ironically this may be a great way to promote affordable housing too, as residential real estate becomes a less attractive investment.

[spamizbad]

A somewhat ironic outcome given that his boosters in the 2014 were extremely cocky and thought his deal making skills and business acumen would have him making quick work of the dopey machine politicians in the state house.

He was going to be the next Chris Christie/Scott Walker and then would be a presidential contender for 2020-2024.

Fast forward 4 years and he's achieved none of his goals, further entrenched his opposition, almost lost the Republican primary to a far-right flank, and is now ranked the 2nd least popular governor in America.

Oh and he left the state without a budget for half of his first term because of a failed grudge match with the speaker of the house, which increased our cost of debt and messed up the financials for many colleges in the state... among other things.

[hnal943]

The only way to reform pensions is to deal with the unions. The Wisconsin model works.

[ams6110]

Illinois is liberal because of Chicago. Downstate is mostly conservative, excluding a few university towns.