Standard and Poor’s has downgraded Illinois’s credit rating, from A+ to A, with a negative outlook. It sited the accumulated $44 billion in budget deficits over the last five years as one reason. Illinois has a balanced budget requirement in its constitution, so how did it run five years worth of unbalanced budgets? Easy, it cooked the books because, unlike corporations, it doesn’t have to conform to Generally Accepted Accounting Principles or have its books certified by an independent authority.
Even worth is its $83 billion in unfunded liabilities in its pensions funds. The Illinois Legislature met in special session this summer to deal with the problem. It adjourned after doing exactly nothing. Again, the rules that apply to private-sector pension funds don’t apply to government ones. So they can play all sorts of games that allow them to make big promises and then not have to pay for them, at least in the short term. The estimable Walter Russell Meade explains the unholy alliance between public-service unions, governments, and Wall Street hedge funds.