Pension Problems Could Mean Bankruptcy
Dire news for cops, firefighters, teachers and more
Illinois is facing one of the worst fiscal crises of any state in recent decades, largely because it has mismanaged its pension system.
The shortfalls could potentially mean sharply higher taxes and cuts in spending. And even though the state’s highest court just threw out a landmark plan to cut worker and retiree benefits, some lawmakers say they may have to find another way to make those reductions as well.
Illinois’s problems resonate well beyond its borders. Pennsylvania, New Jersey, and Kentucky are among the states confronting similar problems, and to them, Illinois is a model of what can go wrong—with political intransigence, mounting costs and a complicated legal terrain.
So, elected officials, union leaders, investors, fiscal hawks, and even bankruptcy lawyers across the country are watching Illinois closely to see how it addresses the crisis. In Washington, some Republicans have even raised pointed concerns that President Obama’s home state might someday seek federal help.