Monday, January 18, 2010

Illinois is flat broke busted

From the Crain's Chicago Business article:

"The crisis will come when you see state institutions shutting down because they can't pay their employees," says David Merriman, head of the economics department at the University of Illinois at Chicago.
A record $5.1 billion in state bills was past due at year end, almost doubling to 92 days from 48 days a year earlier the average amount of time it takes the state to pay vendors such as doctors, hospitals, non-profit service providers and other contractors.
State tax receipts from July through December last year were running more than $1 billion behind 2008, including a $460-million plunge in sales taxes and a $349-million drop in personal income taxes.
While California has an even bigger budget hole to fill, Illinois ranks dead last among the states in terms of negative net worth compared with total expenditures.
The sharp rise in pension payments is the biggest factor pushing Illinois toward what a legislative task force last November (2009) called a 'tipping point' beyond which it will be impossible to reverse the fiscal slide into bankruptcy.

And if you're wondering, while there is no legal provision for states to file bankruptcy, they can and have defaulted on debts. Arkansas did during the Great Depression. In the 1840s nine states defaulted on debts. Four completely or in part repudiated their debts. Two, Maryland and Pennsylvania, were able to pay back debt & interest after enacting property taxes. (New taxes - sounds familiar.) The other states already had property taxes which had been raised "(also sounds familiar) and thus resorted to walking away.

1 comment:

The Arthurian said...

"The crisis will come when you see state institutions shutting down because they can't pay their employees..."

Gee willikers, it's a good thing we didn't squander all of that $787 billion stimulus money on things like roads and bridges.

Or idunno, maybe it's all part of the master plan: to reduce the size of government by the simple expedient of bankruptcy.