The government employee pension systems in many states are not sustainable. Connecticut, New Jersey, and Illinois come to mind.
It is Illinois that may be buffeted first by the winds of economic reality. Cronies in state and local government, in partnership with public employee unions, have promised the moon to government retirees. Taxpayers however are already feeling the tax pinch and are not inclined (nor may they have the ability) to deliver the moon for theses “public servants.”
Michael Cembelast at JPMorgan says that Illinois might as well put its face into the gale sooner rather than later.
This can be accomplished by utilizing Chapter 9 and other tools Congress just gave Puerto Rico. The process would entail about two years of unpleasant headlines, but the city and the state will rebound far sooner and less painfully than if t hey stay on their current paths.
Why do we think that somehow, some way, whatever the path of Chicago and Illinois in coming years, it will be the taxpayer who gets hurt the most?