The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
Illinois suffered a blow when the State Supreme Court ruled that public employee retiree health benefits are enshrined in the state constitution and may not be adjusted via legislation. Illinois has lost an important tool for reducing $56 billion of unfunded retiree health care liabilities and $100 billion in unfunded pension liabilities. These unfunded retiree costs outstrip the state’s $33 billion of net tax supported debt.
The state of Illinois had two milestone events recently. The legislature passed a long-awaited pension reform and the state treasurer issued $350 million of taxable general obligation (GO) bonds. The Bond Buyer reported on the GO offering:
from Full Focus:
Ava and Jaidon have two moms. Theresa Volpe is “mommy” and her partner Mercedes Santos is “mama”. Santos and Volpe are a same-sex couple raising two of their biological children as they struggle to get same-sex marriages passed into law in Illinois. Photographer Jim Young spent time documenting the family. Read Jim's personal account.
After similar challenges fought in 42 other states, Muniland’s two weakest credits - Illinois and Puerto Rico - are fighting difficult battles over pension reform. The pension struggles will have enormous effects on their creditworthiness.
Numerous public pension plans across America are in horrendous shape. The employee plan of the Commonwealth of Puerto Rico, funded at an alleged 7 percent of assets, is functionally broke. Other public plans, like that of Charleston, West Virginia, have 24 percent of the assets needed to meet future promises to retirees.