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The Land of Lincoln is suffering a number of financial woes, fueled in large part by unfunded pension liabilities, but neither Illinois nor any other state should expect a bailout from Uncle Sam, according to a resolution introduced into the senate last summer.
U.S. Senate Resolution 268 was introduced into the U.S. Senate on June 27 by U.S. Sen. Tom Cotton (R-Arkansas) and referred to that chamber's Finance Committee the same date under Page S4636. The resolution currently has no companion in the House and no further action has been taken.
Cotton also is a co-sponsor of the Government Bailout Prevention Act, legislation "intended to ensure that federal dollars cannot be used to help insolvent state, territory or local governments pay off their obligations," according to a statement Cotton released in July.
U.S. Sen. Tom Cotton (R-Arkansas) | cotton.senate.gov
SR 268 in its text, is intended to express "the sense of the senate that the federal government should not bail out any state," the resolution said.
Every U.S. state "is a sovereign entity with a constitution and the authority to issue sovereign debt," and every state legislature "has the authority to reduce spending or raise taxes to pay the obligations owed by the state," the resolution said. Every state also has "the legal obligation to fully disclose the financial condition of the state to investors who purchase the debt of the sState."
Congress also "has rejected prior requests from creditors of a state for payment of the defaulted debt," the resolution said while referring specifically to the recession that struck the country in the 1840s, touched off by the Panic of 1837.
During that crisis, "the Senate requested that the Secretary of the Treasury report to the senate with respect to any negotiations with any creditor of a state relating to assuming or guaranteeing any debt of the state, to ensure that promises of support by the federal government were not proffered," the resolution said.
The resolution concluded, "that it is the sense of the senate that the federal government should take no action to redeem, assume or guarantee any debt, including pension obligations, of a state and the Secretary of the Treasury should report to Congress any negotiations to engage in actions that would result in an outlay of federal funds on behalf of creditors of a state."