Prairie State Wire

Illinois has asked Congress for a bailout, but not because of the COVID-19 pandemic.

Sen. Don Harmon asked for $40 billion to help the public safety pension system, help hospitals and cities, and to fund unemployment insurance for residents affected by the crisis.

His letter includes a request for $15 billion to “stabilize the state’s budget” and hardship money for hospitals and nursing homes, as well as $9.6 billion in direct aid to other struggling Illinois cities.

Mike Shedlock of TheStreet.com's "Mish Talk" said that he believed Illinois needs both pension reform and bankruptcy reform, but said the feds are not responsible for providing a bailout to achieve those aims.

“Illinois does not deserve a bailout. Its pension woes are of it own making, and have nothing to do with the coronavirus,” said Shedlock.

Shedlock said COVID-19 is not the reason pension funds are low. According to Wirepoints, "Some funds were even on the brink of becoming pay-as-you-go plans, where pensioners are forced to rely directly on employer operating budgets, and not pension fund assets, to get their retirement checks."

Again quoting Wirepoints, Shedlock said that Gov. Pritzker and Chicago Mayor Lightfoot "continue to reject an amendment to Illinois’ pension protection clause."

“But soon, they may be forced to choose between either chaos or reforms. Barring state bankruptcy, pension reform is the only way to cut Illinois’ strangling debts and to keep pension fund asset-to-payout ratios from plunging straight to zero,” Wirepoints concluded.

Shedlock said he expected the state to be insolvent, but insolvency occurred in a way that he did not anticipate.

He said the two things Illinois needs—pension reform and bankruptcy reform—are not up to the federal government. He said these matters should be the state's responsibility.