Illinois Budget Crisis - Essay Example

Illinois Budget Crisis Illinois Budget Crisis The issue Illinois Budget Crisis featured in the New York Times on May 8th, Monica Davey wrote the report. The Illinois state has operated in dire financial crisis over the past years. The state has not been able to pay its pension obligations as the other US states. The state’s Governor Pat Quinn proposed cuts in the state’s pension schemes. Governor Quinn signed the bill in 2013. However, the Illinois Supreme Court during a seven-judge sitting session rejected the bill stating that the state’s financial crisis is not enough reason to violate the Illinois Constitution. The Governor’s proposal to reduce the states spending could lessen the impacts of the financial mess. However, the move would in the future raise cost of living adjustments for workers, rose retirement age and reduced pensions for higher salaried citizens. Budget documents had previously in 2011 projected 1100 layoffs in a proposal to reduce state spending and, consequently, close particular state offices (Yaccino, 2012). The move to cut pension benefits implied a violation of the constitution that formed the umbrella of workers protecting them against the grim consequences of such changes. The article critically analyzes the Illinois State Budget Crisis as published as published by the New York Times editors. The paper compares the crisis to Canadian jurisdictions and applies the methods Canadian state previously utilized to contain a predicament of a similar nature. The essay will offer an integrated approach t the topic of study. The state’s financial crisis made the workers become uncertain about their retirements while at the same time straining the state’s budget and sinking credit ratings. Political leaders agreed to solve the financial shortfalls by cutting the pension benefits. The union and state workers celebrated the court ruling (Davey, 2015). However, critics viewed the ruling as capable of escalating the state’s financial challenges. The State Representative Elaine Nekritz, a Democrat, defined the extent of the challenge as more difficult and painful. The Democrat officials previously held numerous debates with the unions for several years while discussing a way forward to solve the state’s issue. The unions, however, opposed the proposals to cut the pension benefits. The officials, surprisingly, argued that in the essence of the state’s economic situation, they would pass into law the bill that proposes a cut in the pension benefits. The reporter notes that the state experienced a pension finance deficit amounting to over $100 billion. The lawmakers, consequently, agreed to the package amidst the workers opposition. Governor Pat Quinn signed the deal and expected to save up to $160 within a span of 30 years (Davey, 2015). A legal expert’s team had previously predicted the court ruling in favor of the workers. The court’s justices published what the reporter refers to as an unsympathetic note to the suggestions of the lawmakers to reduce the pension benefits. The justices blamed the lawmakers for the state’s financial crisis while asserting that the lawmakers had shorted what they ought to have contributed into the system. The justices expected the delayed contributions to cover for the state workers and teachers outside Chicago (Davey, 2015). Recent reports have showed that the financial crises are attributable to the current sophisticated financial markets. A close look at the Canadian system of managing financial crises of similar kinds revealed that an integration of banks, insurance companies, and large investment companies could prevent an occurrence of a financial crisis. The Canadian financial system did not overhaul credit advances to creditors when it suffered a financial crisis. In fact, the lending bodies continued to lend, and the government did not inject any public fund into the financial institutions. Furthermore, Mr. Quinn had introduced a tax increase in 2011, which survived the court ruling, but, surprisingly, did not solve the financial crisis saga (Davey, 2011). Justice Cramer affirmed that the state could prevent the financial crisis from occurring because other states had also experienced and managed such crises. He additionally blamed the General Assembly for the state’s current financial situation. Labor officials received the court ruling with an applause noting that the court considered the will of the people and protected the hard-earned life savings of its workers (Davey, 2015). They referred to the move by the lawmakers to cut the pension benefits as unfair and unconstitutional. The general assembly could have developed a prescriptive and principles-based approach to solving the situation as evident in the Canadian case. The approach ensures that financial institutions meet the intention of the legislation in addition to what is completely prescribed. The ruling, however, left the state’s fiscal position in doubt. The court’s decision left the lawmakers with a challenge to solve the already underfinanced pension situation without taking away the benefits. The political environment also grew more complex when Bruce Runner replaced Mr. Quinn. Mr. Runner issued a press brief saying that he expected such a court ruling regarding the pension adjustments. He recommended an election that would provide a more mutual and reliable ruling on the way forward. He added that the constitution did not provide for a section that diminishes workers benefits (Davey, 2015). However, the constitution allowed the officials to assign new benefits to future workers. Mr. Runner proposed a referendum to clarify that the state should protect the benefits though he noted that the benefits could be higher or less. He issued a grave fiscal position of the Illinois state and compared the state to a bankrupt corporation. The court ruling, however, left the lawmakers uncertain of the state’s future financial position. Mr. Cullerton, the state’s Senate President, challenged the ruling by arguing that the judges should have balanced against the state’s grave financial situation. The Chicago plan, which also proposed an overhaul in the workers’ pension benefits, suffered legal criticism similar to the state’s pension overhaul proposal. The plan grew out of talks with some of the unions. Mr. Emmanuel, Mayor, issued a press brief noting that the court would not affect their decision. He affirmed that the decision considered the constitutional requirements since it primarily preserved and protected the worker pensions rather than diminishing them (Davey, 2015). The judges were considerate to the state’s current financial position but rejected the proposal while arguing that the situation was not a proper explanation for the proposed pension overhaul. The court published a press statement regarding the ruling. The justices noted that they did not mean to aggravate the state’s situation or to escalate the difficulty experienced by the lawmakers, but they ensured they followed the law as the constitution demands. The Illinois state should apply the approach of integrating the large financial bodies in the economic management of the state. The state should develop a prudent long-term fiscal policy that influences positively on the financial sectors. However, the state government should banish the macroeconomic policies that contribute to imbalances, as it will eventually infect the financial markets. The government should design and implement rigorous exit strategies to avoid global imbalances. References Davey, M. (2015). Illinois Supreme Court Rejects Lawmakers’ Pension Overhaul. The New York Times. Retrieved May 18, 2015.Web: http://www.nytimes.com/2015/05/09/us/illinois-supreme-court-rejects-lawmakers-pension-overhaul.html?_r=1 Davey, M. (2011, January 12). Questions Persisting as Illinois Raises Taxes. The New York Times. Retrieved May 18, 2015, from http://www.nytimes.com/2011/01/13/us/13illinois.html Yaccino, S. (2012, February 22). New Spending Plan Means New Round of Pain for Illinois. The New York Times. Retrieved May 18, 2015, from http://www.nytimes.com/2012/02/23/us/illinois-budget-calls-for-cuts.html Read More