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Monday, January 04, 2010 8:18 PM


School Bills Due But State Can't Pay: "There is No Money"; Let the War on Public Unions Begin


While the stock market marches on oblivious to the real world, things are rapidly approaching crisis mode in Illinois, and for that matter nearly everywhere you look. Please consider School bills are due, but state won't pay.

Say the words out loud to get a feel for the size of it: Forty-five million, two hundred and six thousand, six hundred and fifty-four dollars, and sixty-one cents. That's how much the state is behind in payments to your local schools.

When the quarterly payments came due at the end of the year, the state again missed its categorical and grant payments to all 871 Illinois school districts.

This money is supposed to fund projects like school buses, special education, reading programs and early childhood development. But the money's not coming, instead getting added bill by bill to an already $4.5 billion IOU the state has for services from schools to homeless shelters.

But the same state that's no longer paying for these programs legally requires them.

Unlike the usual budget bellyaching when political pressure can make money appear, this time is different, said state Rep. Linda Chapa LaVia, D-Aurora. There is no money. "This is not a false alarm. This is not someone pulling a fire drill. This is a fire," Chapa LaVia said.

The West Aurora School District plans to lay off teachers for the second year running. Last year, the district planned to lay off 120 teachers, but ended up only giving 55 the ax. The district didn't have a change of heart -- laying off all 120 would have pushed class sizes past the maximum in the teachers union contract.

There's a fee the district can pay if they want to go past that limit by laying off more teachers. They're considering it. "It's cheaper to pay a premium than to pay a teacher," West Aurora Chief Financial Officer Christi Tyler said.

It's not that the state is denying it owes this money. The Illinois State Board of Education, like many state agencies, is dutifully sending its vouchers to the comptroller's office, where ... nothing happens.

What usually is a bureaucratic delay where the comptroller gets the voucher and then cuts the check within a week or two is now an eternal dead-end for bills, a purgatory where state payments linger while Springfield figures out how to fix the state's funding calamity.
Illinois $4.9 Billion Overdue In Paying Bills

Inquiring minds looking for more details on Illinois' missing $billions are reading Splurge. Borrow. Repeat.
You're a deadbeat, an astonishing $4.9 billion overdue in paying your bills. You owe much of that for services that were provided many months ago by people who, day in and day out, care for your ailing, handicapped and often helpless fellow citizens.

You're also -- sorry to be blunt -- inept. You repeatedly spend more than you earn and borrow to fill the gap. This year you'll outspend your income by some $12 billion.

In the process you've embraced debts that could plague your descendants after you're dead and gone. Examples: You've bizarrely promised your workers some $80 billion more in pension payouts than you can afford. What's more, you've promised them additional billions that you don't have for their health care after they retire.

Your money managers are the politicians who run Illinois. Many of them have failed you spectacularly. What will you do now? Your state is in dreadful shape financially -- well on its way to being New Michigan or, worse, New California.

Yet as 2010 dawns, many of your pols have an incredible deal for you: Yes, they've made you insolvent -- that means you can't pay your bills as they come due -- but they promise to make everything spiffy if you re-elect them. They will pay down your debts, which they manufactured in your name. To that end, they want you to hand them even more of your income in . . . taxes.

We have watched those politicians in recent years create ever more obligations for taxpayers -- yet also spent citizens' money in ways that defy common sense. Many public officials are so terrified of bucking public employees unions and other interest groups that they've ducked crucial decisions: to reduce pension benefits for future state hires, to move Medicaid patients to managed care, to demand consolidation of small school districts, to outsource costly internal functions like janitorial and food services . . . The list of money-saving moves private companies long ago would have made goes on and on.

Today's Illinois even borrows from itself: The sometimes acceptable practice of short-term lending repeatedly has been overused and abused. The result is a Ponzi scheme on speed that pays yesterday's costs with money borrowed today and due back, with interest, tomorrow.

On Feb. 2, Illinois voters have a choice. We can raise up our little porridge bowls and ask for more of the same.

Or we can demand that public officials aggressively streamline their governments and how they do business.
Why is Illinois broke?

The answer is easy. Politicians are unwilling to stand up to unions and demand reform. Instead they put off fixing the problem year in and year out selling long-term bonds to finance short-term needs.

Some complete idiot emailed me today telling me the problem was that unions did not make enough money. He made $70,000 and seemed proud of the fact that he spent every penny of it. It is really sad such fools can graduate from high school not understanding money, interest rates, taxes, inflation, credit cards, or anything they need to know to survive in the real world.

Lesson #1.
It does not matter how much you make but how far the money you do make goes
Lesson #2.
The ability to tax is not infinite.
Lesson #3.
Public unions and politicians who refuse to stand up to them are bankrupting cities, states, and municipalities

The system is flat broke and the state of Illinois is bankrupt. Meanwhile unions refuse to even compromise. At this point compromise is not needed. A taxpayer revolt and all out war on unions, graft, pension promises, and corrupt politicians is.

Let the war begin.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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