With $130 billion in unfunded pension liabilities and a prohibition against any measure to retroactively reduce those liabilities, Illinois is inevitably headed toward bankruptcy, according to Mark Glennon, founder of Wirepoints Illinois News.
"[I]t will become evident there’s no alternative,” Glennon wrote on his website. “This isn’t about whether bankruptcy is a good option. It’s about whether it’s the only option.”
Federal law does not allow states to declare bankruptcy, but Glennon believes Congress would eventually achieve bipartisan support for legislation enabling the action for Illinois and other states. While he points out a number of reasons that both parties would put up initial objections, he also says any legislation would adjust the current bankruptcy code for its application to states, giving lawmakers an opportunity to alleviate those concerns.
Glennon pointed to Puerto Rico, a U.S. territory, which has filed for what is essentially bankruptcy protection.
“It’s difficult to see how Illinois can avoid a similar wave of lawsuits at some point, and only an organized insolvency proceeding – bankruptcy – can fairly manage and prioritize an overwhelming number of claims,” Glennon wrote. “The sooner we pass through the stages of ridicule and violent opposition, as Schopenhauer called them in that quote above, the less painful this will be for everybody.”