A U.S. Senator wants to send a message to states like Illinois that have accumulated large pension debts: Don’t look to the federal government for a bailout
A newly-filed resolution by U.S. Sen. Tom Cotton, a Republican from Arkansas, states that Congress should not be responsible for bailing out fiscally-irresponsible states.
“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,” the resolution reads.
Rachel Greszler, a research fellow with the Heritage Foundation, said states are carrying trillions of dollars in estimated future debt.
“Some of those obligations are so large in states like Illinois, California, and Connecticut that it seems nearly impossible that they would be able to come up with this money,” she said. “They have anywhere between $28,000 and $48,000 per person in unfunded pension liabilities.”
She said there have long been state-level officials who say the federal government should help.
“States, including Illinois, have floated the idea of having the federal government back their pension debts,” she said, referring to former Gov. Pat Quinn’s 2012 budget, which proposed having future pension borrowing guaranteed by the federal government to lower interest on the loan.
Illinois’ pension debt has been estimated between $136 billion and $250 billion, by government officials and credit rating agencies.
The U.S. House of Representatives is set to vote on legislation that would allow for low-interest public loans to private pensions that could be forgiven, something Republicans have called a bailout of the plans.