How not to run anyone's finances, the case of Illinois
The governor proposes to borrow $3.5 billion to cover a year’s worth of pension payments, a step that would cost about $1 billion in interest. And every major rating agency has downgraded the state; Illinois now pays millions of dollars more to insure its debt than any other state in the nation. . . .
Public colleges and universities occupy a fiscal sickbed all their own. This year they muddled through without $668 million expected from the state; the University of Illinois has yet to receive 45 percent of its state appropriation. Legislators made no pretense of promising to pay this bill soon. Instead they authorized colleges to borrow against the expected state payments.
“The big fear is that next year we’ll be down twice as much,” said Randy Kangas, an associate vice president of the university. “No one knows how to make the cash flow work.” . . .
The state’s last elected governor, Rod R. Blagojevich, is on trial for racketeering and extortion. But in 2003, he persuaded the legislature to let him float $10 billion in 30-year bonds and use the proceeds for two years of pension payments.
That gamble backfired and wound up costing the state many billions of dollars. Illinois reports that it has $62.4 billion in unfunded pension liabilities, although many experts place that liability tens of billions of dollars higher. . . .