Illinois Seeks a Bailout From Congress for Pensions and Cities

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DealBook|Illinois Seeks a Bailout From Congress for Pensions and Cities

Illinois Seeks a Bailout From Congress for Pensions and Cities

The president of the State Senate asked for $40 billion to help the pension system, fund unemployment insurance and aid hospitals and cities.

“This is an unprecedented situation,” the leader of the Illinois Senate said in a letter to members of Congress.
“This is an unprecedented situation,” the leader of the Illinois Senate said in a letter to members of Congress.Credit…Seth Perlman/Associated Press

Illinois needs more than $40 billion in relief from the federal government because of the coronavirus pandemic — including $10 billion to help bail out its beleaguered pension system, according to a letter the Illinois Senate president sent to members of Congress.

The letter, sent this week by State Senator Don Harmon, also seeks a $15 billion grant to “stabilize the state’s budget,” $9.6 billion in direct aid to Illinois’s cities, $6 billion for the state’s unemployment insurance fund, and hardship money for hospitals and nursing homes, among other things.

“I realize I’ve asked for a lot, but this is an unprecedented situation,” Mr. Harmon, a Democrat, wrote in the letter to the state’s congressional delegation, a copy of which was viewed by The New York Times. A spokesman confirmed that Mr. Harmon had written the letter.

The letter was shared with Gov. J.B. Pritzker, also a Democrat, who said this week that the federal government should provide more funding to states. Messages left for State Senator Bill Brady, the minority leader, were not immediately returned on Friday evening. Democrats hold 40 of the State Senate’s 59 seats.

The letter said the outbreak had caused economic havoc in the state, which has been under a stay-home order since March 21. Economic activity has frozen up across the country, causing tax collections to evaporate while spending has soared.

Last week, the National Governors Association said states needed “unrestricted fiscal support of at least $500 billion.”

The prospects of such a measure are uncertain. Democrats in Congress have pushed to include billions of dollars in aid for states and local governments in an interim package, pairing those funds and additional money for hospitals with the administration’s request for an emergency infusion of cash for a loan program to help distressed small businesses. Republicans have balked at the request, which has led to a lapse in funding for the loan effort, known as the Paycheck Protection Program, but Democrats argue that the request has merit, and discussions with the administration are expected to continue into the weekend.

Though Mr. Harmon pointed to the pandemic as the reason Illinois needed help, the problems with its pension system far predate the coronavirus. It is considered by experts to be one of the worst funded in the nation.

The system is actually a complex family of pension funds. Five are operated by the state, for teachers outside Chicago, legislators, judges and other state workers. Hundreds of other pension funds are operated by municipalities. Many of them are deeply underfunded, and local governments have had to sharply raise taxes to pay what they owe.

In his letter, Mr. Harmon noted that the $9.6 billion in federal assistance to Illinois’s cities “will dramatically impact municipalities’ ability to fund retirement systems for the police, firefighters and other first responders providing emergency services during this Covid-19 outbreak.”

The pension obligations are big enough to crowd other spending out of the state’s budget. The three main ratings firms — Fitch Ratings, Moody’s Investors Service and Standard & Poor’s — rate Illinois’s credit at just one notch above junk territory, citing ballooning pension obligations as one reason.

Some states have been able to reduce their pension obligations after lengthy court fights, but it is all but impossible for Illinois to reduce what it owes: The State Supreme Court ruled unanimously in 2015 that no cuts would be possible.

Emily Cochrane contributed reporting.

  • Frequently Asked Questions and Advice

    Updated April 11, 2020

    • When will this end?

      This is a difficult question, because a lot depends on how well the virus is contained. A better question might be: “How will we know when to reopen the country?” In an American Enterprise Institute report, Scott Gottlieb, Caitlin Rivers, Mark B. McClellan, Lauren Silvis and Crystal Watson staked out four goal posts for recovery: Hospitals in the state must be able to safely treat all patients requiring hospitalization, without resorting to crisis standards of care; the state needs to be able to at least test everyone who has symptoms; the state is able to conduct monitoring of confirmed cases and contacts; and there must be a sustained reduction in cases for at least 14 days.

    • What should I do if I feel sick?

      If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others.

    • Should I wear a mask?

      The C.D.C. has recommended that all Americans wear cloth masks if they go out in public. This is a shift in federal guidance reflecting new concerns that the coronavirus is being spread by infected people who have no symptoms. Until now, the C.D.C., like the W.H.O., has advised that ordinary people don’t need to wear masks unless they are sick and coughing. Part of the reason was to preserve medical-grade masks for health care workers who desperately need them at a time when they are in continuously short supply. Masks don’t replace hand washing and social distancing.

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      It seems to spread very easily from person to person, especially in homes, hospitals and other confined spaces. The pathogen can be carried on tiny respiratory droplets that fall as they are coughed or sneezed out. It may also be transmitted when we touch a contaminated surface and then touch our face.

    • Is there a vaccine yet?

      No. Clinical trials are underway in the United States, China and Europe. But American officials and pharmaceutical executives have said that a vaccine remains at least 12 to 18 months away.

    • What makes this outbreak so different?

      Unlike the flu, there is no known treatment or vaccine, and little is known about this particular virus so far. It seems to be more lethal than the flu, but the numbers are still uncertain. And it hits the elderly and those with underlying conditions — not just those with respiratory diseases — particularly hard.

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      If the family member doesn’t need hospitalization and can be cared for at home, you should help him or her with basic needs and monitor the symptoms, while also keeping as much distance as possible, according to guidelines issued by the C.D.C. If there’s space, the sick family member should stay in a separate room and use a separate bathroom. If masks are available, both the sick person and the caregiver should wear them when the caregiver enters the room. Make sure not to share any dishes or other household items and to regularly clean surfaces like counters, doorknobs, toilets and tables. Don’t forget to wash your hands frequently.

    • Should I stock up on groceries?

      Plan two weeks of meals if possible. But people should not hoard food or supplies. Despite the empty shelves, the supply chain remains strong. And remember to wipe the handle of the grocery cart with a disinfecting wipe and wash your hands as soon as you get home.

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      That’s not a good idea. Even if you’re retired, having a balanced portfolio of stocks and bonds so that your money keeps up with inflation, or even grows, makes sense. But retirees may want to think about having enough cash set aside for a year’s worth of living expenses and big payments needed over the next five years.


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via The New York Times

April 18, 2020 at 09:03AM

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