There's nothing funny about the joke that Illinois' economy has become, Michael Hicks, a professor of economics in the Miller College of Business at Ball State University, told the Chicago City Wire recently.
“This isn't a distant problem that’s far off,” Hicks said. “It's within the building life of one major piece of infrastructure.”
Hicks primarily focused on Chicago's troubles, which in some ways epitomize the state's, he said. One of the major issues he noted is the lack of credit worthiness in Illinois municipal bonds. Hicks said the problem is a matter of insecurity, not just numbers: A lack of confidence by bond rating agencies can be very detrimental to the entire economy.
Michael Hicks
“Chicago's policies are broken across a number of domains,” Hicks said. “The state's policies are also broken across a number of domains.”
While the rest of the country is enjoying low interest rates, many local boards in Illinois are looking at the equivalent of what Hicks called a “payday loan” to go toward infrastructure.
“It's like buying roads with a teenager’s credit card,” Hicks said.
Hicks said it all relies on residents getting fed up with projects not getting done due to bond prices and forcing change.
“When do you get voter backlash?” Hicks said. “They haven't taken notice thus far.”
At the core of the problem, he said, are pension obligations, which is why declaring bankruptcy -- even if possible -- wouldn't help the state all that much.
“The bigger challenge is unfunded liabilities,” Hicks said, adding that fixing the pension crisis would go a long way toward solving the state's financial problems.
Hicks said pensions are enjoyed by only 1 percent to 2 percent of the population, and at some point the rest of the people might decide to get serious about changing the equation on pensions.
In a letter published in the News-Sentinel on June 14, Hicks elaborated on some of the political reaction to all of this grim news.
“I’ve heard at least four different governor’s chortle over Illinois debt, the gubernatorial cell mates and the general insensibility of the Chicago Way,” Hicks wrote.
Citing the unfunded liabilities that loom in the form of state debt, Hicks stressed the poor shape of the state’s bond rating.
"A Chicago bankruptcy is likely unavoidable, as even the Obama Administration and Democratic Congress made clear that no bailout was in the cards," he wrote. "The shear human cost of a failed city is profound, and we should all be worried that about half of all 18 year olds in Chicago graduate into a lifetime of poverty each year. These folks live next to us, and their failure or success will label the Midwest for decades … The time for jokes about Illinois has passed.”
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