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Pennsylvania, Illinois Usher In The New Year With Record Budget Impasses

We’ve written quite a bit this year about the fiscal crises unfolding among America’s state and local governments. Illinois became something of a poster child for the problem when, in May, the state Supreme Court struck down a pension reform bid, triggering a Moody’s downgrade for Chicago.

After that, the situation in Springfield worsened materially and before you knew it, the state was paying out lottery winnings in IOUs and missing hundreds of millions in pension payments. 

The Illinois high court decision effectively set a precedent. “My reaction was, ‘Yeah, that’s going to play here,’ “ John D. McGinnis, a lawmaker in Pennsylvania, told The New York Times back in May. As the Times went on to note, Pennsylvania “has been diverting money from its pension system, setting the stage for a crisis as more and more public workers retire.”

“The judiciary in Pennsylvania has been solidly of the belief that there are ‘implicit contracts,’ and you can’t deviate from them,” McGinnis said. “If lawmakers in Harrisburg were to unilaterally cut pensions now, they could be taken to court and be dealt a stinging rebuke, like their counterparts in Illinois.”

Those comments underscore the extent to which Illinois is not alone in struggling to deal with fiscal mismanagement.

Indeed, Pennsylvania just broke a record for longest budget impasse in state history. “The current impasse is dragging on as Democratic Governor Tom Wolf and the Republican-led legislature can’t agree on a spending plan for the year that began in July,” Bloomberg said earlier this week, adding that “the delay is threatening Pennsylvania’s credit rating and has investors demanding higher yields on its debt.”

For his part, Wolf blames the evil Republicans. “A historic compromise budget that included the largest increase in education funding in history, reforms in public pensions, and a reduction in the deficit was within reach,” Wolf said on Wednesday, referencing the Senate’s move to shelve a complete spending bill in favor of kind of half-measure that included less funding for schools. “It is deeply disappointing that today the Senate has caved to those same House leaders and extreme interests to continue the failed status quo and harm our schools and children by denying them these critical additional funds.”

Wolf is alluding to the fact that, in a replay of what we’ve seen in Chicago, the partisan stalemate is beginning to threaten the state’s schools. As we pointed out back in August, Pennsylvania schools started the year “minus $1 billion” in funds.

“Tensions in Harrisburg have ratcheted up as warnings from nonprofits and schools that have gone without funding hit a new level,” WSJ wrote on Wednesday. “The head of the Philadelphia public school system, the nation’s eighth largest with 134,000 students, said this month that schools could begin to cancel classes on Jan. 29 if the budget impasse isn’t resolved.”