A Radical “Re-Boot” Idea for Bankrupt Illinois Is a Stark Warning for New Jersey

RealClearPolitics published a piece that presents a possible salvation for bankrupt Illinois – and possibly New Jersey as well.  Author Richard Porter decries Illinois’ massive pension debts, high taxes, declining home values and the outmigration of its citizens, and suggests that it “re-boot” as a new state that could remedy these depressing realities – essentially a GM-style bankruptcy restructuring.  Porter rightly mentions New Jersey as a state in similar straitened circumstances, and the sad thing is that you could replace “Illinois” with “New Jersey” and you would have an accurate list of New Jersey’s many problems.  Let this serve as a warning for New Jersey to avoid such a fate!

Here’s Porter’s piece:

A GM-Style Restructuring for Illinois  

By Richard Porter

March 03, 2020

(Antonio Perez/Chicago Tribune via AP)

Illinois has many natural, commercial, geographic, cultural, and physical advantages and is among the best places in the world to locate and grow a family or business. That’s why, for much of the last 200 years, Illinois was one of the fastest-growing states in the union.

But today Illinois groans under a quarter-trillion dollars of debt that continues to increase. Taxes go up but aren’t keeping up with liabilities.

Frightened by our state’s financial crisis and with other states offering a better value proposition, more people move from Illinois than to Illinois despite the many advantages of locating in the state. So demand for property falls and economic opportunities are reduced.

Home values, the retirement nest egg for millions of Illinoisans with no defined-benefit pension plans, fall too, especially relative to national home values.

As home values fall and population bleeds out, the expected future burden of growing liabilities increases exponentially, scaring even more people away and exacerbating the state’s financial spiral.

Illinois isn’t alone in this spiral: New Jersey and Connecticut are likewise experiencing financial problems that are massive, complex, and daunting to try to fix directly. Current leadership’s apparent solution: a lifetime of “shared pain” through ever-increasing taxes to pay government’s excessive debts.

But the people governed by our indebted governments have no personal liability for the governments’ debts.

Consider what this means for Illinois: each and every one of Illinois’ 12.5 million residents personally decides whether to stay and pay high taxes, or move to states offering a better deal. Who wants to shelve dreams to bear the pain of past governmental mistakes if a better alternative is readily available?

We need to reboot Illinois so that families and businesses that love this area and want to stay aren’t punished for doing so. Illinois can be restructured using a variation on the legal technique the federal government employed in its reorganization of GM — call it the “old state, new state” Illinois reorganization plan.

Recall some founding principles:

1. The U.S. Constitution, our supreme law, provides that “the United States shall guarantee to every State in the Union a Republican Form of Government.”
2. A republican form of government is, as Abraham Lincoln stated at Gettysburg, “government of the people, by the people, for the people.” When paying creditors becomes the government’s primary function, that’s government for creditors, not the people.
3. In a republic, people, not their government, are sovereign; all people are created equal and are endowed with unalienable rights, among which are life, liberty and the pursuit of happiness. The Declaration of Independence states, “That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed — That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its power in such form, as to them shall seem most likely to effect their Safety and Happiness….”
4. Illinois was granted statehood in 1818 by residents living here with the concurrence of Congress.  The Constitution empowers Congress to admit new states to the union, and provides that new states may be formed out of existing states with the concurrence of the state’s legislature and Congress.
5. The “state” of Illinois was created by residents and Congress, not God or science. Before 1818, it didn’t exist — and if it no longer works for the people living here today, we can replace it with the concurrence of Congress.
6. Congress has the power to annul or impair contracts to which state governments are party. Bankruptcy courts impair contracts, and, just a few years ago, Congress passed legislation setting up a process for impairing Puerto Rico’s contracts to resolve its financial failure. Congress has the power to wind down the existing government of Illinois and to establish a process for adjusting or impairing the state’s contracts.

What does this mean?  We can reboot Illinois.

We can abolish the existing state and be founders of a new government, with a new constitution with such principles and in such form as we see fit.

Imagine starting anew. The new state would need to ensure that state workers who played by the rules receive a sustainable pension. But consider, for example, adjusting pensions to levels commensurate with our adjoining states while eliminating abusive practices and multimillion-dollar pension deals that drain the system meant for our workers. We could create a state government that focuses on improving services paid for with sustainably lower taxes and protecting and enhancing investments in housing, farms, plants, and other improvements to our land.

We have the power and the right to start fresh and create a government that makes Illinois a state people want to move to instead of from.

While there should be more direct ways of fixing Illinois, the status quo is extraordinarily difficult to actually change meaningfully through ordinary legislation or even amendments to our existing Constitution. We could elect entirely new legislators, only to find that the prior politicians and judges made reform illegal.

But we are not constrained by the ordinary and need not suffer in a box constructed by those running our existing government. Once we decide we’ve lost enough, we can step out of the “Chicago Way” box and establish something new that empowers us to pursue our dreams in Illinois again.

Richard Porter is Illinois’ national committeeman to the RNC.