January 8, 2011

WHAT COULD GO WRONG? Illinois talking about borrowing money to fund its broke pension system.

“We owe this money to the pension fund. What we’re saying instead is we should put the money in the pension fund and owe the money instead to someone who would issue the bonds,” Senate President John Cullerton, D-Chicago, said.

With this kind of financial wizardry on tap, it’s amazing they ever went broke to begin with. But if I understand this correctly, if they borrow the money and put it into the pension fund, then they can — with much lower political cost — stiff the bondholders as opposed to the unionized state employees they owe now. So it’s sort of like running up your credit cards to pay off your mortgage or some other secured debt. . . .

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