Chambana Sun

Scott Tapley said Senate Majority Leader Mitch McConnell might have a difficult time moving forward with his proposal for states that are short of money, particularly due to steep pension deficits, declare bankruptcy.

But it’s an idea worth exploring, Tapley told the Chambana Sun.

“Several states (including Illinois) have made pension promises that they mathematically cannot keep. I don't know if bankruptcy is the answer,” Tapley said. “But without bankruptcy as an option for negotiating a reasonable, fair solution, it's a one-way street to needing a federal bailout. Maybe a better question is why should taxpayers in states with strong, disciplined financial practices pay for the disasters created by corrupt, incompetent politicians in other states?”

McConnell has labeled state requests for billions of dollars as “blue-state bailouts.”

States received $150 billion in assistance from the $2.2 trillion CARES Act, but that was used up quickly. Now, with tax revenues slowing dramatically in the wake of the COVID-19 pandemic that shuttered businesses, states face an estimated $650 billion budget shortfall over the next three years.

Gov. J.B. Pritzker says Illinois is short more than $7 billion for the next two fiscal years. States have asked for an additional $500 billion while cities and local governments say they need $250 billion.

On April 22, McConnell told radio host Hugh Hewitt he has an idea for cash-strapped states.

“I would certainly be in favor of allowing states to use the bankruptcy route,” he said. “It’s saved some cities, and there’s no good reason for it not to be available.”

That was sharply criticized by Democrats in Congress and state capitols. Tapley said it’s worth putting on the table, at least for discussion purposes.

“The odds of a proposal to enable states to file bankruptcy being successful nationally is approximately zero, given that there have been no serious proposals introduced in either chamber of Congress,” he said. “Even if such a measure passed the U.S. Congress there is no chance of Illinois considering bankruptcy as long as Democrats enjoy dominant political control of the state.

But Tapley said there are solutions if state leaders will consider them.

“The only current policy levers available for addressing the Illinois under-funded pensions are raising taxes and/or massively cutting spending in order to fund the existing promises, or begging for a federal bailout,” he said. “The Illinois Supreme Court said the pension promises cannot be altered, so the state Constitution would have to be changed to address the size of the obligation. A federal bailout would only reset the clock, unless Illinois politicians suddenly stopped lying to themselves and the public about the true cost of their promises.”

Tapley understands money and politics.

He served on the Champaign County Board for a decade (1998-2007), and has been the public spokesman for seven referendum campaigns in the area.

Six succeeded, including supporting a tax cap, opposing a quarter-cent sales tax, supporting the creation of the Champaign Southwest Mass Transit District as well as a tax levy for CSWMTD to fund a lawsuit against CUMTD, a vote no campaign on a tax to support the Champaign County Nursing Home and vote yes to sell it.

He has earned the Chartered Financial Analyst designation and has worked as a financial planner for more than 20 years.