In Michigan, Gov. Rick Snyder formally declared a fiscal emergency in the state’s largest city, Detroit, paving the way for possible state oversight. His decision followed a state review that found Detroit facing nearly $15 billion in long-term debt, including pension obligations. Illinois, meanwhile, agreed to settle federal civil securities fraud charges that alleged the state misled bond investors about the underfunding of its pensions. Illinois has the worst-funded state pension system in the country, with a current shortfall of some $98.6 billion. These developments are more evidence of the burdens that generous past pension promises have placed on governments across the country.
Across America, it’s commonplace for City Councils to cut budgets. The same goes for school boards, county boards and state legislatures. (Just a few years back, Nebraska’s Legislature had to tackle a $1 billion shortfall.) Cuts can be painful, but they’re necessary for responsible governance. But from the way the sequester was structured and is being presented, Americans are now receiving the misleading message that it’s just not possible to cut the federal budget by even a modest amount without sacrificing vital services. Every time our elected leaders re-enforce that message with their public statements, they ill serve the nation.