An editorial in the Mackinac Center for Public Policy blog, coauthored by Michael LaFaive and Carol Liebau, said states that have practiced irresponsible fiscal and pension policies are viewing federal bailout money as a cash cow and should not be rewarded for their behavior.
Some state lawmakers want the federal government to pour money into their states, which can be used for other purposes than the COVID-19 pandemic, the editorial said -- problems the states themselves created long before the virus.
The writers cited Illinois as an abuser and Michigan as an example of fiscal soundness.
Illinois, the blog said, is facing a $100 billion shortfall in its pension plan system, and legislators in that state have asked for a $41.6 billion bailout in which $10 billion could be used to shore up the pension fund. On top of that, $9.6 billion would go to Illinois cities, with no stipulation on how the money would be spent, allowing those municipalities to make up pension shortfalls that predate the coronavirus outbreak.
In Connecticut, too, LaFaive and Liebau said taxpayers were saddled with $60 billion in unfunded liabilities for pensions for state employees and teachers. Payments for retirement pensions exceed the total the state paid on transportation or education.
Such states, the authors indicated, view the bailout money coming from the federal government to help with the pandemic as a kind of gold mine to be plumbed. However, the temporary nature of the bailout money, they said, would not solve the problem of over-generous, underfunded pension plans, but would only encourage more reckless fiscal behavior and extend the problem for another generation.
To the contrary, the blog cited Michigan as a positive example for its balancing of budgets coming out of the Great Recession of 2008 and for enacting fiscal reforms. Lawmakers in Michigan transitioned to 401(K)-type retirement plans rather than wasteful pension increases.
The editorial said forcing all taxpayers to pay for the fiscal mistakes of specific states would be to reward wrongdoing and punish those who practiced restraint.
The column reported that a coalition of organizations has sent a letter to the federal government asking it to reject a bailout of states for problems not directly related to the pandemic.
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