Mayor Rahm Emanuel cautioned Chicago aldermen that the city faces huge tax increases or drastic service cutbacks in the near future if it doesn't find a solution to the problem of how to fund billions of dollars in pensions promised to city employees.

The Civic Federation says the mix of overdue bills, Medicaid payments and insurance claims could drop by 14 percent, to $7.6 billion but also warns of some trouble spots.

A look at 10 states that have taken steps to address unfunded pension liabilities - or the amount of money the state has to pay out but for which it has no funding in the pension pool.

Only California, New York and Texas are carrying more debt. Blame the pensions.

Lack of transparency matters because, in addition to contributing to the budget crisis, incomplete information makes solutions harder to find.

The state of Illinois is running into credit trouble, just like anyone else who pays bills late and owes lots of money.

The bar to approve legislation gets lower in January, when only a majority of the House and Senate is required. Before then, three-fifths of lawmakers would have to vote for pension reform for it to take effect immediately.

New York, Illinois and California -- three of the largest offenders -- have seen the markets and ratings agencies react in very different manners based on their actions (or inactions, as the case may be).

The financial outlook for Chicago Public Schools (CPS), like that of the city of Chicago and the state of Illinois, is grim

Under the Illinois Constitution, fewer votes are necessary to pass legislation after January 1 than between now and the end of this year.

While almost all states faced pension funding issues during the recession, none of them are looking at a predicament as severe as in Illinois. Every day it doesn't get fixed, the burden on taxpayers grows larger.

Attorney General Lisa Madigan says it's absurd to think that her father, House Speaker Mike Madigan, is delaying pension reform to help her in a race for governor.

Illinois had to pay a premium to sell some of its $800 million in municipal bonds Tuesday, a little more than two months after a credit-rating downgrade saw the state postpone a similar sale.

The education cuts of nearly 3 percent are necessary because the state's annual pension payments - now more than $6 billion a year - will divert money from other government operations, Gov. Pat Quinn has said.

The Democrats who run state government forged an estimated $35 billion spending plan Tuesday that would keep education funding flat, pay for promised state worker raises and cut programs for seniors.

Gov. Pat Quinn this week will unveil his spending priorities for one of the nation's most cash-strapped states, but the $30 billion-plus operating budget will be shaped by many forces he can't get under control.

Proposals to tax Internet retail sales are all the rage as states continue to look for more ways to balance their budgets in the face of revenue shortfalls.

To reestablish Illinois as an economic powerhouse, the Institute has proposed "Budget Solutions 2012," an alternative that does not rely on the state's recent tax hikes as a revenue source, does not include borrowing and has positive cash flow for fiscal year 2012 - all while funding core services the poor and disadvantaged rely upon.

Paper suggesting a variety of ways to fixing state budgets in crisis, including freezing or slowing public employee salary growth, privatizing infrastructure and state operations, eliminating prevailing wage and placing constitutional limits on taxing and spending.

A detailed, comprehensive alternative budgeting plan addressing Illinois' immediate financial problems focused on three key elements: spending reallignment, right-sizing government labor costs and pension fund reform.

Illinois' total pension shortfall is set to double when Moody's evaluates Illinois' pension funds based on investment return targets that more properly reflect today's market realities.

While almost all states faced pension funding issues during the recession, none of them are looking at a predicament as severe as in Illinois. Every day it doesn't get fixed, the burden on taxpayers grows larger.

Attorney General Lisa Madigan says it's absurd to think that her father, House Speaker Mike Madigan, is delaying pension reform to help her in a race for governor.

Gov. Pat Quinn has called lawmakers back into session to try to deal with the state's unfunded pension obligation. But expectations are low for a resolution, even though Democrats control both chambers and the state's credit rating is taking a beating.

Gov. Pat Quinn offered a compromise suggestion today on how to break the impasse on pension reform: combine the dueling plans into one bill and let the courts sort it out.

Gov. Pat Quinn today called lawmakers back into special session June 19 to deal with the public employee pension shortfall after another rating agency downgraded Illinois' credit rating.

Investors in the $3.7 trillion municipal market assumed Illinois lawmakers would fix the worst-funded U.S. state pension system. The legislature's latest failure is showing buyers the cost of inaction.

Illinois Gov. Pat Quinn had claimed he was "put on earth" to solve the nation's worst pension crisis, but the goal eluded him once again as lawmakers adjourned their session without addressing the $100 billion burden on the state's struggling economy.

The Chicago-based Civic Federation said Tuesday the funding gap for 10 Chicago-area public pension systems widened by 16.7 percent to $32 billion in fiscal 2011 from the year, warning of service cuts or tax hikes to bridge the gap.

"There's nothing more that government can do to help jobs and economic growth than for the Legislature to put a comprehensive public pension bill on my desk by the end of this month," Gov. Pat Quinn said.

Illinois' total pension shortfall is set to double when Moody's evaluates Illinois' pension funds based on investment return targets that more properly reflect today's market realities.

Putting aside the merits or shortcomings of the Common Core, accepting national standards over which states have no control weakens the role that local officials have traditionally had in K-12 education.

At its core, the debate over how to properly fund public pension plans starts with how to accurately value liabilities so that governments can meet their obligations in the future.

Time to add a new diagram to the state budget and policy playbook--your state's highest paid employee is probably a football or basketball coach.

The bombshell Oregon Medicaid study released this week should give all states pause as they consider plans to expand Medicaid under the Affordable Care Act. States must now ask what the point of Medicaid is in the first place. 

To help prevent union strong-arming that fleeces taxpayers, we should know precisely what public union officials are demanding and what government employers are offering in any collective negotiation about employment terms and conditions.

And it isn’t just individuals who must reconfigure budgets, the states are looking at smaller “paychecks” as well.

The latest Illinois pension reform proposal, the Nekritz-Biss plan, proposes that the state, and by extension taxpayers, become the guarantor of the state's pension systems. That means funding pensions could legally take priority over all other discretionary spending.

Just as state spending should identify performance outcomes, tax preferences should as well.

State and local politicians may think they can relax as third quarter tax revenues showed 12 consecutive quarters of growth year over year. But that would be a mistake in light of pension investments that again failed to erase any of more than $5 trillion owed to government workers.

This map looks at state government budgets - specifically, how much of each state's budget comes from the federal government. Mississippi tops the list with 49% of its general revenue coming from Washington; Alaska, by contrast, gets only 24% of its general revenue from the feds.

A National Insistute on Retirement Security brief on proposals to freeze local and state defined benefit pension plans in a shift to defined contribution plans that limit taxpayer risk ignores is what protections are needed against endemic public pension corruption and offers no explanation of who is going to sacrifice to pay this massive hidden debt.

The "State of the States" report released this week puts hidden state and local debt at $7.3 trillion, stating: "States do not account to citizens in ways that are transparent, timely or accessible." If state and local governments fail to act decisively now, cities, towns and counties will go bankrupt, and states could fall beyond a fiscal event horizon into perpetual debt.

The U.S. Census Bureau today released its Annual Survey of State Government Finances for 2011, and it shows the "revenue crisis" politicians have been blaming on the Great Recession is false.

From Fiscal Years 2007 through 2011, politicians and government pension fund managers blew all the money taxpayers and government workers contributed. All of the $611 billion that was supposed to be invested is gone. So is the $609 billion earned on investments. According to the latest U.S. Census Bureau Annual Survey of Public Pensions: State-and-Locally-Administered Defined Benefit Data, more than $1.22 trillion came in to the pension plans and more than $1.29 trillion went out instead of growing to pay guaranteed future benefits. Those promised benefits grew by about $1 trillion over the same period. 

Illinois Gov. Pat Quinn needs to know his government pension crisis is no political squeeze play but a metastatic cancer that eventually will waste his state's whole economy.

Members of a state and municipal workers organization recently got a dose of reality on pension reform at a gathering of public workers who have benefited from defined contribution plans for 40 years. A key fact from the presentations was stated by Ken Parker, city manager of Port Orange, Florida: "Note: the only way a governmental entity can truly fix its cost related to retirement is to change from a Defined Benefit Plan and adopt a Defined Contribution Plan."

Of all accounting frauds state leaders commit to push devastating costs onto future generations, the worst is deluding citizens about the security of so-called catastrophe insurance funds. Hurricane Sandy and a tsunami scare in Hawaii at the same time should be warning enough for governors to start paying the premiums.

The report details that Illinois has the lowest bond rating of all fifty states, a wildly underfunded public pension system, skyrocketing Medicaid costs, and budget gimmicks galore, and concludes that Illinois’ state budget is “not fiscally sustainable.”

When a "premier global consulting and actuarial" firm proves in its first Public Pension Funding study that those government pensions are doomed, it is past time for action. Milliman's study showing a 33 percent increase in pension debt over official numbers from a minute change in accounting should be enough to spur reform.

No matter what the Government Accounting Standards Board says or how grossly state and local politicians pervert new guidelines to continue looting workers' pension funds, reality will triumph when the real reckoning comes. Just ask the National Association of Bond Lawyers, municipal bond rating agencies and actuaries who do the calculations.

Anyone interested in the state and local government pension crisis - and all Americans should pay attention to this hidden $4.6 trillion hidden black hole in our economy - must read Alicia H. Munnell's new book, "State and Local Pensions: What now?" It is the best primer on this complex issue except for one missing factor: Reality.

When a widely recognized world pension expert refers to current defined benefit and defined contribution plans as "dysfunctional," it is time for politicians to stop their lying and denying that this fiscal catastrophe is spiraling out of control.

When State Budget Solutions started looking at real total state debt, just the staggering size of the numbers alone did not tell the whole story. So how to get a fix on the real burden taxpayers must bear in each state? Per capita is the usual way. But even that does not tell the whole story.

The worst news is that earnings on investments were a negative $14.2 billion, a $66 billion decline from the same quarter last year. These pension funds paid out $53.4 billion in the second quarter, putting a year-over-year hole of at least $68 billion in capacity to pay future benefits.

If current state and municipal workers and retirees refuse to accept their fair share of sacrifice on retirement benefits, the looming taxpayer backlash will sweep away a century of progress. Workers must act voluntarily now because politics and law never will resolve this crisis before the money runs out, and legal protections they are counting on may be as false as politicians' promises.

There are certain critical facts that we believe the people of Illinois should keep in mind as they watch the conflict develop and evaluate the claims made by the two sides

Maryland Gov. Martin O'Malley told Democratic faithful gathered at the national convention Tuesday that "Democratic governors are balancing budgets," when he knows that is a lie, especially in the Old Line State. Twenty Democratic governors account for about 53 percent of total state debt, according to a study released last week by State Budget Solutions.

Vice presidential candidate Rep. Paul Ryan of Wisconsin and New Jersey Gov. Chris Christie put on cheery faces for the faithful this week at the Republic National convention, but both know the catastrophe states are hurtling toward because of hidden debt.

They just keep on letting politicians pick their pockets. Latest official public pension data - the most optimistic available -- compiled by Census show investments administered by states fell short more than $1.2 trillion even by their own trick accounting from Fiscal Year 2007 through 2011. Yet managers scraped off at least $45 billion in "Other Payments" to enrich a handful of insiders.

"Unsustainable" is the word state officials heard from experts for the first time at their annual National Conference of State Legislatures gathering here, where one of four sessions on the pension crisis drew a standing-room only crowd of more than 300.

When U.S. Sen. Dick Durbin of Illinois tried to fire up a ballroom full of state legislators here Tuesday morning, he used the phrase "states rights." It popped up a few other times as the National Conference of State Legislatures met to its annual "Build Strong States" summit. The only problem: There is no such thing as "states rights."

We're going to pay enough for 2,000 "Curiosity" Mars rover missions, but the money will produce no government services or benefits of any kind. Yet, nowhere does a state legislative directive on pensions approved Tuesday mention how states are going to pay this debt.

National Conference of State Legislatures members meeting here ended their first day with even more bad news about municipal bonds, debt interest that takes more than 20 cents of every dollar they spend each year and that pays for essential public works, among other things.

The word "taxpayer" appears only 14 times in 165 pages of the Securities and Exchange Commission's Report on the Municipal Securities Market released Tuesday. Only two of those mentions in the body of the report refer to looking out for our interests.

Question: When does 80 percent of something equal 100 percent? Answer: Never, except in the fantasy world of public pension accounting. The American Academy of Actuaries Tuesday sent a letter to Sen. Orrin Hatch, R-Utah, puncturing that fantasy in a committee report he released six months ago.

Push past the spin. Most public workers covered by defined benefit pension plans - and taxpayers stuck with the tab - don't have to wait years to find out what's happening to their money. They can get quarterly reports from the Top 100 funds representing 89.4 percent of "financial activity."

If our states and municipalities were trauma victims, they would be bleeding out while doctors argued about injuries. Even as financial gurus Paul Volcker and Richard Ravitch studied the municipal and state fiscal crisis for a report released this week, public pension debt alone grew to an untreatable $4.6 trillion, according to analysis released Wednesday by economist Andrew Biggs for State Budget Solutions.

Anybody who doubts whether public pensions can push state and local governments beyond a fiscal event horizon into a black hole of perpetual debt should read an auditor's note in Montana's latest annual report: "The Unfunded Actuarial Accrued Liability amortization period is infinite ...."

It may be equally as worrisome to know that the Department of Labor is also engaging in the practice of publishing one set of rosier numbers, only to amend them to the real numbers days later, thereby avoiding dissemination of the worst numbers.

Public pensions just keep falling further and further behind. In fact, they have fallen so far they never can get up again. The local and state pension crisis got at least $300 billion worse in the first quarter of this year compared to 2011, according to analysis of latest data released by the U.S. Census Bureau. That added at least $1.5 trillion to the shortfall -- calculated at $800 billion to more than $4 trillion as of 2010 -- future taxpayers must make up on top of all other taxes and rate hikes.

Despite the obvious need for maintaining these funds, many state lawmakers deplete or insufficiently fund the reserves to cover costs elsewhere, leaving constituents to fend for themselves during bouts of extreme weather.

Now, 70 percent equals 100 percent. The people crashing municipal and state pension plans into a bottomless fiscal abyss just released a "study" they claim finds them "solidly funded" despite irredeemable losses in the recession and lagging growth since. They did it by lowering their standards. No problem, they expect taxpayers to make up the difference.

Maybe average Wisconsin voters didn't consciously know each household must pay $1,563 in extra taxes every year for the next 30 years just to fund public pension shortfalls. But they probably realized they don't have a pension anymore, even if they have jobs. And any lucky enough to have jobs know that before Scott Walker became governor, they were paying higher taxes while working harder and longer at lower pay with slashed benefits.

Politicians are forcing public pensions to take more risks with taxpayer money and public workers' retirements. Recent accounting reforms actually will make the crisis worse, according to a study just released by three economists. They call for "drastic reform." Congress actually has the power to impose something drastic now.

In March, Kristen De Pena asked, "Is reading bills a thing of the past?"  Illinois State Representative Mike Bost answered her question with a resounding "Yes" and then some on the floor of the Illinois House.

Far more worrisome for many lawmakers and taxpayers is the additional cost to fund tuition waiver programs, an arguably repetitive option to comprehensive federal and state student assistance. 

In Illinois, the House and Senate are working on their respective budgets. Senate Democrats have introduced their budget that includes facility closures, layoffs and spending cuts for most state agencies, while leaving education funds the same as last year.

This all boils down to who gets to pick taxpayers' pockets first, public pensioners or municipal bond investors? More people are waking up to the hard reality that when it comes to state and local government, somebody has to lose money over the next few decades. The National Association of Bond Lawyers is worried enough about it to issue "Considerations" for advising clients who think they're getting safe investments.

Despite an organized campaign to stop public pension reform, reality is beginning to break through.  One recent report outlines a possible path to long-term solutions and another details the necessity of states and municipalities finding their own way because federal bailout is impossible.  And Chicago Mayor Rahm Emanuel released a plan that could have been based on both reports.

Hey, young public employees, what are you going to do when your pension checks bounce after you paid in for decades? That is what will happen in many - maybe all - states and municipalities sooner or later if they do not reform right now. If you want to see the future, just look at Illinois. One citizen there did, and came up with a real reform plan that might work.

Public employees should take their pension money now and run to avoid risk of getting reduced benefits - or nothing - in the future. It's the best deal for them and for taxpayers. A growing chorus of credible voices including the Government Accountability Office, a Federal Reserve bank and now the Harvard Kennedy School Mossavar-Rahmani Center for Business and Government confirm state and local government finances are "spiraling out of control" and even draconian reforms only make it "more likely" that future benefits will paid in full.

Hey, young public employees, what are you going to do when your pension checks bounce after you paid in for decades? That is what will happen in many - maybe all - states and municipalities sooner or later if they do not reform right now. If you want to see the future, just look at Illinois. One citizen there did, and came up with a real reform plan that might work.

This is what it sounds like when the Federal Reserve Bank screams: "Much has been written about the various headwinds restraining economic activity over the near term. However, our economy also has other headwinds to confront over the medium- to-longer-term. ... the finances of some state and local governments are also under stress and in need of serious adjustments."  - Federal Reserve Bank of Cleveland President Sandra Pianalto

Chicago Mayor Rahm Emanuel attempts to reform pensions for public employee unions while financially supporting the recall elections against Wisconsin Governor Scott Walker for enacting similar reforms.

A string of recent high profile public official corruption cases have brought the topic of pension forfeiture to the debate roundtable.

As state lawmakers struggle to close budget gaps and reduce deficits, many are scrambling to find new sources of revenue, often in the form of new taxes. To bolster revenue, states like Texas and Illinois are honing in on a new type of tax, a "skin" tax, aimed at strip clubs in the state.

On February 14^th, we celebrate love, family, and our partners. When it comes to celebrating partners, state governments have a number of Valentines. Because state governments continue to award the sweetest deals to their sweethearts, big business, they are never alone in love on Valentine's Day.

Despite the sunny rhetoric the Illinois budget office spouts, the outlook is hardly so rosy. The budget issues are apparent: the state is drowning in debt and now has unpaid bills running into the billions. But the problem appears larger than just overspending. The problem, it seems, is that principled business and budgeting practices simply do not exist in Illinois.

Michigan directly tackled its pension problem in 1997 by replacing the traditional "defined-benefit" pension plan with a 401(k)-style "defined-contribution" retirement plan for new state employees. The Michigan reforms have been immensely successful. Unfortunately, the story in Illinois is not nearly as encouraging.

Not only will agricultural subsidies legislation disproportionately affect the budgets of Heartland states, it also may play a more influential role in the upcoming Presidential election than a cursory count of electoral votes and voting trends indicate. 

It will come as little surprise that Illinois finds itself in a harsh fiscal crisis, with a state debt of $120,743,173,392. What might be more shocking is that the Land of Lincoln is home to both staggering debt and a constitutional balanced budget requirement. 

Illinois, unable to marshal the political will to set aside money for workers' pensions, keeps doing nothing, apparently hoping the pension mess will fix itself. But that never happens, of course. Instead, it just gets worse.

The third part of a three part series exploring the budget process in Illinois, which is set up to be transparent from the beginning.

An overview of the governor's role in Illinois' budget process.

An overview of the legislative process in Illinois and the importance of transparency in that process.

After Republican leaders made it clear they would not support his plan to borrow $8.75 billion, Gov. Pat Quinn  stated that he is focused on emergency borrowing of "about $2 billion" to pay off health care debts.

It's not entirely clear whether $33.2 billion or $35 billion will end up being the final price tag on running the state.

Illinois Democratic Governor Pat Quinn presented his budget address last week, but it is unclear whether it will be enough to solve the state's budget woes.

Now, when nearly every state is tottering on the edge of a fiscal cliff as they try to balance their budgets, public sector workers are being forced to shoulder a share of the financial burden.

Someone should tell the unions (in Wisconsin, at least) that there is a new sheriff in town.  And he's not afraid to call in the National Guard to quell unrest among state employees.

Lame duck Chicago Mayor Richard Daley prefers a less steep, and less complete, solution to the pension problem than that in proposed legislation.  He wants 50 years to get the police and fire pension funds to a point where they have assets to cover 80 percent of their outstanding liabilities.

Is it possible that Illinois needs an income tax increase?

Fiscal stress and strain continues in the fifty states this week as more legislators look for ways out of the black holes in which they find themselves. Solutions sought by states include delayed retirement, increased pension contributions, and furloughs.