Bankruptcy is often looked at unfavorably due to what it says about the parties involved and the arduous process to achieve a fresh start. We overlook the reality that it is often the only means to rebuild something that was once great. Many significant and very large companies have had to undergo the Federal Bankruptcy Court process to restructure and come back for a brighter future.
Take American Airlines as an example, the company and its parent, AMR Corp., filed for bankruptcy in November 2011. By early 2014, AMR and US Airways Group had signed a merger to form the world’s largest airline, American Airlines Group. After several years of toil, they are now a viable enterprise with a bright future. Similarly, Illinois’ United Airlines reorganized in Federal Bankruptcy Court and it too has excellent prospects.
If these companies are able to employ our Federal Bankruptcy Courts to rebuild into something better ultimately, why are our States unable do the same? Unfortunately, Federal Bankruptcy Laws failed to include State government entities such as Illinois.
There are the two basic tests for determining if an ‘entity’ is bankrupt. An “entity” can be a person, any business, or government body. Those tests are as follows. First, an entity that is spending more than it is taking in, and second, an entity that owes more than it owns. If any entity meets both of these tests it is economically considered bankrupt.
Presently Illinois is spending nearly $36 Billion per year but its revenues are $3 to $5 billion less than its expenditures. Therefore, Illinois meets the first condition to be considered bankrupt.
Truth in Accounting, an Illinois based think tank, reported in 2014 that Illinois had $25.9 billion of assets available to pay $212.8 billion of liabilities. Therefore, Illinois meets the second test in as much as Illinois owes substantially more than it owns. The
The -$186.9 billion shortfall represents compensation and other costs incurred in prior years that incompetent leaders in Springfield authorized but failed to pay. Instead, costs were shifted to future taxpayers. So, unfortunately Illinois meets both criteria and we can safely conclude that the State of Illinois is economically bankrupt.
Given these significant indicators that a financial debacle exists here, States like Illinois should have access to the Federal Bankruptcy Courts, just like any other entity that meets the two tests. This would allow States to reduce and restructure their liabilities, and ultimately emerge stronger with great prospects for the future.
Because Federal Bankruptcy Law fails to include “States,” many people conclude a State cannot go bankrupt. While this may be true as a legal matter it is wrong to have the same conclusion as an economic matter.
Vince Kolber, Congressional Candidate, has built a business over decades serving the airline and railroad industries. Both of these industries have experienced traumatic financial difficulties leading to many bankruptcies. Through these difficult times, Vince Kolber gained hands-on experience working with airlines and railroads through their restructurings in Federal Bankruptcy Courts. While these reorganizations in Federal Court were challenging, they could not have occurred without courageous leaders committed to saving jobs and the enterprises as a whole.
Illinois has a crying need to have access to a Federal referee. Vince Kolber’s proposed change in law would create a Federal referee for States such as Illinois. Send Vince Kolber to Congress and tell him to make Illinois’ access to Federal Bankruptcy Courts his number one priority. Illinois needs a Federal referee, not a bailout.