The Road Ahead

It's been two years since I warned that Arizona was on the road to bankruptcy.  People ask me what's going to happen next and I remind them that making accurate predictions is occasionally difficult.  However, you don't pay the big bucks for Espresso Pundit in order to hear me hedge my bets and whine that there are many variables...yada yada yada.  So here it goes. 

My best guess is that the state finally runs out of cash, gimmicks and borrowing capacity on September 30th of this year.  That's the date of a major payment to schools and at our current pace, it seems unlikely that we will be able to make that payment. 

If you want to know what Arizona's future looks like, you might want to take a look at what's happening in Illinois.

While Illinois doesn't have the option of shutting its doors or shedding debts in a bankruptcy reorganization, it seems powerless to avert the practical equivalent. Despite a budget shortfall estimated to be as high as $5.7 billion, state officials haven't shown the political will to either raise taxes or cut spending sufficiently to close the gap.

As a result, fiscal paralysis is spreading through state government. Unpaid bills to suppliers are piling up. State employees, even legislators, are forced to pay their medical bills upfront because some doctors are tired of waiting to be paid by the state. The University of Illinois, owed $400 million, recently instituted furloughs, and there are fears it may not make payroll in March if the shortfall continues.

Without quick corrective action or a sharp economic upturn, Illinois is headed toward a governmental collapse. At some point, unpaid vendors will stop bidding on state contracts, investors will refuse to buy Illinois bonds and state employees will get paid in scrip, as California did last year.

Comments

[ron]

When do food riots start....

[Blackbird03]

How about they establish a new Chicago Mercantile market for futures on ammunition? That market would be a strong leading indicator of unrest.

[Brian]

Or perhaps we should just chart the decline in sales of Janet Napolitano collectible coffee mugs as a leading indicator of unrest. ;-)

[Travis]

Ooh, Napolitano coffee mugs and ammo, that gives me an idea...

[Al Tam]

When the dough runs out, I say we round up every single irresponsible land developer, home builder and mortgage lender who didn't know when to quit, and hold them upside down by the legs and shake every last loose cent out of their pockets.

[Gilbert_Sundevil]

How about we round up the republican controlled state legislators that kept passing on bloated budget after bloated budget on to Napalitano over the last 1/2 decade?

[Steve F.]

The republicans that enabled Nappy to pass her bills are GONE. They were the moderates that got voted out in the last election.

It's totally coincidental that Nappy decided to take the DHS post rather than face a new legislature. Now Brewer gets to take all the heat. Pretty good politicking on Nappy's part, don't you think?

[BobH]

I love to laugh at Napolitano as much as anybody, but you do have to give her credit for magnificent timing -- she got all the credit for the bread and circuses, and left town just before the bills came due.

[Tom in Kingman]

Sorry, the Republican legislature is solely responsible for the State of Arizona today. Their policies have prevailed at every turn over the last 20 years. The hypocricy of Russell Pearce and the no,no, never, never, tax policy to benefit the growth industries have given Arizona its current result. Meanwhile the most important things in life on West Washington in Phoenix are concealed guns and butting into private reproduction decisions.

[Bergie on the Left]

Agree Tom! Don't forget tax cuts for the wealthy, stripping any educational funds, and chasing out any progressive company (like Google) through Neanderthal thinking and actions.

At the root of my problems in life -- unemployment, living with friends, no girlfriend -- can be directly traced to the right wing mafia.