May 3, 2011

State Comptroller Says No to Bankruptcy

Illinois State Comptroller Judy Baar Topinka is dead set against the idea of bankruptcy for Illinois.

A PROPOSAL has been floated in the U.S. Congress to allow states to declare bankruptcy, which heretofore has been illegal under Federal law. Although the proposal is the brainchild of prominent Republicans, the Illinois State Comptroller, Judy Baar Topinka, a Republican herself, is dead set against the idea for Illinois.

“THERE IS no question Illinois faces serious financial challenges, but declaring bankruptcy is not the answer,” Topinka said.

WHILE SUPPORTERS of bankruptcy “are no doubt well-intentioned, their proposal to allow states like Illinois to break their financial commitments is misguided at best,” she continued.

STATE BANKRUPTCY would immediately result in increased borrowing costs, reduced access to financial markets and suspended or downgraded credit ratings, Topinka contends, noting “It is irresponsible. In fact, I fear that the mere discussion of this option runs the risk of destabilizing the bond market.”

BEYOND THOSE consequences, “State bankruptcy threatens to create more financial uncertainty and stunt economic recovery,” Topinka said. “Residents in our State already face high unemployment, residential foreclosures and other economic difficulties. Bankruptcy will only exacerbate their plight. In addition to disrupting the bond market in the short-term, it would stop infrastructure and construction projects that are needed to jump start the economy. In Illinois specifically, it would also further paralyze business recruitment already made more-difficult by the recently-approved corporate tax increase.

“PERHAPS MOST important: bankruptcy is simply not the right thing to do. Sadly, my State and others have made irresponsible spending and borrowing decisions that have led to massive deficits. As State leaders, we now have a responsibility to make difficult and unpopular decisions to reduce spending and restore our fiscal integrity. Bankruptcy is little more than an ‘easy way out’ that would wrongly allow the State to skip out on its financial obligations without correcting the choices that have led to this point,” Topinka concluded.

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