Kirk Senate Resolution: No Bailout for States
Senator says action needed to protect federal credit rating
CHICAGO-In a move aimed at protecting the nation's federal credit rating, U.S. Sen. Mark Kirk (R-Ill.) announced today that he and 14 Republican Senators have introduced the No State Bailouts Resolution, S. Res. 188, which bans federal bailouts of financially struggling states like Illinois.
Illinois State Treasurer Dan Rutherford, who earlier this week released a report showing the detrimental effect the state's declining credit rating has on the state's taxpayers, said he endorses the Senate resolution.
"With this resolution, we are blocking any potential state bailouts," Senator Kirk said. "Some states have reduced spending, lowering their borrowing costs as lenders restore confidence. Encouraging fiscal responsibility will help lower the lending costs on municipal bonds. For example, a recent report released by Illinois Treasurer Dan Rutherford showed Illinois families had to pay $530 million or $428 million more than families in Washington or Michigan because the Illinois credit rating is deteriorating."
No State Bailouts declares that the States, as sovereign entities, retain control over their spending and taxation, and are responsible for their own debts. The resolution also states that historic precedent opposes a bailout of the states, citing the historic example from the financial crisis of 1842. As such, the cosponsors agree that the Federal Government should "take no action to redeem, assume, or guarantee State debt."
Original cosponsors include Sens. Lamar Alexander (R-Tenn.), Kelly Ayotte (R-N.H.), John Barrasso (R-Wyo.), Dan Coats (R- Ind.), Susan M. Collins (R- Maine), Mike Crapo (R- Idaho), John Hoeven (R-N.D.), Ron Johnson (R-Wis.), James E. Risch (R-Idaho), Pat Roberts (R-Kan.), Marco Rubio (R-Fla.), Richard Shelby (R-Ala.), Olympia Snowe (R-Maine), and Roger Wicker (R- Miss.).
"I oppose singling out a particular state for federal aid to fill budget shortfalls, particularly when other states have been making the necessary and tough choices to manage their budgets," Roberts said. "States all across our country are facing tighter budgets as revenues continue to decline, and we understand their plight; but make no mistake, each state is responsible for its own financial situation. As a United States senator, I took an oath to uphold the Constitution and have worked consistently to promote less government intrusion in people's lives and pocketbooks."
"If a state gets itself into financial problems, it needs to get itself out of them and not expect a bailout from other states' taxpayers-especially from Tennesseans, who live in a fiscally responsible states that has almost no debt," Alexander said.
"Federal taxpayers should not be on the hook for bailing out the fiscally irresponsible behavior of individual states," Johnson said.
"Governments at all levels must tighten their belts, and this will help discourage states from indulging in short-sighted fiscal policies," Rubio said. "Families across America have had to make tough decisions about their spending in order to live within their means, and all officials in Congress and state capitals alike should follow that example."
In 1842, several American states spent so much that they could not repay their creditors. The Senate requested then-Secretary of State Daniel Webster report any negotiations with State creditors to the Senate, in order to ensure no promises of Federal Government support were offered. At the time, the prospects of U.S. bonds were so poor that contemporary Charles Dickens' A Christmas Carol used the phrase "a mere United States' security" to describe something as worthless. States survived this crisis without a federal bailout and became the modern United States of America.
Under Senate Resolution 188, Illinois and other states should heed the call to reverse out-of-control spending and return to fiscal sanity. Senate Resolution 188 also will make it clear that a federal bailout of the states will not occur, forcing Illinois and other troubled states to make tough decisions here and now.
Adhering to this policy today, Senator Kirk said, will help Illinois avoid the fate of California, where severe cutbacks have forced the state to close 70 state parks--a small step toward filling California's $15 billion budget hole.