Another must read

The post below details the problems of Detroit. Meanwhile, in Illinois:

For the second time in history, federal regulators have accused an American state of securities fraud, finding that Illinois misled investors about the condition of its public pension system from 2005 to 2009.

In announcing a settlement with the state on Monday, the Securities and Exchange Commission accused Illinois of claiming that it had been properly funding public workers’ retirement plans when it had not. In particular, it cited the period from 2005 to 2009, when Illinois also issued $2.2 billion in bonds.

The growing hole in the state pension system put increasing pressure on Illinois’ own finances during that time, raising the risk that at some point the state would not be able to pay for everything, and retirees and bond buyers would be competing for the same limited money. The risk grew greater every year, the S.E.C. said, but investors could not see it by looking at Illinois’ disclosures.

There's more, a lot more, at the link, including this happy bit of news:

The S.E.C. noted that Illinois had passed a law in 1994 allowing itself to put less than the required amount into its pension system each year. It is not the only state to have done so. For the next 15 years, Illinois issued annual reports showing that it was on track with its lawful schedule, even as it fell further behind the real-world amount needed to pay all current and retired public employees.

By 2003, the state was so far behind that it issued $10 billion of bonds and put the proceeds into its pension funds to make them look flush. The main underwriter of those bonds, Bear Stearns, was later found to have made an improper payment to win the business, figuring in the corruption trial of a former governor, Rod R. Blagojevich.

In 2005, the state passed another law, giving itself a holiday from making even the inadequate annual pension contributions called for by its 1994 schedule. It said it would offset the missing money with bigger contributions from 2008 to 2010, but then did not do so. By 2010, the reported shortfall of the pension system was $57 billion, and senior officials were warning that the system was at risk of breaking down completely.

And of course Sammy should have no trouble bailing out Illinois, right?