Pres. Barack Obama’s plan for yet another round (!) of stimulus spending, this time focused on highway infrastructure work, is, like so many products of this administration, something other than what it seems. What Obama is proposing is another backdoor bailout for spendthrift states, such as his political home state of Illinois, giving them large injections of federal money so that they can redirect spending that would be dedicated to highway projects to other areas—e.g., to the government-employees’ unions that are Obama’s most loyal constituency. Call it “No Blue-State Appropriator or Union Goon Left Behind, Part Whatever.”

The highway system in particular (and the transportation racket more generally) is a source of endless financial shenanigans and a rich seam of political patronage to be mined by Obama’s allies at the state and local levels. The federal highway system is maintained by a combination of federal and state spending (in a few cases, local spending as well) with the bulk of the states’ money coming from gasoline taxes and fees levied on car owners. Illinois, for example, levies a 39-cents-a-gallon tax on gas (the sixth highest in the nation, according to the Tax Foundation), and it also applies its general sales tax (another 6.25 percent) to gas. Once you figure in the total tax burden, government levies are probably a bigger contributor to the price of a gallon of gas in Illinois than is the crude oil from which it is distilled. So, what does Illinois get for its money?

Part of what it gets is the Illinois Department of Transportation (IDOT), one of those wonderfully, comically inept state agencies that does things that make political analysts laugh and taxpayers weep: things like deciding to suddenly stop doing roadwork because they are out of gas money (irony!) or threaten to start leaving roadkill on the highways unless the state gives them another $20 million.

Highway maintenance is important, of course. But that’s not all that IDOT does with its money. For instance, IDOT helps to maintain a vast network of full-employment programs for petty bureaucrats, called “regional planning agencies.” Every region in the state has one, and they are not small: The Chicago version lists 94 staffers on its website. Its budget of $16.7 million comes mostly from IDOT ($3.8 million) and the Federal Highway Administration ($11.5 million), with money reshuffled from other government agencies, local levies, and our friends over at the Environmental Protection Agency (no, really!) kicking in another $1 million or so. Nearly a hundred bureaucrats spending state transportation money, FHA money, and EPA schmundo, doing . . . what? Overseeing roadwork? Not exactly.

Because our entire government is turning into a bank, IDOT is in the business of making low-interest loans and grants for business-related projects that it likes under its Economic Development Program (EDP). These are supposed to be transportation-oriented projects, but “economic development” is a famously elastic definition under which to operate.

May I give you a little flavor for how carefully this economic-development business is managed? Here’s an excerpt from the minutes of a recent meeting of the Chicago Metropolitan Agency for Planning, or CMAP. Mr. Blankenhorn is CMAP’s executive director, Ms. Powell its chairman:

Mr. Blankenhorn said IDOT’s FY2010-11 budget includes $5 million to fund Metropolitan Planning Organizations statewide, with CMAP due to receive $3.5 million of that. He said the drawback is that all the money is supposed to be used for transportation planning, and while some of CMAP’s programs, such as community and economic development, can be tied in, most cannot. He said IDOT has promised to be flexible in what spending it will allow, but it’s really up to the General Assembly to provide funding for an agency it created to do more than transportation planning. He urged CAC members to mention the need for funding other areas if they meet with their legislators or people in leadership roles at other state agencies. Mr. Mellis asked if this means CMAP is fully funded for next year. Mr. Blankenhorn said the funding is buried in IDOT’s budget, but it’s in there. Ms. Powell said CMAP is technically not fully funded if it has programs it can’t pay for. Mr. Blankenhorn agreed and said he will no longer use the term‚ fully funded.

Buried in its budget, but they’ll be flexible! Sweet.

So, what does CMAP spend money on? Personnel, mostly — more than half of its budget goes to salaries and compensation: Just over $9.3 million is budgeted for FY2011, or about $100,000 for each of the 94 staffers listed. (I’m looking to see how lavishly compensated the top staffers are and will update you when I get the information.) If you start pumping billions of dollars into bridges and highway resurfacing, you free up a lot of money for the CMAPs and such of the world. But given the sorry record of previous “shovel ready” stimulus programs, don’t be surprised if the bridge-and-blacktop stuff is skipped altogether and the money goes straight into “community development” projects.

This is the sort of horsepucky upon which President Obama proposes to lavish another $50 billion. Stop him.

– Kevin D. Williamson is deputy managing editor of National Review.

So now that the state of New Jersey has been charged by the SEC with lying to bond investors about the (desiccated, horrific, probably insolvent) state of its pension funds, the guessing game begins: Who is next? Exchequer readers will not be surprised to learn that Illinois, the place where Barack Obama developed his famous financial acumen, is on the list of potential targets.

When Illinois passed its pension “reform” law a few months ago, it decided it could skip an additional $300 million in pension contributions this year, and many millions more in the future. This, for a pension system that already is less than half funded. The New York Times asked a few actuaries about that decision, and the bean-counters are crying foul:

Paradoxically, even though the state will make smaller contributions, the report forecasts that Illinois will get its pension funds back on track to a respectable 90 percent funding level by 2045. It projects that costs will increase slowly and an economic recovery will make cash available for the state to make the contributions it has failed to do in the past.

Whether that is even possible is contested by some actuaries who note that its family of pension funds is now only 39 percent funded. (If a company let its pension fund dwindle to that level, the federal government would probably step in, but federal officials have no authority to seize state pension funds.)

Some actuaries who have reviewed the state’s plans said that shrinking contributions would make the pension funds shakier, not stronger.

Indeed, one of them, Jeremy Gold, called Illinois’s plan “irresponsible” and said it could drive the pension funds to the brink.

Further, Mr. Gold pointed out that Illinois’s official disclosures said that its pension calculations used an actuarial method known as “projected unit credit,” but that the pension reform report used another method, which had not been approved for disclosure.

“According to Illinois statute, the prescribed contributions are determined under a method that may not be in compliance with the pertinent actuarial standards of practice,” Mr. Gold said.

The Wall Street Journal has more on state pension shenanigans here.

Hey, taxpayer: How’s your retirement fund looking these days? Anything left to put in it after the state-workers’ unions are done with you? Heck, you’re probably the kind of sucker who pays his mortgage with his own money.

The Land of Lincoln (or, if you prefer, the Origin of Obama) is going broke, in a big, big way, as I have noted earlier. The main reason is it going broke is because its public-sector caste is robbing the rest of the state blind.

Have the taxpayers finally had enough? Is nearly a half-million dollars a year for a suburban Chicago parks director too much?

Dozens of Highland Park residents confronted their Park District commissioners Thursday night, demanding that they resign for approving a series of exorbitant bonuses, salary increases and pension boosting payouts to top district executives between 2005 and 2008.

. . . former executive director Ralph Volpe, finance director Kenneth Swan and facilities director David Harris were awarded bonuses that totaled $700,000 during a four-year span.

Additional salary increases during that time have or will provide the three executives with pensions that rival or surpass their total salaries to run the district in 2005. By 2008, Volpe’s total compensation topped $435,000.

Swan’s salary, which was $124,908 in 2005, spiked to $218,372 in 2008. Harris’ pay jumped from $135,403 to $339,302 during that time.

Even though Harris resigned in 2008, Park District officials confirmed that he was paid the remaining $185,120 left on his three-year contract. The district also gave him a sport utility vehicle while his compensation without the SUV in 2008 still totaled $339,302 for eight months on the job, officials said.

As Derb says: We’re in the wrong business. Get a government job.

Highland Park has 34,000 residents. Its park system is not exactly monumental. Get this: By way of comparison, the head of the Central Park Conservancy in New York City earns only  (only!) $364,000 — and the conservancy itself raises most of the park’s $25 million annual budget. New York is not exactly famous for the austerity of its public institutions. That Central Park boss must feel like he’s getting the short end compared to that Highland Park parks tycoon.

An interesting thing happened on the way to the bond market: As I mentioned earlier, the state of Illinois went to market with $900 million in “Build America Bonds,” which are federally subsidized debt instruments intended to be used for infrastructure projects — building bridges, blacktopping roads, and the like. Which is to say, right in the middle of a fiscal meltdown, Illinois is launching a major construction campaign — basically, it’s a make-work jobs project, a chance to get a piece of all the money that the stimulus bill has left on the table and put it in the hands of politically connected union bosses. Thanks to Barack Obama, Nancy Pelosi, and Harry Reid, you and I will be covering a 35 percent federal tax credit for investors in those bonds. (Most of the investors, that is, but not all — more on that development in a second.)

Illinois, already sitting on top of $5 billion in unpaid bills and an imploding pension system, is borrowing money everywhere it can, having already tapped into the bond markets three times in recent years just to cover its unfunded retirement obligations for state employees. (Illinois state-government pension? You should have a retirement so fat.) So the chance to go even deeper into debt, with a federal subsidy to sweeten the deal, was irresistible.

Strangely, the market went crazy for those Build Americas. Illinois is already paying a premium in the debt markets; its credit was downgraded in June and its finances are just abject. But the yield demanded on those Build Americas came in 15 basis points lower than expected, meaning Illinois will pay a little less interest on that $900 million bond obligation. Why did the markets cut Illinois a break? Did they forget the Land of Lincoln is the land of Obama, Blago, and George Ryan? That it has the worst credit rating of any state in the Union? That it’s currently considered a greater default risk than Iceland and that it’s only one spot behind Iraq in the default-risk ratings? (And only three behind Pakistan!) What gives?

The most obvious explanation is that the yield on the Build Americas is nearly 7 percent, and there’s not much out there paying 7 percent right now. Investors also get a 35 percent federal tax credit on those returns, so the real rate is even higher. [See correction below.] But what about the risk? My own suspicion is that, even though the law explicitly says otherwise, there is some suspicion on the part of investors that the Obama administration would, in a crunch, stand behind those Build Americas — especially from a big state like California or from a politically sensitive state like the president’s home turf of Illinois.

Addison Wiggin has an interesting observation: 29 percent of the bids for those Build Americas came in from overseas, where investors don’t even enjoy the tax subsidy. They’re just looking for a yield and not paying much attention to the risk. Investors are liking governments: Capital inflows into municipal bonds are way up — $2.7 billion this week vs. $676 million last week, with similarly strong increases in the four-week rolling average — and junk-rated municipal bonds are popular, too. Wiggin sees a bubble and reports:

Allstate (perhaps not ironically headquartered in Illinois) has trimmed its muni holdings by 13% over the last three quarters. An insurance giant holding $20 billion in munis is seeing the same subprime-style risks we outlined in the last issue of Apogee Advisory:

• Widespread investor acceptance
• Complicated derivatives
• Intense incentive for banks to make deals
• Boneheaded assumptions of endless return on investment
• Loads of underqualified borrowers
• Stunning amounts of leverage and debt
• Social and political pressure to grow at all costs

The multi-trillion-dollar muni market remains loosely regulated, and despite high-profile mishaps in the subprime market, municipal bonds still carry overstated credit ratings from Wall Street’s finest firms.

The latest stimulus under consideration, Stimulus V, is a state-and-local bailout in disguise. If Illinois, California, and the others keep borrowing like this, they won’t even be able to disguise the coming bailout when the municipal-bond bubble bursts.

I wonder, Where will the money come from?

STIMULUS SPENDING UPDATE: $50,000 in stimulus dollars spent to put on a stage version of Gertrude Stein’s novella Brewsie and Willie. Taking the stimulus to the theater? And nothing for the critics?

UPDATED: Reader Prayin’ for Reagan (nice name)  sends in a correction, which I’m still trying to confirm. In short: There are two kinds of Build America bonds: one in which the 35 percent interest subsidy is paid directly to the bond issuers, and another in which the subsidy is passed on to the bond investors in the form of a tax credit. Either way, the investors receive a higher real yield and the issuers get the benefit of a federal subsidy to offset their risk. I thought Illinois was issuing tax-credit bonds, PfR says I’m wrong. Am checking out now, will update.

UPDATED AGAIN: Prayin’ for Reagan is indeed correct, and I am wrong.

– Kevin D. Williamson is deputy managing editor of National Review.