quote:

Originally posted by feersum dreadnaught:

Don't Forget:

Despite budget deal, Illinois finances still in death spiral
By Rick Moran

After 15 Republicans joined Democrats in overriding Governor Bruce Rauner's veto of the state's first budget deal in three years, it was assumed by uninformed observers that the worst of the state's fiscal crisis was behind it.

Nothing could be farther from the truth.

In fact, the budget deal did not address the more than $15 billion in unpaid bills that have accrued over the last several years, nor did the agreement deal with the massive unfunded pension liability that "officially" stands at $130 billion.

The state's bond rating could still fall to junk status. Even if it doesn't, Illinois cannot beg, borrow, or steal enough cash to even begin to cover those obligations.

Reuters:

The $36 billion spending plan relies on a $5 billion tax increase that permanently hikes the flat personal income tax rate to 4.95 percent, up 32 percent from its prior 3.75 percent rate.

To address the state's nearly $15 billion in unpaid bills, Illinois depends heavily on borrowing. Lawmakers approved $6 billion of 12-year bonds to raise money for repayments. But State Representative Greg Harris, the House Democrats' point person on the budget, has acknowledged there is only enough revenue to support half of that borrowing amount.

Illinois will also borrow up to $1.2 billion from various state accounts that have accumulated cash for specific purposes, while "sweeping" cash from other accounts – a government version of looking under couch cushions that is expected to yield $300 million.

Illinois' $130 billion pension liability is one of the largest in the nation, and the new budget takes only small steps to address the structural underfunding of Illinois' five retirement systems.

The new law gives the state five years to phase in changes retroactive to fiscal 2014 in actuarial or investment return assumptions made by the pension systems for an estimated savings of $892.1 million.

Seemingly small changes in projected investment results can have significant impact on a pension fund's actuarial calculations. Last year, when the Illinois Teachers' Retirement System reduced its earnings assumption to 7 percent from 7.5 percent, the change caused a $660 million spike in the state's fiscal 2018 contribution.

The new budget attributes $500 million in savings to the creation of a new tier of pension beneficiaries. But that tier applies largely to newly hired employees, raising questions about how the state expects to book that savings in the current fiscal year.

That estimate was lifted straight from the proposed budget presented by Rauner earlier this year. The projection has not been independently verified by legislative leaders, and Rauner's office has not responded to requests for an explanation of how the estimate was calculated.

The state is talking about savings of a few hundred million dollars while the pension system needs tens of billions of dollars to return to fiscal health. There is an air of unreality surrounding the entire debate, as if moving a few decimal points around will address the problem. Politicians won't face the facts, because if they did, it would open a chasm beneath their feet that could be filled only by massively increasing taxes.

The Illinois constitution guarantees those pension payments regardless of how much money the state has. Rauner tried changing the pension system, but the courts – and the unions – shot him down. So, during the next economic downturn, those revenue projections will fall dramatically, forcing the state to pay a lot more into the system. Since the prospect of borrowing to make up the pension deficit isn't realistic, the only way the state can meet its constitutional obligation is raise the state income tax to unprecedented levels. This is the ticking pension bomb that looms over everything the legislature does. And no one has any idea what to do about it.

Few Democrats or Republicans in the state are talking out loud about a federal bailout. They are still pretending they can solve their fiscal problems without going hat in hand to Washington. But, if anything, the idea of a federal bailout of the state's finances is even more unrealistic than the idea they can borrow their way to solvency.

This leaves the prospect of the biggest, the messiest, the most painful bankruptcy in U.S. history. The politicians will play out the string, kicking the can down the road as far as they can to avoid facing the unthinkable. But this is only going to make things worse in the long run.

Eventually, they're going to run out of road.

http://www.americanthinker.com...in_death_spiral.html

Illinois’ strategy for digging out of debt: Borrowing more money!

Business 07/13/2017

SPRINGFIELD — Illinois lawmakers who recently ended the longest fiscal standoff of any state since the Great Depression are counting on an ironic strategy to dig out of mountains of debt: borrowing even more money.

It’s an unorthodox approach, considering deficit spending largely created the mess, and Illinois’ worst-in-the-nation credit rating makes borrowing inordinately expensive. However, supporters say it’s the best way to begin to erase $14.6 billion in overdue payments to vendors and service providers.

Bills that are 90 or more days past due incur 12 percent in late-payment fees. By paying off a chunk of that at a time with the sale of bond proceeds, the state could cut that rate in half.

“We are being smothered by our liability and our indebtedness, not only in the state and trying to deal with the budget, but with the people we owe money,” said Democratic Sen. Donne Trotter, of Chicago, the assistant majority leader who sponsored the measure.

Trotter said it currently takes Illinois about 200 days to pay a bill, but his plan would reduce that to as few as 60 days.

The Democratic-controlled General Assembly endorsed the budget — and a $6 billion borrowing scheme — over Republican Gov. Bruce Rauner’s vetoes. However, it’s unclear whether Rauner will actually use the borrowing authority given to him. He has said nothing about it in the 10 days since the budget was passed, and his spokeswoman, Eleni Demertzis, declined to comment on Thursday.

It’s typically advisable for governments to borrow for long-term construction projects only. But analysts say for Illinois, it’s a sound way to get ahead of its crisis instead of letting it fester.

“Illinois’ problems are entirely a matter of politics and willingness,” said Matt Fabian, a partner at Municipal Market Analytics. “The state has had the ability to fix its budget and remedy its long-term liability. It’s just chosen not to for all these years.”

Creditors don’t object.

“If the state came to me and said, ‘We’ll pay you all the back pay at one time, but you won’t get the [late-payment] interest, I’d be happy with that,” said Ken White, owner of Above and Beyond Cleaning Specialists, which maintains several downtown Springfield Capitol complex buildings and is owed up to $200,000.

Bond-rating houses have reacted favorably to Illinois’ financial plan, if not to the idea of borrowing specifically. Three major agencies threatened a downgrade of Illinois’ creditworthiness to “junk” status without a swift remedy, but have published positive messages since the July 6 budget action.

While not unprecedented, borrowing to pay bills is “not a good sign of fiscal stability,” said Alan Schankel, municipal bond strategist for Janney Capital Markets. Schankel noted that Connecticut borrowed to bridge a deficit several years ago. But Connecticut’s credit rating, like Illinois’, is in the tank.

A state such as Georgia, with gold-standard credit, could borrow at about 3.5 percent interest, Fabian said.

Lynnae Kapp, senior revenue and bond analyst for the Commission on Government Forecasting and Accountability, the Illinois Legislature’s budget office, said Illinois would be forced to pay as much as $2.5 billion in interest on a $6 billion loan — even if it’s paid off quickly.

Historically, debt from a state such as Illinois has been an attractive investment because, with its power to take whatever means necessary to pay off its bills, the state is considered immune from default. Detroit’s bankruptcy and Puerto Rico’s $70 billion debt-restructuring plan have given the market pause.

“You don’t want to finance deficits with borrowing, but sometimes you have to,” Schankel said. “The deeper into the hole you get the harder it is to dig out of the hole. … Illinois has got a lot going for it, but the willingness to get things done is hard to see.”

http://chicago.suntimes.com/ne...debt-taking-on-more/

The hole gets deeper and deeper. It is only a matter of time before the sides cave in.

quote:

Bills that are 90 or more days past due incur 12 percent in late-payment fees. By paying off a chunk of that at a time with the sale of bond proceeds, the state could cut that rate in half.

It does make logical sense.
If you are paying 18% interest on your credit card, you refinance your house and pay off the credit card. Of course, if you ring up new credit card charges you have only dug a deeper hole.

The Tiny town gas station is offering the power ball lottery again ,
when I asked if he ( the station owner) guaranteed payment,
he giggled.

and he never giggles

The woman who sold me some tickets shared a laugh with me over that, too.

Ultimately, I'm sure they'll pay, but it will be like pulling teeth. It will be fun to watch the continued shaming of this rotten-to-the-core shithole of a state.

I don't know why anyone would do business with Illinois at this point unless they paid cash upfront.

A few years ago I went into a currency exchange wanting to cash an overtime check. The clerk refused to cash it. When I pointed out that it was a City of Chicago check, she said she knew and that's why she wasn't going to cash it

Bulldog, I know you've devoted your career to Chicago, and in all sincerity, I hope you can collect your pension when you retire. You and CPD SIG (can't remember our third CPD member at the moment, sorry!) deserve it since you earned it.

Chicago teachers and politicians I have no sympathy for, though.

quote:

The Illinois constitution guarantees those pension payments regardless of how much money the state has.

This makes no sense at all and is a huge part of the problem. If the money is not there, then the money is not there.

quote:

Originally posted by grumpy1:

quote:

The Illinois constitution guarantees those pension payments regardless of how much money the state has.

This makes no sense at all and is a huge part of the problem. If the money is not there, then the money is not there.

Of course it makes no sense but it's in there and the judges will keep saying so until someone tells the judge " The money's not there , why don't you write the check?"

It'll be a version of:
"He made his ruling now let him enforce it!"

Klusk newtosig. Thanks

^^^^^
Thanks! My apologies for not remembering him.

quote:

Originally posted by grumpy1:

quote:

The Illinois constitution guarantees those pension payments regardless of how much money the state has.

This makes no sense at all and is a huge part of the problem. If the money is not there, then the money is not there.

Just wait until the judge doesn't get paid because that money had to go pay off the pensions.

quote:

Originally posted by Bulldog7972:
Klusk newtosig. Thanks

Didn't Klusk recently have some surgery? Hope all's well.

quote:

Originally posted by chellim1:

quote:

Bills that are 90 or more days past due incur 12 percent in late-payment fees. By paying off a chunk of that at a time with the sale of bond proceeds, the state could cut that rate in half.

It does make logical sense.
If you are paying 18% interest on your credit card, you refinance your house and pay off the credit card. Of course, if you ring up new credit card charges you have only dug a deeper hole.

The difference is that they are not refinancing the house and paying off the credit card.

They are just borrowing more money to pay off part of the credit card that is past due.

quote:

Originally posted by 6guns:

quote:

Originally posted by Bulldog7972:
Klusk newtosig. Thanks

Didn't Klusk recently have some surgery? Hope all's well.

Recovered and doing well. As Bulldog, CPDSIG and newtosig can attest to, we have been very busy. Most of my days off have been cancelled with either fests, protests, beach details or just filling in where manpower fall short. I used to like summers, but I pray for winter's icy cold grip.

As far as Illinois and Chicago's debt goes, it is unfortunate that most of us will be paying the price for the politicians inability to reason with common sense. When in a hole, Stop Digging. Stop spending money for things we can't afford or need. If the state was run with the collective mindset of this forum, we would be solvent and profitable. But as it stands, I will have to leave this place where I have spent most of my life, all because I can't afford to live here.

re: armored's post on page 4

If anything, Iowa would overwhelmingly vote to go in the exact
opposite direction.

almost no one in Iowa wants to get anywhere near cook county , IL.

they would go across the Missouri river in too Nebraska, instead of crossing the Mississippi in to Illinois.

best answer give cook county to Canada , let them have the headache and sorrow

Jeez Louise.


Why Illinois Is In Trouble - 63,000 Public Employees With $100,000+ Salaries Cost Taxpayers $10B

https://www.forbes.com/sites/a...rs-10b/#44c27c441141


Here are a few examples of what you’ll uncover:

20,295 teachers and school administrators – including superintendents Joyce Carmine ($398,229) at Park Forest School District 63, Troy Paraday ($384,138) at Calumet City School District 155, and Jon Nebor ($377,409) at Indian Springs School District 109. Four of the top five salaries are in the south suburbs – not the affluent north shore.

10,676 rank-and-file workers and managers in Chicago – including $216,200 for embattled Mayor Rahm Emanuel (D) and $400,000 for Ginger Evans, Commissioner of Aviation – including a $100,000 bonus. Timothy Walter, a deputy police chief, made $240,917 – that’s $146,860 in overtime on top of his $94,056 base salary. Ramona Perkins, a police communications operator, pulled down $121,318 in overtime while making a $196,726!

9,567 college and university employees – including the southern Illinois junior college power couple Dale Chapman ($465,420) and Linda Terrill Chapman ($217,290). The pair combined for a $682,000 income at Lewis and Clark Community College. Fady Toufic Charbel ($1.58 million) and Konstantin Slavin ($1.04 million) are million-dollar doctors at the University of Illinois at Chicago.

8,640 State of Illinois employees – including $258,070 for Marian Frances Cook, a “contractual worker” at the newly created Dept. of Innovation and Technology. Further, there are the “barber” and “teacher of barbering” positions in the state prisons making $100,000+. Loreatha Coleman made $254,781 as a nurse at the Dept. of Corrections.

8,817 small town city and village employees – including 84 municipal managers out-earning every U.S. governor at $180,000. These managers include Lawrence Hileman (Glenview – $297,988); Michael Ellis (Grayslake – $264,486); Robert Kiely (Lake Forest – $255,247); Kevin Bowens (Libertyville – $254,428); and Richard Nahrstadt (Northbrook – $250,248).

In total, there is roughly $12 billion in cash compensation flowing to six-figure government workers when counting the 9,031 federal employees based in Illinois.