FISCAL MAYHEM: Illinois Has Days to Plug $13 Billion Deficit That Took Years to Produce
Bloomberg Video - Jan. 3 - William Atwood, executive director of the Illinois State Board of Investments, talks about the possibility Illinois lawmakers may approve a plan to sell $3.7 billion of bonds to fund the state's pension contributions. Illinois State Board of Investments manages about one-fifth of the pension funds.
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Illinois lawmakers will try this week to accomplish in a few days what they have been unable to do in the past two years -- resolve the state’s worst financial crisis.
The legislative session that began today as the House convened will take aim at a budget deficit of at least $13 billion, including a backlog of more than $6 billion in unpaid bills and almost $4 billion in missed payments to underfunded state pensions.
The fiscal mess is largely of the lawmakers’ own making, and failure to address the shortages threatens public schools, local governments and other public services, said Dan Hynes, the state’s outgoing comptroller.
“We’ve reached a very critical and concerning point,” Hynes said in an interview in his Chicago office, with packing boxes stacked in the corner. “What’s missing right now is a general understanding by the public of where we are, of how bad it is, and what the fallout would be if we don’t deal with it properly.”
What the public may not appreciate, Wall Street does. Illinois shares with California the lowest U.S. state credit rating from Moody’s Investors Service, which in September forecast possible “further financial deterioration.” Unlike California, Moody’s assigned Illinois a negative outlook.
Illinois’s deficit, about half its $26 billion general-fund budget, puts it among the U.S. states confronting $140 billion in shortfalls in the coming fiscal year after closing $160 billion in gaps this year, according to the Center on Budget and Policy Priorities, a Washington research group.
Hynes, 42, predicted the deficit might rise to $15 billion by midyear, and that prospect has come with a price tag. The cost of insuring Illinois debt against default rose to a five- month high last week as the state headed into this year without a plan to finance a $3.7 billion pension-fund contribution.
Insuring $10 million of Illinois debt against default cost $350,000 a year on Dec. 29, more than California’s $298,000, according to data compiled by Bloomberg. Illinois and Arizona were the weakest states in a Dec. 30 financial-strength index report from the Chicago office of BMO Capital Markets, a financial services company.
Lawmakers meeting in Springfield will consider spending cuts, an expansion of casino gambling and a proposal from Democratic Governor Pat Quinn to borrow $15 billion to pay overdue bills and help fill the budget hole. The bill before the House would create five new casinos, including one in Chicago, and authorize electronic gaming at horse-racing tracks and nine existing casinos. The measure has passed the Senate.
Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co. in Newport Beach, California, said Illinois was one of the states whose debt he would avoid. “Illinois is probably in the worst shape,” Gross said in a Dec. 28 interview on CNBC.
“The state was hoping for a quick recovery or inflation, and they didn’t get it,” Johnson said in a telephone interview. “And there was no appetite to reduce the escalating costs of spending.”
“I think they’re finally educated that all the one-time adjustments and shenanigans have been pulled, and they are now facing the fiscal abyss,” Nowlan said in a telephone interview. “But maybe I’m too hopeful.”
Continue reading at Bloomberg...
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Illinois is broke.com...
Video: Illinois Is Broke, Bankrupt, Busted
The official website
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Honest Abe would be pissed.
Jan 11, 2011 at 5:13 PM
Reader Comments (18)
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"The bill before the House would create five new casinos, including one in Chicago, and authorize electronic gaming at horse-racing tracks and nine existing casinos."
If you're not right at retirement age or already in retirement, don't count on SS or any pension being there for you. These clowns in gov't CANNOT manage it, and they've even screwed up the fund we already had by the constant raiding. SS will soon start paying out more than it takes in, and it's all downhill from there.
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@g street...was waiting for someone to comment on that...
We need money in the system, no matter how we get it. It aint nice, but were down to our last 2 cards in our hand. One could save us, one could kill us.............!
Bottom line is, were in big trouble and the choices are few.
http://letthemfail.us/archives/7130
Illinois lawmakers pass big tax hike to aid budget