Democrat Illinois Is Broke And Will Cease All Road Work On July 1

[polychronopolous]

Liberal Utopia.





Could Illinois be the first state to file for bankruptcy?

Illinois residents may feel some solidarity with the likes of Puerto Rico and Detroit.

A financial crunch is spiraling into a serious problem for Illinois lawmakers, prompting some observers to wonder if the state might make history by becoming the first to go bankrupt. At the moment, it's impossible for a state to file for bankruptcy protection, which is only afforded to counties and municipalities like Detroit.

Chapter 9 bankruptcy protection could be extended to states if Congress took up the issue, although Stanford Law School professor Michael McConnell noted in an article last year that he believed the precedents are iffy for extending the option to states. Nevertheless, Illinois is in a serious financial pickle, which is why radical options such as bankruptcy are being floated as potential solutions.

Ratings agency Moody's Investor Service earlier this month downgraded Illinois' general obligation bonds to its lowest investment grade rating, citing the state's growing pile of unpaid bills and its mounting pension deficit. Illinois, by the way, has the lowest credit rating of any state. Lower ratings mean higher borrowing costs, since lenders view such borrowers as riskier bets.

"Legislative gridlock has sidetracked efforts not only to address pension needs but also to achieve fiscal balance, allowing a backlog of bills to approach $15 billion, or about 40 percent of the state's operating budget," the agency noted.

As noted by the Fiscal Times, Illinois is the only state that's been operating without a balanced and complete budget for almost two years.

"We're like a banana republic. We can't manage our money," Gov. Bruce Rauner said after the Illinois Legislature failed to produce a full 2017 budget earlier this month.

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The situation has prompted comparisons with Puerto Rico, which earlier this year announced a historic restructuring of some of its $70 billion in debt through courts after negotiations with bondholders failed.

Like Puerto Rico, Illinois has a massive pension crisis. Its unfunded pension liability for the state's five major plans grew 25 percent alone in one year, reaching $251 billion, according to Moody's. On a per-household basis, the state's pension debt burden stands at $27,000, according to the conservative-leaning Illinois Policy Institute.

So how did the state's pensions balloon into such a crisis? First, the pension problem has been a long time in the making. The state has more than 660 government pension funds, which are sometimes called defined benefit plans because they promise workers will receive a specific pension when they retire.

But critics say some of those pensions carried overly optimistic assumptions, especially given periods of market turmoil like the global financial crisis, which ate into investment returns. The state's general assembly wasn't required to fully fund pensions, which meant tax money was spent on other priorities such as schools or infrastructure.

The result? Growing unfunded liabilities, or money promised to workers in their pensions when they retire that the state doesn't have. Other contributing factors include inadequate employer contributions and benefit increases, according to the Civic Federation.

Adding to the state's financial pain is a shrinking tax base. For the last three consecutive years, Illinois has lost residents. Its population is now at its lowest in a decade. Tepid wage growth on top of fewer residents puts a strain on the state's ability to grow its tax revenue.

It's not unprecedented for a state to default on its debt. Arkansas defaulted in 1933 as it struggled to repay debt during the the Great Depression. Spending on an ambitious road-building project and a series of natural disasters heightened the Southern state's problems.

Bankruptcy is often seen as a last-ditch effort, but it also can help struggling cities or companies reinvent themselves on a stronger financial footing. Detroit serves an example of how a reorganization can help, at least in the near-term. The city is now paying its bills and is keeping up with maintenance, although it still has a looming pension payment that could spell trouble in just a few years, according to the Detroit Free-Press.

As Michigan Treasurer Nick Khouri told the publication, "We certainly know many people were hurt during the bankruptcy, but what would have been the alternative and how would they have been hurt under the alternative?"

As for Illinois, Rauner on Thursday called state legislators to a 10-day special session starting next week to hammer out a budget deal and end an unprecedented impasse that could soon enter a third year.

The Republican announced the news in a Facebook video and statement, accusing majority Democrats of "ignoring" his recommendations.

"We have tough, urgent choices to make, and the Legislature must be present to make them," he said.

Lawmakers adjourned last month without a deal before a critical May 31 deadline, triggering the need for a three-fifths majority vote instead of a majority on a budget agreement. The new fiscal year begins July 1. Rauner has called for a special session running from June 21 to July 30.

[polychronopolous]

[Soul Crusher]

Liberal Governance = debt, bankruptcy, corruption and failure

[Soul Crusher]

Illinois Is The ‘Venezuela Of The Midwest’
Hotair ^ | 06/30/2017 | John Sexton
Posted on 6/30/2017, 4:19:36 PM by SeekAndFind

Our columnist Jazz Shaw wrote earlier in the week about the dreadful financial crisis in the state of Illinois. The deadline for a budget deal is July 1st which makes tomorrow the last day for lawmakers to try to arrive at the state’s first budget agreement in three years. From CNN Money:

After decades of historic mismanagement, Illinois is now grappling with $15 billion of unpaid bills and an unthinkable quarter-trillion dollars owed to public employees when they retire.

The budget crisis has forced Illinois to jack up property taxes so high that people are leaving in droves. Illinois may soon have to take the unprecedented step of cutting off sales of lottery tickets because the state won’t be able to pay winners.

It will get worse if lawmakers can’t reach a budget compromise by Friday. This would be the third year in a row that America’s fifth-largest state has failed to pass a constitutionally required budget…

Rather than dealing with the problem, Illinois continued to reward the state’s powerful unions with more generous benefits.

Ted Dabrowski of the Illinois Policy Institute points out that the budget crisis creates a spiral of higher taxes that push more people out of the state. That cuts state revenues and makes it harder for the state to deal with the mounting debt. From U.S. News and World Report:

Demographics aren’t exactly on the state’s side to bring in more government revenues. Temporary tax increases to help cover debt and pension payments expired at the end of 2014, and the number of workers employed throughout the state in May – contributing income taxes to the state’s coffers – was more than 125,000 smaller than it was 10 years ago.

“Illinois has shrunk three years in a row. We used to have 26 representatives in Congress. We’re predicted to have 16 in a couple of years. That’s what’s happening to the population,” says Ted Dabrowski, vice president of policy and a spokesman at the Illinois Policy Institute.
The Chicago Tribune ran an editorial today pointing out the outrageous attempt at blame-shifting being carried out by Democratic House Speaker Michael Madigan. Madigan is demanding that Republicans provide half the votes for a package of tax cuts he will propose to deal with the crisis that happened on his long watch:

Every budget that over-spent and over-borrowed since 1983, with the exception of those in 1995 and 1996, advanced through the House with Madigan’s blessing. He was speaker. During at least the last five years, House Republicans didn’t play along with the Democratic budgets.

Many of those budgets balanced, if that’s the word, thanks to borrowing, also known as running up taxpayers’ debts. Some budgets balanced because of grossly inflated tax projections. Some budgets balanced because lawmakers skipped full pension payments. Some budgets brimmed with hidden pork projects. In fact, some budgets from 2003 to 2015 when Democrats controlled all three branches of lawmaking were crafted by Madigan’s own staff. During that time, the unfunded pension liabilities in the state’s five funds more than doubled.

Concurrently, Madigan tightened House rules that allow him to dictate who runs House committees; whether committees are allowed to meet; how bills get assigned to committees; whether bills get out of committees; whether they get a vote on the House floor.

And now he wants 30 Republicans, in the minority for all but two years of his tightfisted reign, to equally share blame for this state’s financial crisis.

U.S. News notes that some have taken to calling Illinois the “Venezuela of the Midwest” and that seems like a fairly apt comparison. As in Venezuela, it was mostly left-leaning politicians who have had a supermajority in the state for many years offering generous giveaways. That combined with a refusal to make necessary adjustments when it became obvious the state had a problem has led to this looming disaster. Also as in Venezuela, leaders are trying, unfairly, to blame the crisis they created on the opposition party. There’s no quick fix for this kind of fiscal quagmire. At some point, you simply run out of other people’s money. Illinois reaches that point tomorrow.

[Thin Lizzy]

It's no accident that Trump put out this tweet at this particular time. As I said in the other thread, he's trying to calm financial markets.

Donald J. Trump @realDonaldTrump

Crime and killings in Chicago have reached such epidemic proportions that I am sending in Federal help. 1714 shootings in Chicago this year!