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In Latest Humiliation For Illinois, Fitch Downgrades State's Credit Rating To BBB+
Last week, beleaguered Illinois Comptroller Leslie Geissler Munger admitted that, thanks to the bitter budget battle going on in Springfield, the state would miss a $560 million pension payment in November.
The news came as no surprise to those who have followed the story.
A state Supreme Court decision in May effectively ruled out pension reform (it's the whole "implicit contract" argument) prompting Moody's to cut Chicago to junk and thrusting the state's financial crisis into the national spotlight.
As we noted when the news hit, despite hiring an "all star" budget guru (for $30,000 a month no less), governor Bruce Rauner has been unable to pass a budget in a timely fashion leading directly to all types of absurdities including everything from the possibility of shortened school years to lottery winners being paid in IOUs.
Now, Fitch has cut the state's GO rating citing the budget impasse. The move affects some $27 billion in debt.
Still no word on when lottery winners can trade in their Rauner bucks for real cash.
* * *
Fitch Ratings has downgraded the rating on $26.8 billion in outstanding Illinois general obligation (GO) bonds to 'BBB+' from 'A-'.
In addition, the ratings on bonds related to the state based on its appropriation have been downgraded to 'BBB' from 'BBB+' as detailed at the end of this release.
The Rating Outlook has been revised to Stable from Negative.
SECURITY
Direct general obligation, full faith and credit of the state of Illinois
KEY RATING DRIVERS
REDUCED FLEXIBILITY: The downgrade reflects the continued deterioration of the state's financial flexibility during its extended budget impasse. Illinois's inability to balance its operations, eliminate accumulated liabilities, and grow reserves during a period of economic expansion leaves it far more vulnerable to the next economic downturn.
ONGOING BUDGET GAPS: After four years of nominally balanced operations that benefitted from temporary tax increases, the fiscal 2015 budget was only balanced through extensive one-time action and a budget has not been enacted for fiscal 2016, which began on July 1. The state continues to spend in most areas at the fiscal 2015 rate, which is expected to lead to a sizeable deficit. As was the case during the most recent recession, this deficit spending is likely to be addressed by deferring state payments and increasing accumulated liabilities.
LONG TERM LIABILITIES HIGH: The state's debt burden is above average and unfunded pension liabilities are exceptionally high. The state has limited flexibility with regard to pension obligations following the May 2015 Illinois Supreme Court decision that found the 2013 pension reform unconstitutional. Pensions remain an acute pressure on the state's fiscal operations.
ECONOMY A CREDIT STRENGTH BUT RECOVERY WEAK: The state benefits from a large, diverse economy centered on the Chicago metropolitan area, which is the nation's third largest and is a nationally important business and transportation center. Economic growth through the current expansion has lagged that of the U.S. as a whole.
RATING SENSITIVITIES
The Stable Outlook incorporates the expectation that the state of Illinois will use one-time solutions to nominally balance the fiscal 2016 budget, but will not achieve more permanent, structural solutions in a time frame that will have a significant impact on fiscal 2016.
Failure to enact measures that lead to ongoing budget balance beyond fiscal 2016 could lead to negative rating action.
Successful implementation of measures to enact a structurally balanced budget and reduce accumulated budget liabilities may lead to positive rating action.
CREDIT PROFILE
The downgrade on the GO bonds of the state of Illinois to 'BBB+' from 'A-' reflects the deterioration of the state's financial flexibility as its budget stalemate continues deep into the current fiscal year. With the national economic expansion now extending into a sixth year, Illinois has failed to capitalize on economic growth to restore flexibility utilized during the last recession or to find a solution to its chronic mismatch of revenues and expenditures. Once again, the state has displayed an unwillingness to address numerous fiscal challenges, which are now again increasing in magnitude as a result.
Temporary increases in personal and corporate income tax rates in place for four years, from January 1, 2011 through December 31, 2014, closed or partially closed the budget gap across five fiscal years. However, with their expiration, and the failure to enact a spending plan within expected revenues, the budget gap has ballooned. As a result, the state finds itself with a current operating deficit, structural budget deficit, cash crunch that is now causing a delay in pension system contributions, and accumulation of accounts payable that approaches its highest level at the depth of the recession. As the fiscal year progresses, fewer options remain for closing the gap on a current year basis, pushing the potential solutions into fiscal 2017.
ONE-TIME SOLUTIONS CLOSED 2015 GAP
The current budget stalemate follows a fiscal 2015 when a significant gap was closed primarily through the use of one-time fund sweeps rather than on-going spending or revenue action. The enacted budget for fiscal 2015 relied on approximately $2 billion in one-time revenues to achieve balance, given the anticipated expiration of the temporary taxes half-way through the fiscal year. These included interfund borrowing, use of prior year surplus to prepay fiscal 2015 Medicaid expenses, underfunding of specific budget line-items, and an increase in anticipated accounts payable.
Upon taking office in January 2015, and finding a budget gap that was larger than expected, the current administration proposed, and the legislature enacted, an additional $1.3 billion in fund sweeps and approximately $300 million in budget reductions. However, the lack of a structural solution in fiscal 2015 left the state in a weak fiscal position in developing the fiscal 2016 budget.
FISCAL 2016 SPENDING SUBSTANTIALLY ABOVE EXPECTED REVENUES
The governor and state legislature have not come to agreement on a spending and revenue plan for the current fiscal year, which began July 1, 2015, for which there is a large projected deficit that reflects the full-year impact of the temporary tax expirations.
Despite the absence of an enacted budget, due to continuing and permanent appropriations, court orders and consent decrees, and an enacted appropriation for schools, the state is spending approximately 85% of its budget at the fiscal 2015 enacted rate during the budget impasse. Continuing to spend at this rate, without further appropriations or other changes, is forecast to lead to an annual operating deficit of approximately $2.1 billion, or 6.8% of forecast revenues. This deficit would most likely be addressed by an increase to the accumulated accounts payable balance.
Fitch believes that this deficit figure is likely to be higher, as it incorporates the state withholding $5.9 billion in spending for universities, the group health insurance program, and a variety of other programs, some of which would ultimately have to be covered with state revenue. The state notes that it has already taken approximately $1 billion in actions to reduce spending and reallocate funds to the general fund.
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Bullshit...alls unicorn shitting paradise...strictest gun laws in the nation make everythign all good...right?
Now...who the fuck gets a margin call for their newly subprime debt.
RIPS
Stop paying for people's health care ($28,000,000,000 / yr).
Make them buy Obamacare.
They voted for it.
http://www.usgovernmentspending.com/piechart_2015_IL_state
Kinda BS to lay the blame at the feet of Rauner (Rauner bucks) when the de facto governor is that stroke Madigan.
My personal FICO is 847.
Interesting to think that my credit is better than the state of Illinois...
why bust on Rauner...?
guy just got there 6 months ago....and was voted in specifically to fix the insanity.
Ah, Illinoise - The Land of Lincoln.
We screwed some folks.
The Illinois democrat machine always finds a republican dumb enough to be the fall guy. When does this one go to prison?
Before Corzine.
They voted for free stuff and to show their neighbours they where better then them by not being a open racist.
And they touht the free stuff was no strings attached....
2015... going 2016...
1. America is now the most racist country in the world.
2. America is the most violent country in the world
3. America is a fascist communist police state
Remember guys, when America goes down, the number of enemies who will want a piece of beating the shit out of it will be a numerous.
Don't be surprised and be the first to run when it happens.
Merika -
Leading the world in innovation... lol.
Math's a bitch.
Illinois must honor its pension obligations regardless of the costs. Just like Greece honor its debt obligations regardless of the costs.
So if Greece has to go bust to save German banks, so too must Illinois go bust to save pensioners.
Pensions should be cut only after welfare, food stamps, public housing, public transportation and all other GIMMEDAT PROGRAMS have been eliminated.
BS! How many actual taxpayers were at the table during those negotiations? Show me the signatures of actual taxpayers on those contracts. Fuck you, the contracts aren't worth the paper they were printed on.
That's the whole point. An agreement cannot be valid when the party picking up the tab isn't properly represented.
the Federal Government (who can print money) didnt "honor" bondholders when they took over GM.
How many citizen/taxpayers are at the table when any contract by the state is negotiated and signed? Kinda puts all state contracts up in the air. You built a road, no payment for you, you did not get a majority of taxpayers to sit at the table and cosign the contract.
...but Chicago would turn into a smoldering ruin if they eliminated all of the "GIMMEDAT PROGRAMS"
Yeah, but it would be fun to watch all of the parasites fight each other for the crumbs.
So?
Pensions are a form of welfare.
except one has to actually WORK....consistently, for 5 years to qualify...
Um...being employed and working aren't synonymous. These are public employees we're talking about here. Did you mean to say one actually has to "work"....?
Joke: How does a state worker wink? Opens one eye.
PUBLIC pensions....
Talk to the teachers or or firemen making over $100K/year on their pensions and everything WILL be sacrificed so they will get paid.
They'll tell you it's in the Illinois constitution. They'll laugh at you when you you tell them that Illinois can't afford the outrageous pensions anymore.
Greece/ Peurto Rico was the same story. Early and generous retirement. Jobs guaranteed by the constitution. Not enough money to pay for it. The land of lincoln can impose some austerity on themselves, or the market will do it for them.
In the mean time their bond ratings are going in the dumpster, and their interest rates will go hockey stick.
The liberal wet dream always ends the same way...
It's only fair to confiscate everything from those profiteers in Illinois.
Those fema camps will finally be put to good use.
And to be honest, the best thing to do is confiscate the land from the squaters who say they live there and sell it for a penny on the dollar to our Arabian and Chinese friends.
America needs you guys! Time to beat the living daylihts of those terrorists who occupy China's new free trade zone!!
Send in the patriots to clean house!
Is this what the handle part of the hockey stick looks like?
Fire government employees. Bunchezzzz!
Let's see: what can we use to distract people from our piss poor management?
I know! Gun Control!
Pay them with Official Illinois Script.
Eye oh you!
If it's good enough for lottery winners. After all, what is a government jerb, if not hitting the lottery!
Most are True Believers anyhow. I'm sure they think the Great Pumpkin or some such shit will come and spray money to fix it all. I mean, it is a bottomless pit, right?
It's for the children.
but but but Socialism is the answer
"Fitch Downgrades Debt Rating From A- To BBB+"
And they're being kind.
that is what i was going to say
First world economy, LMAO. CCC is not far off..
The Land of Lincoln is stinkin'
No way the State Income Tax stays where it's at, teachers getting fired to.
Good! Eat shit and die .gov parasites. Welcome to the blood bath that the private sector has been expierencing for the last 8 years.
"Welcome to the blood bath that the private sector has been expierencing for the last 8 years."
They'll tell you that they have pity for the private sector but they deserve the $100K plus/year in pensions their getting.
No! Their attitude is " fuck YOU, pay ME"
1st and the 15th, motherfucker. Like clockwork.
til it's not,
Damn, I hope I live to see it. It's like training to be a soldier all your life, and no war comes!
I cannot fucking wait to see government parasites go through what we have had to endure.
I guess Illinois needs to start looking around for any neat shit - collectibles, cars, property, etc it can sell off to raise some cash. Maybe hold a nice side walk sale or something. Cookie anyone?
How about a state lottery?
Yeah, that's the ticket. Too bad if you win though, 'cause that IOU isn't worth the toner it's printed with. But, the teacher's union and the "refugees/illegals" get plenty of money flowing their way, since they're all undocumented Democrats. Look up Boss Tweed. Chicago politics is how the whole state rolls now. My advice, if you're not a Democrat, get the fuck out while you can.
It shows what short term simple minded thinkers they are, doesn't it? Killing off a free money scam that prints cash like a press with that IOU idea.
Hell, buying lotto tickets is the ONLY way some people pay into the system, period.
+ 1000 NB. How much of an idiot do you need to be, to fuck up the lottery scam?
Oh how much you wanna bet both detroit and Illinois bundled their worthless municipal bond paper and sold it overseas?
So, what.
SO, FUCKING WHAT! feel me, Fitch?
People gonna flow out of Illinois like Syria. Border states best get an early start on fences to prevent the feed and need.
Won't be long before states require proof of supporting yourself and family before allowing residency.
"People gonna flow out of Illinois"
Change that to productive people. And also businesses.
The flight to border states has been going on for years already. IN is taking a lot of business, offering all sorts of TIFs, statements, grants, exemptions, etc. same with WI, but their income and property taxes are worse than IL. IA is good too, but nothing there in infrastructure density like Chicago. MI is trying to attract business too. Downstate is mostly Ag anyhow, and they're sick of supporting Chicago. Illinois is a red state, with a big blue/black eye/cesspool known as Chicago that controls the state. It can't survive without the welfare of the rest of the state.
A few tactical neutron bombs could solve the surplus problem. In the end, if we let taxpayers vote and make it clear that their day of reconning can be delayed by a few years if those EI's or Evil Illinoisians are dealth with!
They had it comming right? The people wanted their politicians to blow the money away no?
So in a way... they're not really Americans, just no good aliens terrorist who hate the rest of America for their freedom and wealth!
Illinois needs a wall. And snipers on that wall... a lot of snipers... and drones! I've heard they have weddings and other terrorist type of activities over there!
A FIRST STRIKE IS NEEDED!!!!
BBB+ ? Come on have the balls to call it what it is...Pure junk!
BBB+ lottery tickets. Who would have thought?
LOL...no shit. It's like proudly showing your parents the F+ you got on your report card.
pathetic...
BBBBBBB------ BS like everyone gets a trophy. Thats like I didn't get a C in Latin, I got a BBBBB-----.
Didn't Washington default in the 90's?
Where'nt the run by banks during that period?
Interesting...
America's first greek state.
PUNISH THEM BECAUSE THEY'RE NOT US!!!
1 down........49 states to follow !! Blame it on.......Debt. Thank Greenspan, Bernanke and Yellen for this.
So no lottery payoffs. And now no pensions paid. You have been Rahmed !!!!!
Gov. Rauner asked the House and Senate to pass a balanced budget; If they wanted to give out free .gov cheese, they had to show how to pay for it.
The slack-jawed Reps just looked at him with glazed eyes, like he was speaking in a foreign tongue. The request was so against the culture of Springfield, they could not comprehend.
When Quinn was there they would always raise taxes, they would say it's for the children.
The schools are so flooded with money they are looking for new ways to spend it. Giving back money is not an option, they have to spend it.
That's correct. They will spend it or they will "lose it". Sure. WTF?
Thanks to Madigan and the Democrats that have controlled Illinois for decades.
Madigan and Cullerton are the real problems.
On many R&B radio stations the Democrats are trying to blame the governor.
Illinois just needs a black governor and they can get on with their plans to become the next failed state. Chicago is certainly coming along nicely.
Rumor has it a Nobel winner will become available soon ...
If something is falling, push it. It's the humane thing to do.
This is exactly what should have happened. After all, the people voted for it.
more like a black proxy governor to blame it on as usual at the end of the race..like it all happened overnight
do you see what happens larry?
Wow..... this is what "things" must look like when the S starts to HTF? Taking from the lottery just seems so bad? It has to be bad to take the lottery money? I cant even trust betting a few bucks in that state, thats bad. Its certainly not a sign of robust growth? or is it just me?
No, it's not just you.
ONE-TIME SOLUTIONS CLOSED 2015 GAP
The current budget stalemate follows a fiscal 2015 when a significant gap was closed primarily through the use of one-time fund sweeps rather than on-going spending or revenue action. The enacted budget for fiscal 2015 relied on approximately $2 billion in one-time revenues to achieve balance, given the anticipated expiration of the temporary taxes half-way through the fiscal year. These included interfund borrowing, use of prior year surplus to prepay fiscal 2015 Medicaid expenses, underfunding of specific budget line-items, and an increase in anticipated accounts payable.
They smashed the piggy bank last year.
Was this rating report for the state of Illinois or the United States of America? 'Cause it pretty accurately described the federal government situation.
Rauner took office to protect the interest of the bond holders. By downgrading the
bonds the bond holders get more interest. You know he will protect the bonds and the holders
and get them paid no matter what so whats to worry, if the fat cats get paid all is good.
With the people running Springfield it's really been the state of Chicago instead of Illinois.
Chicago politicians have been running Illinois for years.
In fact prior to Rauner, both Quinn an Blago lived in Chicago.
For the most part Madigan ran Illinois with his backroom public union deals.
That's why they called the previous governor "3 County Quinn" (won the governorship on only 3 out of 102 counties). Actually if you get out of the big cities, Illinois is pretty darn conservative - way more so than Wisconsin, Iowa, or Minnesota.
Illinois is a microcosm of our country: the whole state gets tarred and feathered by the deeds of faraway Chicago . . .
Il is a border port invasion state, we should exclude all foreign nationals from us citizenship birthrights as well as voter apportionment rights in border port states.
Fuck invasion and the invasion vote.
Lololol
I can't think of one significant problem in IL that's been caused by immigrants. Not one...and I've lived here 43 of my 44 years on this earth.
No...locally grown"progressives" and state union workers have done all the damage. No help needed.
GIMMEDAT Programs." Fucking LOL!
Obuma where are you?Everyone voted for you expecting so much change.
This is the result of the grand socialist/marxist utopia. Now Illinois, eat your freakin peas.
I don't blame the current Governor, he's the one that's actually been trying to reign this nonsense in.
I blame the progressives that have dominated deep blue Illinois that were buying votes from the public sector unions.
To the informed in Illinois this is no surprise.
We have been talking about this for decades as the democrats ran the state into the ground and idiots like Obama kept promising more free stuff to the animals. The food has run out and now they just kill each other in Chicago and really, no one cares.
The good and decent hard working in Illinois just leave if at all possible which is why Chicago and the State as a whole keep bleeding population.
Tennesse, Indiana, Texas and many others are the recipients of the intellignet and former IL residents.
One site has been spot on about this since the day they came online.
www.truthinaccounting.org
This has nothing to do with the Governor. It has everything to do with Democrats voting huge pay and pension plans to state employees and teachers. The state is bankrupt.
Humiliation for Illinois?
What the fuck about the other 49 states that have to share a country with that wart of a state?
Oh yeah, there's California too...
Hummm.... Land Of O'Fuckhead and his dick sucking Emanuel. Coincidence?...I think not. It's the fertile grounds of their futile fucking plan. WAKE UP SHEEPLE!!!
Homeowners are gonna get fucked.
Next downgrade will read as follows...
The downgrade on the GO bonds of the state of Illinois to FL reflects the deterioration of the state's financial flexibility as its budget stalemate continues deep into the current fiscal year.
Folks... FL is as low as can go in financial ratings... FL stand for "fu*king low"..
California is competing with IL in corruption.
I should take serious notice to these ratings idiots?? After the sub prime's fiasco??
https://en.wikipedia.org/wiki/Credit_rating_agencies_and_the_subprime_cr...
Uhuh. Do you REALLY think ZH readers are that STUPID??