Illinois Policymaker: "We Are About To Become The Financial Deadbeat Of The Nation"

Tyler Durden's picture

One week ago, Illinois state comptroller, Susana Mendoza, gave a detailed explanation in her letter to Gov. Rauner and members of the state legislature - two parties that have been locked in a nearly three year long confrontation, preventing them from agreeing on a state budget - explaining why Illinois was on the verge of total collapse.

"The state can no longer function without a responsible and complete budget without severely impacting our core obligations and decimating services to the state's most in-need citizens," Mendoza wrote. "We must put our fiscal house in order. It is already too late. Action is needed now." And unveiling the most dire language yet, in her letter Mendoza said "we are now reaching a new phase of crisis" perhaps in an attempt to prompt the Democrats and Republicans to sit down and come up with a compromise

Since then, despite all parties' "best efforts" (actually, there have been no real efforts whatsoever)  to reach a compromise after two years of failures, nothing has really changed, with the only difference that Illinois is now just three days away from financial armageddon, because come July 1 and the state has no budget for its third fiscal year, a downgrade of the state to junk - for the first time in US history - is assured, unleashing interest rate hell for future debt issues, and ultimately, bankruptcy.

Those are not our words, but those of Ted Dabrowski, vice president of policy at the Illinois Policy Institute, who said that the Illinois budget crisis has become so dire that the state is in danger of entering a financial "death spiral," as a result of the imminent downgrade to "junk" status. Doing so would increase the cost of borrowing, worsening the deficit and making it even harder for taxpayers to dig out of the hole.

We’re in a death spiral—Illinois has the worst pension crisis in the nation and needs the boldest reforms,” Ted Dabrowski, Illinois Policy Institute’s vice president of policy, told Fox News. “There is no doubt that junk bond rating is on its way.”

As we first reported a month ago, S&P first warned it would most likely lower Illinois' credit rating to below investment grade if the state fails to adopt a budget for a third straight year.  Lawmakers are now in a special session in an effort to break the budget impasse, prodded by Republican Gov. Bruce Rauner... who has referred to his state as a “banana republic.”

There's ample reason for such a fruity comparison: the state faces over $250 billion in unfunded pension obligations, a $7 billion budget deficit, a backlog of over $15 billion in unpaid bills, and - drumroll - $800 million just in interest on unpaid bills.

A downgrade to “junk” status would immediately spike the cost of borrowing for all projects, including critical infrastructure, as well as refinancing existing debt. Which for a state in the "ponzi finance" stage of the Minsky curve, is critical.

Dabrowski said passing a budget would “stave off” the junk rating, but the pension crisis in the state could only be remedied by “bold reforms,” such as a transition from pensions to 401(k) plans. He said the state risks becoming the “financial deadbeat of the nation.”

With just over 72 hours remaining, some lawmakers still see hope for a deal.

Senate President John J. Cullerton, a Democrat, “remains optimistic” the legislature can reach a balanced budget, as there is a “shared sense of urgency” among the legislative leaders, according to his spokesman. “For a state with history of dreaming big and building big, a downgrade to junk status would be an embarrassing black mark on our standing and signal an unacceptable lack of confidence from the financial sector in our state,” Cullerton’s spokesman, John Patterson, told Fox News.

Rauner claims that the Republican plan for a budget could fix the state’s financial situation and called it a “true compromise.”

The plan incorporates reforms like property tax relief, term limits and spending caps, which have caused an “ongoing confrontation” between him and Illinois’ Democratic House Speaker Michael Madigan, one Republican leader told Fox News, adding that the two have been in a “stalemate” since Rauner took office two years ago.

 

“Gov. Rauner inherited this financial mess when he took office, and his proposals have been met by resentment from the speaker,” Deputy House Republican Leader Dan Brady said. Brady added, “we are asking that the speaker allow for a date and a vote before June 30.”

 

When asked whether the legislature would be able to pass a budget package by the June 30 deadline, and about the likelihood of the change in rating, Madigan’s spokesman Steve Brown did not speculate. “I don’t do predictions—there are numerous discussions around the State House on an effort to bring a balanced budget and see where there might be support for that,” Brown told Fox News. “I’m not in finance.”

And if the budget fails, Illinois will — as we reported before — lose the lottery. The state lotto requires a payment from the legislature each year. The current appropriation expires June 30, meaning no authority to pay prizes. In anticipation of the budget deadlock, the state already is planning to halt Powerball and Mega Millions sales.

“It is disappointing that the legislature’s inability to pass a budget has led to this development and will result in Illinois lottery players being denied the opportunity to play these popular games,” Illinois Lottery Acting Director Greg Smith told Fox News.

Of course, if Illinois becomes the first US state ever downgraded to junk, and the yields on its obligations explode forcing the 'deadbeat" state to collapse into a "death spiral",

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stinkhammer's picture

fuck it dude, let's go bowling  nothing is fucked here

jcaz's picture

Hey, way to figure it out, Mendoza- what was your first clue?

Senate President John J. Cullerton, a Democrat, “remains optimistic” the legislature can reach a balanced budget, as there is a “shared sense of urgency” among the legislative leaders, according to his spokesman. “For a state with history of dreaming big and building big, a downgrade to junk status would be an embarrassing black mark on our standing and signal an unacceptable lack of confidence from the financial sector in our state,” 

Pure gold right there- the dude is still campaigning as the Titanic goes down....

jackstraw001's picture

New meaning for "Mendoza Line".

sixsigma cygnusatratus's picture

"We are about to become the financial deadbeat of the Nation."

Obama, the senator from Illinois, and Hillary who is from Illinois would have done the same thing to the entire country.  Maybe it's just a coincidence...

JamesBond's picture

Chickenshit uses a spokesman to give his speeches.  Guess he doesn't want his face associated with the mess he helped create.  

 

jb

eforce's picture

Build a wall around them Doomsday style, it will come down when the debt comes down.

peippe's picture

it's a baseball reference 

yogibear's picture

Saturday 7/1/2017 the democrats slap a beverage tax in Crook County and Chicago.

All the beverage companies should move out of the county.

The tax won't be enough. They will put tolls on every road leading into the illegal sanctuary city Chitcago.

Chicago is the national icon for liberals.

 

 

Antifaschistische's picture

start with 5% across the board pay cuts, including retirees, and future pension benefits. ( yes, I realize that will never happen until it HAS to happen).   

CaptainObvious's picture

Start with firing 50% of Illinois government workers and closing all agencies that duplicate work. (Shootcago has like six taxing authorities for road work, for fuck's sake!).  Then you can do across the board pay cuts.  And write a constitutional amendment to change the ridiculous pension law.  Do these things now, and there's a very, very slim chance Illinois doesn't go bankrupt.  Don't do these things now, and prepare for the largest exodus of productive taxpayers the nation has ever seen.

mybigguns's picture

Ammendments to the Illinois constitution are a joke! We already have a balanced budget ammendment in Illinois...lol

Abbie Normal's picture

Sure hope you're not including those 50% of Illinois government workers amng the exodus of "productive taxpayers"

Anybody that has spent their career inside government is pretty much unsuitable for real world work.

truthseeker47's picture

There actually are 2 states with counties named "Crook".  Oddly enough, the State Where the Governors Make the License Plates isn't officially one of them.

Bumpo's picture

Let me guess the solution:  Taxes over Cuts

GUS100CORRINA's picture

llinois Policymaker: "We Are About To Become The Financial Deadbeat Of The Nation"

My response: YOU ARE THE FINANCIAL DEADBEAT OF THE NATION!!!! LIVE WITH IT!! YOU BROKE ALL PREVIOUS DEBT RECORDS SINCE THE FOUNDING OF AMERICA!

By the way, you can thank OBAMA and his merry band of DESPOTS for your situation.

OLD ABE LINCOLN must be turning over in his grave!!!

Unfunded Pension Liabilities of 251 Billion Dollars!!! ROFL!!!!!!!!

thesonandheir's picture

Ole Granny Yellen is itching to launch QE~ and this could be the reason.

a Smudge by any other name's picture

They better do something fast. Downgrading their rating to "truth" levels is obviously not an option. Prop up the corpse Janet!

lil dirtball's picture

> Prop up the corpse Janet!

What do you want her to say more than 'crisis not likely 'in our lifetime''? That's some pretty heavy lifting, right there.

http://www.cnbc.com/2017/06/27/yellen-banks-very-much-stronger-another-f...

Billy the Poet's picture

Lincoln invented the American despot.

Jack McGriff's picture

no worries, the federal government will be bailing out Illinois and not a single fuck will be given that day.  Dear White Taxpayers:  work harder, there are 100 million people depending on you to make their golden pensions, Escalade and Dodge Charger payments!

yogibear's picture

"Escalade and Dodge Charger"

Shit, they drive more expensive cars than that. The same ones that if they show up at work, come in at 10 AM and leave at 2 PM. 

hardmedicine's picture

AND THEY RETIRE at 50 and 55.  but you are not going to get the same courtesy when you go for your SOCIAL SECURITY.... no you are not.  If you get it at 67 years old your pension amount will be deducted from your total social security amount to come up with your monthly total.  IT WILL BE DEDUCTED NOT ADDED.  Check it out if you don't believe me.  The congress critters have been hard at work "SAVING" social security for the benefit of us ALL!!!

 

I just wish they would leave my money alone/  Wish I could withdraw from this fucked up system.  I hate social security and giving them 7% of my income every month  FUCK THEM ALL .

 

 

 

                                                                                         .marfa

truthseeker47's picture

" come in at 10 AM and leave at 2 PM. "  That is after an hour for lunch, and a morning and afternoon "break".  Jayne Byrne was the most unpopular mayor (1979-1983) with the poltical machine.  She would actually make surprise visits to check up on city workers to see if they were working.  She and her husband lived in an apartment in the Cabrini-Green Public Housing Project (a PR gamble that failed).  She is still the only woman elected as mayor of Chicago.

booboo's picture

I will tell you what I think, both the govenor and the legislature as well as the actuaries figured out a long time ago that it was going to blow and made a conscience decision long ago to go this route and they are both doing a great job of pretending to blame each other. They know how this ends and are laughing their ass off. BAILOUT NO HAIRCUTS, put it on the cuff.

Mr Pink's picture

I'm gonna miss Illinois...it really tied the Midwest together

booboo's picture

I't the skid mark between the cheeks of Indiana and Iowa

truthseeker47's picture

I left Illinois 12 years ago and miss it like dropping an anvil on my foot.  I should have left it sooner.

Doubleguns's picture

Hope you didnt move to Puerto Rico. They want to be the 51st state taking the deadbeat title from Illinois. 

SHEEPFUKKER's picture

What about the nearly 10 year "great recovery"?

gregga777's picture

Good one!

ROTFLMAO (rolling on the floor laughing my a** off)!

jerry_theking_lawler's picture

We are all adults here....we known what ROTFLMAO means so you don't have to spell it out....

 

haha, just jerking your chain (and no, I'm not going to jerk your little chain for your pleasure).

charlewar's picture

complete unadulterated bullshit.

Peacefulwarrior's picture

Don't RAHM, EZEKIEL and ARI (the god of Hollywood) have enough $$ in their coffee can's to fix this?

Lumberjack's picture

Rahm doesn't pay property taxes there.

While I abhor snopes, they even admit the fact.

http://message.snopes.com/showthread.php?t=43002

Foundations should pay taxes or be banned all together.

DeathingerStar's picture

Only if everyone over the age of 75 decides to kill themselves... (another Emmanuel idea)

truthseeker47's picture

The tradition in Illinois is to keep your bribe cash in shoeboxes.  I am not kidding:

https://en.wikipedia.org/wiki/Paul_Powell_(politician)

gynocentricUSA's picture

Chicago and NYC are by far the most crooked cities in the USA. It's the American way!

artichoke's picture

Yeah, but Chicago's problem is that it's losing its major businesses.  It was always corrupt, and always rich, as long as it had commodities and commidities futures and options trading.  Now it's got ... not much.

NYC is still rich so the corruption is just handled in the ordinary course of business, like in the good old days in Chicago.

Peacefulwarrior's picture

Put Rick Santelli in charge of proping this up, while he builds a plank for the perps to start walkin...

RagaMuffin's picture

 "We must put our fiscal house in order. It is already too late. Action is needed now."  If sentence 2 is right then 1 and 3 are irrelevant are't they?

MasterControl's picture

"Action is needed now" = fed taxpayer bailout

Singelguy's picture

Not happening! California thinks they will get a fed bailout somewhere along the road. They too will be disappointed. If for some remote reason a bailout is forthcoming, Trump will attach so many conditions, they will shit themselves.

HalinCA's picture

Trump will do what Trump is told to.

Just like in Syria.

Just like in the Ukraine.

azusgm's picture

California can dredge Oroville Lake and the waterway below the outflow.

CaptainObvious's picture

The day I'm expected to bail out some Illinois and California commie assholes is the day I punch my last time card for paid work.  I'd rather put a few belongings in a hankie hanging from a stick and live the hobo life.

truthseeker47's picture

It has been proven many times that panhandling pays better than a minimum wage job.  No taxes either!

lasvegaspersona's picture

I've paid for a front row seat for this feature...it is going to be great!