Illinois Unpaid Vendor Backlog Hits A New Record At Over $16 Billion

Back in July, the state of Illinois narrowly avoided a junk bond rating with a last minute budget deal that included a 32% in hike in income taxes.  Republican Governor Bruce Rauner vetoed the budget and called it a "disaster," but both houses of the state legislature voted to override his veto.  Meanwhile, S&P and Moody's were apparently both convinced that the budget deal was sufficient for the state to remain an investment grade credit and all lived happily ever after, if just for a few months.  Per CNN:

Illinois narrowly avoided becoming the first U.S. state ever slapped with a "junk" credit rating from S&P Global Ratings after it passed its first budget in more than two years.

 

The ratings firm removed the threat of an imminent downgrade for the fifth most populous state in the country on Wednesday, ruling that the Illinois budget deal has lowered the risk of a "liquidity crisis." Now the state is rated one-notch above "junk" territory, and S&P said the odds of a downgrade within the next year have "substantially diminished."

Back in July, S&P defended its IG rating by saying that the budget package brought the state's revenue and spending closer to parity and "reduced the near-term uncertainty that had come to characterize its financial operations." 

Of course, if that's true, then someone is going to have to explain to us why the state's unpaid payables balance continues to balloon higher with each passing day and now stands at a record $16,046,145,423.20 according the comptroller's office... 

 

...which is only a 3-fold increase over the past two years.

 

But, if you're a resident of Illinois, or worse yet a pensioner in one of the state's massively underfunded pension plans, Democratic Comptroller Susana Mendoza would like for you to know that there is no reason for concern as she has the perfect solution to the state's debt problem: $6 billion in more debt.  Per Reuters:

The bill backlog is growing despite the enactment of a fiscal 2018 spending plan and income tax increase in July that ended a budget impasse between Illinois’ Republican governor and Democrats who control the legislature.

 

“What is going to take this backlog down is the borrowing,” said Abdon Pallasch, spokesman for Democratic state Comptroller Susana Mendoza.

 

A provision in the budget enacted by lawmakers over the vetoes of Governor Bruce Rauner authorized the sale of up to $6 billion of general obligation bonds to pay bills from vendors and service providers that are accruing late payment penalties of as much as 12 percent.

That said, Republican Governor Bruce Rauner points out that there is a small problem with Mendoza's magical $6 billion debt cure-all, namely that there is no funding available to pay 12 years worth of interest payments.

But on Monday, the governor told reporters that the bonds do not solve any problem because lawmakers failed to set aside money to make principal and interest payments over the 12 years the debt would be outstanding.

 

“We need to come up with roughly half a billion (dollars) of cuts just to be able to service a bond offering,” he said, adding that he planned to meet with legislative leaders for discussion.

That said, we're almost certain that if bondholders didn't care about that near-bankruptcy experience back in July, they're also not going to have any problem underwriting another $6 billion worth of debt that has no shot of ever being repaid.

 

And we're pretty sure these guys won't care either...

Comments

NoDebt Tue, 09/19/2017 - 21:10 Permalink

Here are the numbers:  We're broke.And, by the way, who are these "vendors" still supplying shit to them?  Are they fucking stupid or something?  YOU ARE NEVER GETTING PAID.  Hell, even suppliers to Toys-R-Us wised up and went to cash-and-carry months ago. 

takeaction NoDebt Tue, 09/19/2017 - 21:17 Permalink

I bet they will get paid.....just like when there is a gov't shut down.  These vendors probably over charge the FUCK out of the city....like an illegal going to the Emergency room.  The bill is $15,000 for your injury...costs the hospital actually very little...never paid.  If they don't get paid, they just right it off to counter the poor suckers like myself who really have to pay. All "Cost Averaged".  So when the "Bailout" comes and the threats of children and old people dying if they are cut off...it is like a huge windfall when everyone id paid...and then...nothing changes...and REPEAT.

In reply to by NoDebt

NoDebt takeaction Tue, 09/19/2017 - 21:51 Permalink

Mmmmmm..... be careful there, my friend.  You're in the ballpark but not safe at home if you're a vendor thinking that way.  The calculus of "how much will I really get paid?" is VERY tricky business.  It's usually settled in court and only after MANY years have elapsed.  And sometimes the decision can go completely against you.If you're a big company with teams of lawyers you'll probably do OK if you're willing to play the long game.  But if you're some lowly food service or janitorial company, you're fucked.  Even if you eventually get paid, it's too late to matter. 

In reply to by takeaction

LetThemEatRand Tue, 09/19/2017 - 21:09 Permalink

OT but I just looked at the BoatUS hurricane site, and they have Maria as a Cat 5 with 173 mph sustained winds.  That's like an F3 tornado hitting an entire landmass, and it's just hours from making landfall in Puerto Rico.  And the pressure is dropping as of 8pm.  This could be truly catastrophic.  

NoDebt LetThemEatRand Tue, 09/19/2017 - 21:15 Permalink

Puerto Rican bond holders "Triple tax free!!".  Another class of idiots who are nervously eyeing the financial condition of the reinsurers of their bonds and not liking what they see.Oh, and, yeah, a lot of people in Puerto Rico are going to die from the hurricane.  But nobody cares about that because they're not Americans.  No.... wait.  Um, scratch that.  Nobody cares about that because they are brown people. 

In reply to by LetThemEatRand

LetThemEatRand NoDebt Tue, 09/19/2017 - 21:22 Permalink

The lack of compassion around here and most places frankly is pretty amazing.  MSM certainly could give a shit, but I guess they just mirror the population and give them what they want.I had a good friend who moved to PR to start a diving business a few years back.  Unfortunately the business didn't work out, but thankfully he's back in Florida (which by comparison is safe).

In reply to by NoDebt

gregga777 Juggernaut x2 Tue, 09/19/2017 - 22:18 Permalink

I suppose you are aware that the Mississippi Valley is a "failed" continental rift subject to massive earthquake risk. There was a massive earthquake in Missouri along the Mississippi River in the early 1800's. Few, if any, people were killed and there was little property damage because hardly anyone lived there. It's a much different situation today.

In reply to by Juggernaut x2

Haitian Snackout LetThemEatRand Tue, 09/19/2017 - 23:49 Permalink

I know this was not directed at me but please bear with me for a moment...I live about 70 miles from the volcanos, about double the distance of the large volcanic boulders that litter the landscape, 30+ meters above sea level, and about 10 meters above what looks like to me to be the century or so high water mark. So while I can't say for sure that it is a complete lock, I think I have done the basic due dilligence. I have had no special training. Although some RE experience. My house never floods like many of my neighbors. And has been there for over 50 years. Anyone could have done the same tire kicking with minimal research. So while I certainly have compassion, I also believe in making ones own luck.

In reply to by LetThemEatRand

NoDebt LetThemEatRand Tue, 09/19/2017 - 21:40 Permalink

Do you think everyone who is on your side shows up in a nice 3-piece suit with a broad smile and firm handshake with promises of love and kisses?No, my friend.  People who don't know you but are on your side nonetheless, are usually more like me.  Salty, bitchy, thoroughly mal-tempered people who support you anyway because it's obvious you need it and I can help.  It would be immoral not to.  Read my post again and, through all the satire, ask yourself honestly:  If it came down to either NoDebt or somebody I didn't know, when the chips are down, who would I trust to help me out and not fuck me over?  If your answer is "somebody else" you're a fool.Puerto Ricans are AMERICAN CITIZENS for fuck's sake.  OF COURSE I have compassion for them.  My compassion would come in the form of forgiving ALL of their debt on account of their utter and obvious inability to ever pay it.  That won't replace the lives lost but I'm not God.  I can't alter the course of the hurricane and I can't bring the dead back to life.  So that's the best I can do.  Anybody offers you anything better than that is a liar and a fraud. 

In reply to by LetThemEatRand

LaugherNYC NoDebt Wed, 09/20/2017 - 10:51 Permalink

Anyone who bought any form of PR debt in past 15 years that didn't carry an expressed, explicit gurantee of timely PI from USG was buying toilet paper. Given access to below matket rates by giving PR exemption from other states' income taxes was nthing more than encouraging the gorge. Sad. If Warren Buffet had stepped in and bought $5 billion of PR debt, then you'd have known some special bailout was coming. None of the crooked signals were sent. PR will sink below the waves on its mountain of unpayable debt, and maybe be should grant the desires of all those obese loveles who run around screaming and carryng "Viva un Puerto Rico libre" signs at every PR day parade. Give them their freedom. Cut off all the aid, benefits and frre shit from the US, and let's see how they do. Just like all the other Carib islands... people who think 3 hours is a full workday and disparage those work hard to move up, get a real job and get the fuck out. Never had worse vacations than those taken to PR. Even the DR put them to shame with their work ethic. A PR worker told me how taking less pay, in cash, was better than on the books, so he could game the US benfeits system for free shit. Now a monster storm will scour the place clear. Let's hope the rebuilding doesn't turn into the predictible scramble to steal as much aid investment as possible. Why do I feel that in 5 years I'll be readng how all the aid money got siphoned off into sweetheart deals with shell companies run by relatives of the politicians in power, and nothing got built, but the cash is gone?  To anyone who still holds PR paper hoping for some kind of payout, good luck to you.To the honest people in PR, who work hard and believe the system is fair and set up to provide opportunity, I wish you the best. God bless you.

In reply to by NoDebt

Yen Cross Tue, 09/19/2017 - 21:14 Permalink

  I'm flabbergasted at the complete lack of coverage about Illinois and it's fiscal problems. Do the Feds actually think they can sweep that shit-show under the rug?  Do MUNI bond dealers actually think they can repackage and sell this shit, like subprime R/E paper? I just had a revelation... The next crash is going to come from a massive global sovereign debt crisis.  No one gets paid, except for the people holding the gold, ammo, beans, water, ect...

NoDebt Yen Cross Tue, 09/19/2017 - 21:24 Permalink

Easy, son.  Easy.  You're going 1, 2, 6 on this thing.  No, the feds don't think they can sweep this shit-show under the rug.  I'm one of the few who believes the Feds will NOT come to the rescue.  They don't give a shit one way or the other because they have their own fiscal problems to deal with.  The most likely path is that they will assist in a special "restructuring" but on a state-wide scale, similar to the GM bankruptcy.  Going beyond that raises serious Constitutional concerns about State sovereignty and the core of Federalism (which, I concede, nobody gives much of a shit about but it actually is a thing).Yes, Muni bond dealers think they can repackage and sell this shit.  In fact, I think they are salivating at the thought.  Remember, they don't OWN it, they just sell it for a commission.As for massive sovereign debt crises.... c'mon.  How long you been on this board?  At least as long as me.  You should know better. 

In reply to by Yen Cross

Father ¢hristmas Yen Cross Tue, 09/19/2017 - 21:51 Permalink

It is being swept under the rug so that when they pull it, everyone can act surprised and a massive bailout can be slammed through.Remember 2008?  "We never saw it coming.  We have to restore confidence in the markets."Remember 2001?  "No one could have predicted Osama Bin Laden would seek to fly planes into skyscrapers.  We need a Patriotic Act to be quickly passed through a bipartisan Congress to reassure the American public, so they can continue flipping subprime real estate."

In reply to by Yen Cross