SUBSCRIBE to Capitol Fax      Advertise Here      Mobile Version     Exclusive Subscriber Content     Updated Posts    Contact
CapitolFax.com
To subscribe to Capitol Fax, click here.
Rating agencies weigh in on Quinn tax proposal

Friday, Apr 4, 2014

* From a Pat Quinn budget office press release…

Two bond rating agencies have released their reviews of Illinois’ finances ahead of next week’s scheduled sale of $250 million in General Obligation bonds that will finance roads, bridges and schools around the state.

While they say the state still has much work to do, they note the hard work the state government has done to cut costs, pay down old bills, and pass a comprehensive pension reform plan.

“We are pleased that the bond rating agencies recognize the difficult work the Governor and the General Assembly have done to cut spending, pay down the bills and pass comprehensive pension reform,” Acting Budget Director Jerry Stermer said. “It’s clear the rating agencies agree the Governor’s proposed budget would bring long-term fiscal stability to Illinois.”

* Not everything the raters had to say was positive, but considering how New York has trashed us in the past, I suppose beggars can’t be choosers. From Fitch

KEY RATING DRIVERS

BUDGET TEMPORARILY STABILIZED WITH TAX INCREASE: Temporary increases in both the personal and corporate income tax rates, coupled with statutory spending limits, have closed a significant portion of the structural gap in the state’s budget through the current fiscal year 2014.

NEED FOR LONG-TERM SOLUTION REMAINS: Due to the temporary nature of the enacted tax increases, the state will need to find a more permanent solution to the mismatch between spending and revenues. The Negative Outlook reflects the critical need to address this issue. The governor’s recommended budget for the coming fiscal year would make these tax increases permanent and provide a basis for the state to achieve fiscal balance.

LARGE BALANCE OF DEFERRED PAYMENTS REMAINS: The state has a large general fund accounts payable backlog, which although reduced still totaled $4.2 billion at the end of fiscal year 2013. The state prudently used higher than forecast income tax collections in fiscal 2013 to pay down a portion of the accounts payable balance.

LONG TERM LIABILITIES HIGH: The state’s debt burden is above average and rose during the recession with issuance for operational purposes. Continued borrowing is expected under the $31 billion capital plan. Further, unfunded pension liabilities are exceptionally high and are expected to remain so, even if pension reform survives legal challenge.

ACTION ON PENSIONS: Passage of pension reform legislation was a positive indication of the state’s willingness to take action on this complicated issue after many failed attempts. Legal protection of pension benefits is particularly strong in Illinois and, as expected, legal challenge to the reform has been filed.

ECONOMY STRONG BUT RECOVERY SLOW: 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.

RATING SENSITIVITIES

Maintenance of the ‘A-’ rating will require timely action in advance of the expiration of temporary tax increases in fiscal 2015. Deterioration in the state’s financial position, as evidenced by excessive use of non-recurring revenues or additional payment deferrals, would likely lead to a downgrade. In addition, stabilization of the rating will reflect the extent to which pension reform enhances the funding levels of the pension systems and controls the growing impact of pension payments on the budget.

* From Moody’s

SUMMARY RATING RATIONALE

The rating is supported by the state’s general obligation (GO) pledge. Despite substantial pension reforms adopted in December, Illinois remains the lowest-rated US state, at A3 with a negative outlook. Reform enactment launched the legal process that will determine whether constitutional protections prevent the state (and local units) from lowering liabilities through plan changes that affect existing pension participants. Courts may invalidate the reform package altogether, or block pieces of it. If allowed, the reforms could put Illinois on track to manageable long-term pension funding, although the retiree benefits burden will still be heavy compared with many other states. Also pressuring Illinois’ finances is a history of operating deficits, negative GAAP-basis fund balances and payment deferrals. As offsets to its challenges, Illinois has a large and diverse economy, with above-average wealth, and its powers over revenue and spending are strong. State law gives the highest priority to the payment of general obligation debt service. […]

OUTLOOK

Illinois’ negative outlook reflects our expectation that the state’s financial position could deteriorate further if the state’s 2011 tax rate increases are allowed to expire without offsetting steps next year. Pension reforms passed in December could improve the state’s credit standing, by reducing accrued liabilities, but they may be rejected after legal challenges from employees and retirees.

WHAT COULD MAKE THE RATING GO UP

–Implementation of a credible, comprehensive long-term pension funding plan, after favorable court ruling

–Substantial progress in reducing payment backlog, with adoption of a legal framework or plan to prevent renewed buildup of bills

–Establishment of a pattern of structurally balanced budgets

WHAT COULD MAKE THE RATING GO DOWN

–Failure to address impending revenue loss from partial sunset of 2011 tax increases

–Significant further deterioration in pension funded status

- Posted by Rich Miller        


6 Comments
  1. - RNUG - Friday, Apr 4, 14 @ 4:02 pm:

    WHAT COULD MAKE THE RATING GO UP

    –Implementation of a credible, comprehensive long-term pension funding plan, after favorable court ruling

    WHAT COULD MAKE THE RATING GO DOWN

    –Significant further deterioration in pension funded status

    Translation: if the ISC rules agaist pension reform, you’re in big trouble. Even if the ISC approves pension reform, you still need to properly fund it if you want better ratings.


  2. - wordslinger - Friday, Apr 4, 14 @ 4:05 pm:

    Rating agencies love new debt to rate and taxes to cover them.

    And yeah, they just said that if the tax increase isn’t extended, the state will get whacked.


  3. - Hit or Miss - Friday, Apr 4, 14 @ 4:10 pm:

    ===Due to the temporary nature of the enacted tax increases, the state will need to find a more permanent solution to the mismatch between spending and revenues. The Negative Outlook reflects the critical need to address this issue.===

    If the ‘temporary’ income tax increase is allowed to expire how will this impact the states bond rating? Will it lower the states bond rating yet again? Will it increase the states cost of barrowing yet again and if so at what cost (cost in dollars to the taxpayers)?


  4. - Mokenavince - Friday, Apr 4, 14 @ 4:17 pm:

    The rating agencies have spoken, the tax increase is here to stay.
    Rauner will have to deal with it. Lets hope he can fix it.

    We should be worrying about towns going bankrupt. I would not look for much help from our legislature. They have no will or way.


  5. - Arthur Andersen - Friday, Apr 4, 14 @ 4:25 pm:

    Good Lord, how long has Stermer been Acting Budget Director?


  6. - Walker - Friday, Apr 4, 14 @ 4:36 pm:

    At least the ratings agencies have noticed and reported that the total amount of past-due payables is being reduced. That means, of course, that the operating budget is producing a surplus to pay them down.

    Yet GOP candidates and spokesmen that I’ve read, (Murphy, Cross, Duffy, Sweeney, and others) claim that we have not even achieved a “balanced budget” because we still have any late payables at all. They must think we are all stupid.


Sorry, comments for this post are now closed.


* Today's number: 26.8 percent
* Bills gets 10 years for red light scheme
* Mistakes happen
* Derren and Darwin Sorrells' arrest record
* *** UPDATED x1 *** Isikoff hacking scoop criticized
* Rauner says he won't be involved in Murphy replacement
* Duckworth ridiculed for ineffectiveness as she runs new ad
* Question of the day
* Illinois prison population drops 8.7 percent in two years
* Another attempt to explain the Trump phenomenon
* Rauner schooled on school funding
* Dem calls Rep. Kay "misogynist," Kay fires back
* Falling into his own trap
* They knew the odds were stacked against them going in
* Illinois wasn't the only hacked state elections board
* Putting these pieces together will require more than just "monologuing"
* SUBSCRIBERS ONLY - Cable TV buys
* Yesterday's blog posts

Support CapitolFax.com
Visit our advertisers...

...............

...............

...............

...............

...............

...............
<


Search This Blog...

Search the 98th General Assembly By Bill Number
(example: HB0001)

Search the 98th General Assembly By Keyword

  
* There will be another iPhone-like device from HTC, the One A9s
* Instagram Stories diverges from Snapchat by suggesting who to follow
* The Information Commissioner’s Office doesn’t like WhatsApp’s new privacy policy
* It seems that HTC Nexus pricing will take a hike
* Verizon LTE Advanced service boasts 50 percent speed improvement
* Nougat should see a total of three quarterly maintenance releases
* Apple schedules September 7 event, iPhone 7 top of mind

* What a Knight! Fulmer hurls five perfect frames for Triple-A Charlotte
* Rodon rolls on to lead White Sox over M's
* 2 pitches, 3 outs: Sox execute efficient escape
* X-rays negative after Eaton HBP on right arm
* Rodon rolls on to lead White Sox over M's
* Shields hopes to get back on track vs. Tigers
* Rodon rolls on to lead White Sox over M's

...............


Main Menu
Home
Illinois
YouTube
Pundit rankings
Obama
Subscriber Content
Durbin
Burris
Blagojevich Trial
Advertising
Updated Posts
Polls

Archives
August 2016
July 2016
June 2016
May 2016
April 2016
March 2016
February 2016
January 2016
December 2015
November 2015
October 2015
September 2015
August 2015
July 2015
June 2015
May 2015
April 2015
March 2015
February 2015
January 2015
December 2014
November 2014
October 2014
September 2014
August 2014
July 2014
June 2014
May 2014
April 2014
March 2014
February 2014
January 2014
December 2013
November 2013
October 2013
September 2013
August 2013
July 2013
June 2013
May 2013
April 2013
March 2013
February 2013
January 2013
December 2012
November 2012
October 2012
September 2012
August 2012
July 2012
June 2012
May 2012
April 2012
March 2012
February 2012
January 2012
December 2011
November 2011
October 2011
September 2011
August 2011
July 2011
June 2011
May 2011
April 2011
March 2011
February 2011
January 2011
December 2010
November 2010
October 2010
September 2010
August 2010
July 2010
June 2010
May 2010
April 2010
March 2010
February 2010
January 2010
December 2009
November 2009
October 2009
September 2009
August 2009
July 2009
June 2009
May 2009
April 2009
March 2009
February 2009
January 2009
December 2008
November 2008
October 2008
September 2008
August 2008
July 2008
June 2008
May 2008
April 2008
March 2008
February 2008
January 2008
December 2007
November 2007
October 2007
September 2007
August 2007
July 2007
June 2007
May 2007
April 2007
March 2007
February 2007
January 2007
December 2006
November 2006
October 2006
September 2006
August 2006
July 2006
June 2006
May 2006
April 2006
March 2006
February 2006
January 2006
December 2005
April 2005
March 2005
February 2005
January 2005
December 2004
November 2004
October 2004

Blog*Spot Archives
November 2005
October 2005
September 2005
August 2005
July 2005
June 2005
May 2005

Syndication

RSS Feed 2.0
Comments RSS 2.0
WordPress

Loading


* Illinois Gov. Bruce Rauner signs bill ending pe.....
* Young mother angry over Rauner veto of child ca.....
* Elgin man accused of threatening Gov. Rauner ge.....
* Illinois bills aimed to help state's most vulne.....
* Illinois election officials say hack yielded in.....
* Rauner pushes new redistricting effort - Quad C.....
* Rauner vetoes bills aimed to help state's most .....
* Tax activism group's ads call on Democratic leg.....
* Gov. Rauner Vetoes Bills Aimed at Illinois' Mos.....


* Man arrested in triple-slaying in northwestern Indiana home
* Ex-Chicago official gets 10 years in red-light camera case
* The Latest: Names of 3 Indiana slaying victims released
* Illinois bills aimed to help state's most vulnerable vetoed
* Illinois bills aimed to help state's most vulnerable vetoed
* Ex-Chicago official gets 10 years in red-light camera case
* University of Wisconsin-Madison is top party school in US
* Sheriff: Man arrested in slayings of 3 in Indiana home
* Prosecutor downgrades charge in interstate shooting case
* Cook County issues nearly 10,000 same-sex marriage licenses

* FBI warns of possible state election-system hacks; Illinois reported breach in July
* Thirty-year-old SNAP overpayments still being collected
* Despite budget warnings from Rauner, TRS board votes to lower investment estimates
* Progress on U.S. 67 sputters due to lack of funds
* New law makes insurance companies find, pay beneficiaries
* Decatur woman can petition to become nurse under new law
* Illinois redistricting referendum won't appear on ballot
* Comptroller hopefuls argue independence from Madigan, Rauner
* Springfield-area jobless rate remains lowest in Illinois
* Illinois 'Obamacare' health insurance rates up significantly

* United names American Airlines exec as president
* Mondelez drops bid for Hershey
* Clinton proposes plan to address mental health treatment
* Illinois' biggest pension fund to standardize private-equity fees
* Morningstar to rate corporate debt


* Hackers accessed personal info from 200,000 Illinois voters
* Man charged after being shot by state trooper on South Side
* Tuesday Letters: Stop decimation of the black community
* Young mother angry over Rauner veto of child care bill
* Mondelez no longer sweet on Hershey
* Man critical after being pulled from Lake Michigan on North Side
* Over 40% of VW owners seek emissions cheating settlement
* Woman charged with DUI after crashing into state trooper
* Cook County to issue 10,000th same-sex marriage license
* Emanuel calls brothers on parole Exhibit A for tougher sentences


* August most violent month in Chicago in 20 years
* Huma Abedin, a top Clinton aide, is leaving husband Anthony Weiner amid new sexting scandal
* Actor Gene Wilder, star of 'Willy Wonka,' dies at 83
* Officials allege woman was driving drunk when vehicle hit squad car on I-355
* What the fuss over burkinis is really about
* Trump plans to bring outreach to black audience in Detroit
* McDonald's picks Omnicom in all-or-nothing ad agency competition
* Longer than a football field, Ken Griffin's beach home praised for its modesty
* Could ‘Underground Railroad’ author be the best living American novelist?
* Investing: Investing in real estate can be easy


The widget AQL4JYGHIY powered by Feed Informer does not exist.


* FBI warns of possible state election-system hacks; Illinois reported breach in July
* Thirty-year-old SNAP overpayments still being collected
* Heather Eagleton: Ending 'step therapy' puts patients first
* Angie Muhs: The ups and downs of online comments
* Bernard Schoenburg: Davis, GOP quick to attack independent Gill
* Statehouse Insider: Do we hafta put all of that money into pensions?
* Their View: Fair maps shouldn't be victims of partisanship
* Raising awareness to end domestic violence
* Mom's legacy lives on through fund
* Despite budget warnings from Rauner, TRS board votes to lower investment estimates


* Smith: 'There's a lot of excitement'
* Franklin County authorities arrest several on battery, other charges
* Danville man charged with Rantoul mugging
* UI football coaching debuts since 1913
* Champaign man facing sex charges
* Three charged with conspiracy to commit murder appear in court
* New murals are aimed at beautifying Peoria's southern gateway
* Hackers may have taken information on 200,000 voters
* Boil Order
* Rauner vetoes bills aimed to help state's most vulnerable


* 'Willy Wonka' star Gene Wilder dead at 83
* First day of school in Arlington Heights District 25
* Amid a marriage split, Showtime announces 'Weiner' debut
* Elgin man accused of threatening Gov. Rauner gets probation
* Images: Gene Wilder, 1933-2016

* House lawmakers overcome hurdle on key tra...
* Rodney Davis talks funding with Bloomingto...
* The agency that fought Illiana gets a new ...
* Rep. Dold takes educational cruise down Ch...
* Lawmakers decry high turnover rate of VA h...
* CBD Oil, and politics
* Simon considering state Senate bid
* Killer Congressman Tom MacArthur trying to...
* Shutdown? State may not notice
* Rep. Bob Dold

* Des Plaines Gets $11.4 Million To Purchase......

* Duckworth goes on the attack over free tra......
* Panel Is Asked To List Dem Rep's Accomplis......
* Morning Spin: State elections board drops ......

* John Bills To Be Sentenced In Red-Light Camera Scandal
* John Bills To Be Sentenced In Red-Light Camera Scandal (UPDATED)
* Request your ‘Vote by Mail’ ballot now for Nov. 8 general election
* NAR foundation will donate up to $350K in Louisiana flood assistance
* My conversation about Chicago and schools starts at 2 hours into the Rick Smith radio show.
* Integrating schools works best for all students.
* Illinois Supreme Court Rules Against Independent Map Amendment
* Chicago Aldermen Briefed On Mayor's Police Reform Plans
* Rauner Faces Friday Deadline To Act On Life Insurance Bill (UPDATED)
* Video explains what you need to know about Chicago property tax increases


* Statement on Redistricting Referendum
* Rauner Administration Takes Action to Help Illinoisans Find Lost Life Insurance Money
* Illinois Residents Encouraged to Register for ‘The Great ShakeOut’ Earthquake Drill - 'Drop, Cover and Hold On’ Drill Set for October 20
* Governor Takes Bill Action
* Illinois Seeking Flexibility to Improve Delivery of Behavioral Health Care




      Hosted by MCS SUBSCRIBE to Capitol Fax Advertise Here Mobile Version Contact Rich Miller