Quick budget preview
Wednesday, Feb 19, 2020 - Posted by Rich Miller
* Bloomberg…
“I would like to hear about pension reform that goes beyond the income tax referendum,” said Dora Lee, director of research at Belle Haven Investments, which manages about $11 billion of municipal assets including Illinois debt.
James Iselin, head of municipal fixed income for Neuberger Berman Group LLC, which holds Illinois debt among its $11 billion of municipal bonds, said he wants to see momentum for a solution for the pension shortfall, especially amid the improved relationship between the state’s executive and legislative branches. […]
Iselin is also monitoring the income-tax vote in November, noting that “increasing revenue by close to 10% of the state budget is a big number.”
House Republicans want to replicate the bipartisan process by which the state passed its balanced budget last year, Minority Leader Jim Durkin said during a press conference on Tuesday. Durkin, who doesn’t support the progressive income tax, added that “we are at a point where we don’t need additional revenue” and the state has a “growing surplus.”
Wait. There’s a surplus? Last I checked the budget office was projecting a $1.768 billion deficit. I suppose we’ll see what’s what today.
Also, pension reform that goes beyond the graduated income tax is not likely in the cards since any reduction in benefits would be unconstitutional and the governor and the vast majority of the General Assembly aren’t willing to change the constitution.
* AP…
Funding for underfunded public schools could also increase by at least $350 million. Under the proposal, more teachers and social workers would be hired, and money would also be used to increase salaries and for property tax abatements.
That increase is mandated by law. Where he’s getting the money for all this will be answered today at noon, or not. He had some gimmicks in his first budget address last year, you will recall.
* Finke…
There are other areas where Pritzker is expected to increase spending. State-funded pension systems need more money to keep up with their obligations.
Pension payments are expected to grow by about a half a billion dollars.
* Center Square…
While the governor said he plans to save $225 million in the upcoming budget through government efficiencies, he is also expected to announce nearly $150 million more for the state’s child welfare agency. Republicans said more money won’t fix the agency’s problems.
If they don’t hire more people, they can’t do their jobs. And hiring more people means spending more money.
- anon - Wednesday, Feb 19, 20 @ 10:51 am:
how will he close a 1.7 billion deficit? Should be interesting.
- Bruce - Wednesday, Feb 19, 20 @ 10:55 am:
I retired 1/1 (35 years) after realizing that they had no use for long time employees. AFSCME Contract was lacking for long time employees.
Really hard to watch JB attract best and brightest (JB salary stipend) without even looking at what he had inhouse.
- Smalls - Wednesday, Feb 19, 20 @ 10:57 am:
== and the vast majority of the General Assembly aren’t willing to change the constitution. == I think Rich has identified a large part of the problem. I’m not looking forward to the next economic downturn when the current $193.1 Billion liability for pensions and OPEB balloons to $300 Billion. And yet the state still has done nothing for a Tier 2 of OPEB benefits, which they could change today.
- Oswego Willy - Wednesday, Feb 19, 20 @ 11:07 am:
The process of revenue and meeting the demands of “things” like actual governing and pensions…
We are going to hear a great deal of bluster and some show business will be part of it too, but the process to get this passed with a $1.7 billion dollar deficit is going to be something that needs more than big thoughts.
- RNUG - Wednesday, Feb 19, 20 @ 11:47 am:
In a roughly $40B budget, $225M in savings is less than 1% … it’s the pocket change you lost in the couch.
While it is a start, he’s going to have to do better to close the structural deficit (yes, I know the graduated tax is supposed to do that).
- PublicServant - Wednesday, Feb 19, 20 @ 11:49 am:
===“I would like to hear about pension reform that goes beyond the income tax referendum,” said Dora Lee, director of research at Belle Haven Investments, which manages about $11 billion of municipal assets including Illinois debt.===
She’d like to hear something, huh? Maybe someone can read her the ILSC ruling on the unconstitutionality of SB1, and the Ex Post Facto law provisions of the Federal Constitution.
The solution to the pension debt problem created by borrowing from the pensions, is to pay back the money that was borrowed, as clearly stated by the Supreme Court of Illinois.
- Ducky LaMoore - Wednesday, Feb 19, 20 @ 11:50 am:
“Republicans said more money won’t fix the agency’s problems.”
The Republicans self-owning disposition grows daily.
- JS Mill - Wednesday, Feb 19, 20 @ 11:53 am:
=While it is a start, he’s going to have to do better to close the structural deficit (yes, I know the graduated tax is supposed to do that).=
I think that to really address the structural deficit we will need to add a tax on services, which probably won’t happen. Same with a tax on retirement income- not going to happen but would help.
- Pundent - Wednesday, Feb 19, 20 @ 1:37 pm:
I recall Durkin saying something similar when the tax receipts came in higher than expected last year. I was as dumbfounded then as I am now about the comment.
- Downers Delight - Wednesday, Feb 19, 20 @ 2:26 pm:
PublicServant, folks like Dora aren’t just looking at stiffing pensioners. It could be items like reducing benefits for future hires, changing the Constitution for future hires, etc. Reasonable people understand the current limitations regarding Illinois pensions. Funding and maintenance of current plans will only go so far as to what bond investors will be willing to pay for State bonds, especially given the upcoming capital plan.
- PublicServant - Wednesday, Feb 19, 20 @ 3:11 pm:
Downers D, thanks for that. The state gets the quality of employee that it’s willing to pay for. You want good programmers, you’ll need to provide them with good salary and benefits, commensurate with the private sector, regardless of a passable constitutional amendment, whatever that might be.
There’s no shortage of savings in search of investments. Illinois has never missed a bond payment, and is making strides, after Rauner’s purposeful destruction of the state’s finances, towards paying its bills, and the ratings houses have recognized that. Not sure which crystal ball you’re looking at that would prompt a warning about future bond offerings being undersubscribed if Illinois chooses to funds its future plans that way. Cheers.
- RNUG - Wednesday, Feb 19, 20 @ 11:08 pm:
== Not sure which crystal ball you’re looking at that would prompt a warning about future bond offerings being undersubscribed if Illinois chooses to funds its future plans that way. ==
As long as bond returns stay low and IL bonds (barely) retain investment grade, you will find plenty of investors chasing safe returns willing to snap them up.
Reminder to me: check the wife’s bond retirement fund to see if it holds any Illinois bonds.