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Less than two weeks after Illinois lawmakers broke through decades of gridlock and passed a bill to bolster the worst-funded U.S. state pension system, taxpayers are already seeing the benefits.
The state sold $350 million of taxable general-obligation bonds yesterday to pay for work on roads, bridges, schools and public transportation. Debt due in December 2038 priced to yield 5.65 percent, data compiled by Bloomberg show. The 1.84 percentage points of extra yield above benchmark Treasuries was almost a third less than in a comparable sale in April, Bloomberg data show.
The 29 percent reduction from eight months ago saves more than $20 million over the life of the securities, according to Abdon Pallasch, assistant budget director for Illinois, which has the lowest credit grade among states. Standard & Poor’s signaled this week that the accord on retirement costs could trigger a ratings increase.
“The market recognizes that this is a clear improvement and that the credit risk of the state is diminished as a result of this pension action,” said Chris Mier, chief municipal strategist at Loop Capital Markets in Chicago.
That’s kind of a bit of fun with numbers. If the biz powers that be hadn’t opposed Senate President Cullerton’s “A-B” plan over a year ago, we’d be much further along with this process by now.
But the Democratic governor’s glee over the savings was tempered by Republican Treasurer Dan Rutherford, who estimated the state could have saved $70 million more if its credit rating was top-notch and not the worst in the nation.
“We are several tens of millions of dollars worse because we’re not triple-A,” said Rutherford, who is running for governor in the March GOP primary.
I tend to side with Rutherford on the bill’s constitutional questions. However, left up to Rutherford, that bill would not have been signed into law. I don’t know how he intends to get us to AAA ratings with New York by refusing to play New York’s game. And pension reform was definitely a NY game.
* From a Sen. Bill Brady press release…
(A)ccording to State Senator Bill Brady (R-Bloomington) the interest rates Illinois got are proof that passing pension reform, while the tough choice, was the right choice.
“Voting for pension reform last week was by no means an easy vote, but today’s bond rates are proof that we made the right decision,” said Brady. “With this latest bond sale our penalty decreased by 29%. That’s huge improvement and good news for Illinois.”
* More from the Trib…
“This is a tangible, positive development — a positive dividend of (pension) reform for taxpayers,” said Matt Fabian, managing director of Connecticut-based Municipal Market Advisors. “It’s hard to see this as anything else.”
* Meanwhile, the Illinois Policy Institute’s Scott Reeder threw the kitchen sink at the pension reform law in his most recent syndicated column…
After all, is freedom really worth dying for?
Yes, it is.
The men who charged the beaches of Normandy knew that all too well. So did those who gave their lives at Hue and Iwo Jima.
Imagine where we would be today if George Washington had chosen to compromise rather than fight. British tyranny would have prevailed and the greatest nation on earth would never have been born.
Dr. Martin Luther King Jr. recognized the temptation to compromise and addressed it in his great “I Have a Dream” speech:
“We have also come to this hallowed spot to remind America of the fierce urgency of now. This is no time to engage in the luxury of cooling off or to take the tranquilizing drug of gradualism. Now is the time to make real the promises of democracy. Now is the time to rise from the dark and desolate valley of segregation to the sunlit path of racial justice.”
Dr. King knew some things just were non-negotiable.
Nowhere in that speech will one find the soothing balm of compromise.
Those who are regular readers of this column know that I don’t often take a middle ground.
As they say in Texas, “The middle of the road is a fine place to be – if you’re a dead armadillo.”
Some things in life are non-negotiable.
In a recent column, I was blunt in explaining why the recent pension compromise was bad for our state and will do little to resolve the Land of Lincoln’s ongoing fiscal ailments.
I wish I was wrong.
But I cannot remain silent on a matter that imperils the future of this great state.
posted by Rich Miller
Friday, Dec 13, 13 @ 10:52 am
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