* Fox News…
Illinois Democratic Gov. Pat Quinn is getting hit with a nationwide backlash over his suggestion that the federal government bail out the state employees’ pension program.
Critics have in the past several days pounced on the suggestion, made last year when Quinn, in announcing the state’s fiscal 2012 budget, said part of Illinois’ long-term effort to reduce the estimate $167 billion in under-funded liabilities would be to seek “a federal guarantee of the debt.”
A national backlash? Maybe in the conservative echo chamber. As far as I can tell, nobody else cares much, if at all.
* Let’s scroll downward…
The basic plan floated by Quinn would be for the federal government to rescue the pension program through buying the state’s bonds, which critics say are too financially risky to attract investors.
Quinn said after announcing the budget that seeking the federal guarantee was only a precaution, then later called the related wording a “drafting error,” according the non-partisan Citizens Against Government Waste
* OK, we’re gonna take this one point at a time…
* 1…
The basic plan floated by Quinn would be for the federal government to rescue the pension program through buying the state’s bonds
* Former budget director David Vaught did make that suggestion, but not recently. He said this way back in October of 2009…
According to newly installed state Budget Director David Vaught, Gov. Pat Quinn recently brought up the idea with U.S. Treasury Secretary Timothy Geithner and others at the White House. The governor got a good enough reception that “he intends to extend” his efforts, Mr. Vaught said.
A federally guaranteed bond issue could be an enormous help to Illinois in dealing with a huge fiscal 2011 budget hole that Dan Long, executive director of the Commission on Government Forecasting and Accountability, the Legislature’s fiscal research arm, now pegs at $11 billion to $12 billion.
Mr. Vaught said a federal guarantee would cut the interest rate on such a bond to “in the 3% to 4% range” from “5% to 6%.” That would make it much more profitable — and less risky — for the state, which would invest the funds in higher-yielding stocks and bonds.
Since any profits could be booked up front, at least in part, the state would be able to avoid making hundreds of millions and perhaps billions in annual contributions to worker pensions that it otherwise would have to come up with in the next few years.
* 2…
state’s bonds, which critics say are too financially risky to attract investors
* Actually, the state’s bond sales have consistently been way over-subscribed. From July…
State receives $14.9 billion in orders for $1.5 billion bond deal
* 3…
Quinn said after announcing the budget that seeking the federal guarantee was only a precaution
* Um, he never said that. Citizens Against Government Waste claimed Quinn said this last month when it awarded the governor its “Porker of the Month” honor…
When queried about it then, the governor claimed that the inclusion of that bailout language was a “precaution.”
Notice how CAGW used quotes around “precaution,” but the word doesn’t appear at all in the 2011 Fox Business story it linked to. Nor is the word or the quote in the video accompanying the story. So, that’s just false.
…Adding… The group should’ve linked to this story…
The governor of Illinois said Friday he is not seeking a federal guarantee of his state’s pension debt, but that he included the proposal in his budget last week “as a precaution” as he struggles to fund pension obligations for public employees.
“That’s not something we’re pushing, really,” Gov. Pat Quinn (D-Ill.) said in an interview with Fox Business, after he and a dozen fellow Democratic governors met with President Obama at the White House to discuss possible moves to boost the economy.
OK, so he did say that. Let’s move on….
* 4…
then later called the related wording a “drafting error,”
* In reality, Quinn’s staff immediately said a staffer made an error when the analysis was written when queried by Fox Business News and others in 2011…
Brie Callahan, spokeswoman for the governor’s office, said Quinn would turn down all offers of federal bailout if the state finds itself out of cash.
“We believe that the states have an obligation to pay their bills and to meet the demands they have put upon themselves,” she said. “We don’t want any federal assistance in terms of bankruptcy.”
* So, what happened between 2009 and 2011? Back in 2009, and then again in 2010 Quinn used borrowing to make the full pension payment. But then he declared that there would be no more bonding for pension payments. Why? Well, the income tax hike gave him the revenues to make those payments. So, there was no pension bond request in his FY 2012 budget proposal in February of 2011. The tax hike revenues will fall short of making those payments in the coming years, which is a big reason why he’s pushing pension reform. Also, the Republicans took control of the US House in November, 2010 election, so by early 2011 there was no way in heck any idea like that would fly.
In other words, when the state was borrowing to make pension payments, Quinn discussed a federal bailout. But he was apparently denied by the President and DC Democrats back in 2009 because nothing ever happened, even with Democratic control of both congressional chambers.
And now, for whatever reason, the echo chamber is dredging these old stories up.
* Back to the Fox News story…
In addition, an editorial Tuesday in the Chicago Tribune argued that saving Illinois will “start a stampede of demands for equal treatment from other financially troubled states” with public pension debts ranging from $1 trillion to $25 trillion.
That was no “editorial.” It was an op-ed by Dennis Byrne. Big difference. [And no offense meant to Dennis, either. Just pointing out that an op-ed ain’t an editorial.]
- MrJM - Monday, Oct 1, 12 @ 11:47 am:
You and your durn facts, Rich.
– MrJM
- CircularFiringSquad - Monday, Oct 1, 12 @ 11:49 am:
Come on Capt Fax everyone knows a Dennis Byrne free op ed is just like a editorial.
Just think if the US had sent the same amount to the states to erase bill backlogs and fast track public works that they gave AIG — 180+ billion.
Just think if Gags Brady and Billboard had voted to sell the bonds — that already have the pay back source — to pay off IL old bills.
Te real question is when will Fox figure out their nonsense is not gaining traction? Or will they conclude that Romney et al were just too big mutts to carry their brilliant mesaages?
BTW the Shimkus boy toy rasslin’ with LiLo at 6 a.m. was only a part timer. No word if he had been in the page program
- walkinfool - Monday, Oct 1, 12 @ 11:49 am:
Correcting Fox News with real facts?
Sisyphus with his boulder.
- wordslinger - Monday, Oct 1, 12 @ 12:12 pm:
The lunacy on Fox and Drudge is getting worse every day in the runup to Nov. 6. Apparently, virtually the entire planet is in on the conspiracy to keep the “truth” from the people.
- Jim - Monday, Oct 1, 12 @ 12:21 pm:
The governor of Illinois said Friday he is not seeking a federal guarantee of his state’s pension debt, but that he included the proposal in his budget last week “as a precaution” as he struggles to fund pension obligations for public employees.
“That’s not something we’re pushing, really,” Gov. Pat Quinn (D-Ill.) said in an interview with Fox Business, after he and a dozen fellow Democratic governors met with President Obama at the White House to discuss possible moves to boost the economy.
http://www.foxbusiness.com/industries/2011/02/25/illinois-gov-says-controversial-proposal-precautionary/
- Rich Miller - Monday, Oct 1, 12 @ 12:28 pm:
Thanks, Jim!
- Cal Skinner - Monday, Oct 1, 12 @ 12:55 pm:
What happened between 2009 and 2011 was the Republicans took control of Congress and the Illinois Congressman said they opposed Federal guarantees.
- Rich Miller - Monday, Oct 1, 12 @ 12:57 pm:
Cal, that’s mentioned above.
===Also, the Republicans took control of the US House in November, 2010 election, so by early 2011 there was no way in heck any idea like that would fly.===
- Meanderthal - Monday, Oct 1, 12 @ 1:06 pm:
Every cycle there are several GOP rep or senate candidates who get plastered by Personal PAC mailers for being anti-choice when they are not. This isn’t much different.
- Rich Miller - Monday, Oct 1, 12 @ 1:09 pm:
===get plastered by Personal PAC mailers for being anti-choice when they are not===
1) Personal PAC isn’t a news organization.
2) Personal PAC warns everyone who receives its questionnaire that not returning the questionnaire means the group will automatically assume that the candidate is 100 percent pro life.
Doesn’t make it right, but they are at least warned in advance.
- Meanderthal - Monday, Oct 1, 12 @ 1:14 pm:
Fair enough. I look forward to your next post telling Personal PAC it isn’t right to misrepresent a moderate GOP candidate’s views on abortion.
- Cook County Commoner - Monday, Oct 1, 12 @ 1:15 pm:
Putting aside the when and if of the story, Gov. Quinn was prescient in considering, no matter how remotely, the idea of a federal back-up to state pension funds. Illinois needs a currency printing press, and the feds have the only ones. The Illinois Teachers Retirement System recently lowered its future investment return assumption which will lower its funded ratio and increase the amount of required contributions. My local high school just concluded its budget and increased the amount for teacher benefit contributions over 15% from last year. Instead of incinerating $$$$ overseas, maybe it’s time the feds started propping up the states instead of wing nut regimes. The currency devaluation which will ensue in printing states like California and Illinois out of their profligacy may be preferable to the increased taxes and bond sales and significant reduction in services which will be needed to salvage state and local government pensions. Isn’t Illinois too big to fail?
- Rich Miller - Monday, Oct 1, 12 @ 1:16 pm:
Meanderthal, I’ve pointed this out numerous times, but if candidates don’t respond, there’s no real way of knowing where they stand. Stiff that monster at your peril.
- Loop Lady - Monday, Oct 1, 12 @ 1:31 pm:
On a somewhat similar note, (money and politics) what do Rich and his bloggers think of the story on the front page of the Trib alleging that a take over of IL State politics by Republicans is being plotted as i type with the use of boku wealthy GOP donors line Rauner in 2014? Doesn’t it take more than cash to attain power? Do actual votes from the electorate still count? Say what?
- Crime Fighter - Monday, Oct 1, 12 @ 1:35 pm:
Fox & Tribbie sources = empty chairs.
- RMD - Monday, Oct 1, 12 @ 2:55 pm:
A fed bail out maybe the only way the Illinois gets out of this situation. Let’s not take it off the table simply for political reasons.
- Anonymous - Monday, Oct 1, 12 @ 3:14 pm:
If Quinn and company are not thinking that the feds will bail the state out, then what are they thinking? After a massive tax increase, we still have not solved the pension problems and are not seriously considering anything (regardless of the posturing). I would guess the unspoken truth is that Quinn is counting on the feds to save the state as he basically does not have a clue.
- capncrunch - Monday, Oct 1, 12 @ 3:31 pm:
“The currency devaluation which will ensue in printing states like California and Illinois out of their profligacy…”
There would be no devaluing the dollar if the government simply guaranteed Illinois bonds. Only the Federal Reserve Bank can print dollars and even Ben Bernanke is not about to purchase states’ bonds because that would involve the Fed in politics, which is a big no no.
- Anonymous45 - Monday, Oct 1, 12 @ 5:22 pm:
capn: nothing political about the Fed? Maybe not overtly, but c’mon. They are fiscal policy in the US, Bernacke is just a figurehead.
- wordslinger - Monday, Oct 1, 12 @ 5:44 pm:
–capn: nothing political about the Fed? Maybe not overtly, but c’mon. They are fiscal policy in the US, Bernacke is just a figurehead.–
Monetary policy, daddio. It’s a big difference.
- Judgment Day (Road Trip) - Monday, Oct 1, 12 @ 6:02 pm:
Rich:
It’s OT, but you might want to take a look at the story GRETCHEN MORGENSON wrote in the NYT this weekend about the $25 bil mortgage ’settlement’ that almost all the State attorney generals (including our own Lisa Madigan) bought into hook, line, and sinker. And with press conference all over the place patting themselves on the back.
Well, the ‘Banksters’ look to be back playing games, and the financial blogisphere is all over it, which means MSM ought to start becoming aware of it in another 2-3 weeks.
Citibank & JP Morgan Chase are both prominent, but not the only one. Short story: They are forgiving mortgage ‘debt’ that is no longer owed, and probably are going to try and get tax credits for such faked up debt forgiveness. Nice business if you can get it.
Wonder where our illustrious Attorney General is going to be over this one?
- Esquire - Monday, Oct 1, 12 @ 9:36 pm:
Folks, if everything is rosy, why is there an amendment on the ballot to permit the legislature to revise the pension system in Illinois? Pension benefits used to be sacrosanct under the state constitution. This is something that is frightening to many public employees. Can we trust the legislature that messed up to reform itself and make things right after underfunding pensions for so long by skipping contributions?
- western illinois - Monday, Oct 1, 12 @ 10:40 pm:
The Federal Reserve is who is buying bonds and they could very will buy munis at some point of QEternity. Right now they are buying real junk like MBSs. There are as Rich pointed out plenty of buyers for Illinois bonds at good rates
What would really help Illinois would be to some how restructure the penions funds as and Insurance company/Bank like AIG and get acess to the ZIRP money at the feds discount window