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Another one-sided hit piece
Tuesday, Jun 25, 2013 - Posted by Rich Miller * From an AP story that is absolutely drenched in bias…
I’m sure there are some who won’t buy, but every Illinois bond issue has been over-subscribed by a lot. Why? Because the state’s low bond ratings give investors a premium return. * More…
Virginia and Maryland both have AAA credit ratings. Illinois hasn’t had a AAA rating since 1983, so the comparison is not exactly fair. And after peaking in 2010, interest rates on comparitive Illinois bond premiums have actually come down. * More…
California’s pension reform was almost solely focused on new hires. Illinois did that in 2010. There’s no doubt that California is far better managed than Illinois, but the media constantly ignores the fact that Illinois beat Cali to the punch on prospective pension reform. Massachusetts’ pension system wasn’t nearly as generous as ours. For instance, the state’s 2011 pension reform plan actually increased some benefits, including…
The state also reformed its health insurance plan for retirees, something Illinois has already done. Louisiana’s reforms are here. There was a “cash balance plan” for new hires as well. * The bottom line is Illinois has a severe problem, both in its pension systems and the way they are perceived. That perception problem isn’t helped by goofy stories like the AP’s.
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- Roadiepig - Tuesday, Jun 25, 13 @ 2:29 pm:
After reading the whole article this morning I asked the SJ-R ( on the comments board) if they had starts getting the reporting from the Civic Committee of Chicago. So bias even thus blogs resident state worker “haters ” would probably be embarrassed by the reporter’s obvious leanings….
- Roadiepig - Tuesday, Jun 25, 13 @ 2:31 pm:
Sorry for the typos - autocorrect acting up on my phone
- wordslinger - Tuesday, Jun 25, 13 @ 2:32 pm:
I saw that on the right this morning. It’s commentary. I’m surprised the AP let it through masquerading as a straight news story.
- Ahoy! - Tuesday, Jun 25, 13 @ 2:37 pm:
I agree that our perception isn’t helped by the goofy stores (and some that are just plain wrong), AP included.
Of course, Illinois could help it’s perception by being a little less goofy, we need to help ourselves and than maybe others will help us. One of the reason’s others are using us as a punching bag us is because we’ve made it easy.
- Rich Miller - Tuesday, Jun 25, 13 @ 2:39 pm:
===we need to help ourselves and than maybe others will help us===
Try reading the post again.
- Ummmm - Tuesday, Jun 25, 13 @ 2:43 pm:
So that comparison isn’t “fair” because Illinois has been dysfunctional and mismanaged financially since the early 80s? C’mon now. The point is accurate and truthful. The fact is that taxpayers are indeed being hosed by the longstanding political corruption ruining this state.
It’s proper enough to point out the context of the disparity - how loooong Illinois has been in a basket case situation but it sure doesn’t change the base reality.
It’s time to stop looking for excuses to explain away the democrat part and Republican Party corruption that has brought us too this position and instead admit it openly in order to do something to actually solve it - namely cut off the corrupt politicians from the free spending habits that got us here.
- dupage dan - Tuesday, Jun 25, 13 @ 2:45 pm:
=== I’m sure there are some who won’t buy, but every Illinois bond issue has been over-subscribed by a lot. Why? Because the state’s low bond ratings give investors a premium return ===
Ummm, doesn’t that translate to higher costs of borrowing for us poor taxpayers? Great, the bonds sell like hotcakes. We’re the ones left paying the higher interest costs. And the upside of this is…….?
- Anonymous - Tuesday, Jun 25, 13 @ 2:46 pm:
Last Friday Rich pointed out a quote from a story covered in Bloomberg’s and other places, “Relax, Bondholders, Illinois Won’t Default
By Marc Joffe”
Mr. Joffe noticed, “The ratio of debt to gross state product of Illinois is about 6 percent, and it has ratings in the single A range; Ontario, Canada, with a similar population and similar-sized economy, has a debt-to-gross-domestic-product ratio of 39 percent and ratings in the double A range. Something doesn’t quite add up.”
- Will Caskey - Tuesday, Jun 25, 13 @ 2:51 pm:
Sure, IL’s national pension press is kind of silly and driven by an ideological fixation on pensions.
But if you look at just, for example, our insane outflow backlog and our budgeting process even before the first ridiculous stopgap budget, the broad view of the state’s finances isn’t any nicer.
I mean, the debate over pension reform is “circumvent the constitution using various legal jargon” or “LOL who cares let’s just cut everything.” How does the constitutional mandate to endure bond repayment look in light of that?
- Anonymous - Tuesday, Jun 25, 13 @ 2:58 pm:
Rich,
Why is this story so bias? Illinois bonds are indeed toxic to some investors, hence the increased interest necessary to attract investors willing to take on risk. The numbers don’t lie, Illinois tax payers are paying considerably more for our roads, bridges etc, because of extreme fiscal mismanagement and the failure to do anything about the serious budget problems this past legislative session.
- wordslinger - Tuesday, Jun 25, 13 @ 3:03 pm:
–And the upside of this is…….?–
DD, do you read anywhere where someone said there was an upside? It’s a direct response to the preceding quote in the story. Why are you confused?
- Rich Miller - Tuesday, Jun 25, 13 @ 3:04 pm:
===hence the increased interest necessary===
OK, but look at the quote the AP ran…
===won’t buy Illinois or bonds with Illinois labels at any price===
That’s the bias. Read, for crying out loud.
- Robert the Bruce - Tuesday, Jun 25, 13 @ 3:05 pm:
The bias I see is that there’s nothing in the article about the fact that our bond issues have been oversubscribed, and nobody quoted saying that at the interest rates they are going for, Illinois bonds might be one of the best bargains in the bond market right now.
What is accurate about the article is the simple fact that Illinois’ taxpayers ultimately pay more in interest than taxpayers in other states. Blame the rating houses all we want, but not all bond buyers don’t take those ratings as gospel anyway; the state leadership and those responsible for selling our bonds need to start making better arguments for paying out less of a premium.
- Joe M - Tuesday, Jun 25, 13 @ 3:06 pm:
This has been mentioned before, but it is something that the media ignored. Moody’s in its June 6th downgrade report said this about Illinois, “Illinois still has a diverse and large economic base, with above-average wealth levels.” That same report also mentioned Illinois’ strengths.
STRENGTHS
–Sovereign powers over revenue and spending
–Statutory provisions giving priority to debt service over other state expenditures
–Large, diverse, and wealthy economy
http://www.moodys.com/research/Moodys-downgrades-State-of-Illinois-27-billion-of-General-Obligation–PR_275057
Also ignored by the media is the fact that Illinois has the 5th highest GDP of the 50 states. And even accounting for population, Illinois has the 15th highest GDP per capita. So yes, Illinois still has a diverse and large economic base, with above-average wealth levels.
- Just Observing - Tuesday, Jun 25, 13 @ 3:10 pm:
=== === won’t buy Illinois or bonds with Illinois labels at any price === ===
=== That’s the bias. Read, for crying out loud. ===
The guy quoted says “[t]here are investors” that won’t buy at any price. He doesn’t say there aren’t any investors that will buy.
- Anonymous - Tuesday, Jun 25, 13 @ 3:14 pm:
won’t buy Illinois or bonds with Illinois labels at any price===
That’s the bias. Read, for crying out loud.
It says some investors, That is certainly true. If all bond investors were willing to buy Illinois bonds there would be no premium.
- Left Illinois Behind - Tuesday, Jun 25, 13 @ 3:20 pm:
Depends on the maturity date. Would you purchase a 20, 25 or 30 year bond expecting Illinois to be more solvent then than now?
- wordslinger - Tuesday, Jun 25, 13 @ 3:22 pm:
JM, also ignored is that it is still a seller’s market in muni bonds, where rates are the lowest since they’ve been since the 1950s.
Illinois was AAA in the 80s and paying upwards of 13% on long bonds.
The state could work harder, and the “underwriters” could do something other than cash their checks, in order to get the supply and demand lines closer for a better price. There’s no glory in being oversubscribed by a factor of four.
- Arthur Andersen - Tuesday, Jun 25, 13 @ 3:24 pm:
Aside from the bias, who the heck is Performance Trust Capitol Advisors?
Don’t bother with the Google, as their website is full of baloney.
Apparently none of the major bond buyers were willing to walk out on the limb with such a “toxic” quote. That firm, which says its primary line of business is brokerage, not money management, must not want any State of IL business.
- wordslinger - Tuesday, Jun 25, 13 @ 3:25 pm:
–Depends on the maturity date. Would you purchase a 20, 25 or 30 year bond expecting Illinois to be more solvent then than now?–
170 years, never missed a payment.
What does “more solvent” mean, anyway?
- dupage dan - Tuesday, Jun 25, 13 @ 3:33 pm:
Word, many folks here post that same stuff about how bonds will be hard to sell since the ratings have been lowered. All I was doing was making note of the other side of the equation. Bonds are safe since the state has to pay them off no matter what. Lower ratings means higher costs. It’s all good for the bond buyer, no? Just not so good for us taxpayers. Not sure what there is about that that is baffling to you.
- Jimmy 87 - Tuesday, Jun 25, 13 @ 3:36 pm:
Several weeks ago, towards the end of session, there was a subscribers only CapFax that began with the intro - “Rich, your not helping.” I think you correctly pointed out in the same Fax that frankly its not your job to help; I 100% agree with you.
But just as you surmised that it’s not your job to “help” with the issue you discussed that day, I really don’t feel it’s the job of the AP to help run PR on the way the state’s pension problems are perceived. The AP wrote an article that was factually accurate (yes, it was biased) but I don’t know that I would necessarily characterize it as goofy either. Just my thoughts…
- Rich Miller - Tuesday, Jun 25, 13 @ 3:50 pm:
===an article that was factually accurate===
I disagree.
- Robert the Bruce - Tuesday, Jun 25, 13 @ 4:01 pm:
I suspect what is going on is:
–Ratings Houses - Let’s cover our arses and make up for some past gross failures at providing accurate ratings. Let’s give some bad ratings out; might as well pick on Illinois.
–Advisors to Bond Buyer Investors - Let’s beat up on Illinois’ financial situation in order to get an extra 1% of return for our clients. I know, I’ll call AP and point out what the ratings houses are doing.
—Mainstream media - Always fun to do a hit piece on Illinois finances. And we didn’t study finance or math so we don’t really understand this; we studied journalism…but that get other sides of the story was taught a long time ago.
—Republican politicians and conservative media: Outstanding! Another chance to beat up on the Democrats who are in charge. Never mind whether our bashing Illinois’ finances might actually hurt my state’s finances in the long run.
–Illinois’ underwriter - Make money if the bonds sell. Haha my stupid client doesn’t demand lower interest rates for their bond sales.
—Gov Quinn’s office - 4x oversold…good! An extra $18M in annual interest costs? Well, that stinks. But omigod what will happen to us if the bonds don’t sell out? Wow, that’d be doomsday. Let’s not take that chance. Go ahead, underwriter, offer whatever you want!
- BR - Tuesday, Jun 25, 13 @ 4:04 pm:
More like the truth hurts Rich… Are you calling the AP writer a liar? We’re all wrong and Illinois is really in great shape? We all can be so relieved now… Rose colored glasses is how we got to be the worst state in the Union in so many ways….
- Rich Miller - Tuesday, Jun 25, 13 @ 4:12 pm:
===We’re all wrong and Illinois is really in great shape? ===
Did I say anything even close to that?
Sheesh, you argue like a child.
- wordslinger - Tuesday, Jun 25, 13 @ 4:20 pm:
This is one of those posts where actually reading it is considered optional by many of those commenting, lol.
- Bill White - Tuesday, Jun 25, 13 @ 4:20 pm:
Cui bono?
Who benefits from smear pieces that excessively denigrate our state? Bond holders who receive higher interest rates due to stirred up passions.
Perhaps some see IL bonds as toxic. Most others see superior yield to risk ratios.
- SG8prl - Tuesday, Jun 25, 13 @ 4:24 pm:
Out of curiosity, why is the link to Boston.com and not to sj-r.com?
- BR - Tuesday, Jun 25, 13 @ 4:25 pm:
Please give us specific things that are NOT accurate or a lie…. instead of calling me a child… (which in itself really says more about you than me).
- Old and In The Way - Tuesday, Jun 25, 13 @ 4:25 pm:
Talk about a shell game! Read the Rolling Stone/Taibi article on Moody’s, S&P, and Fitch’s complicity in the mortgage backed securities fiasco and you either have to laugh at the AP article or just puke! Believe me there will be plenty of buyers at the next sale. What is a scandal is that the bond ratings houses are perpetuating a scam that is costing the Illinois taxpayers millions and we are actually paying them a fee for the abuse!!!
Of course there are those who would say that this additional cost is the price the taxpayers are paying for NOT making the pension payments these many years……the truth can be painful and expensive.
BTW Could we get AA to do a financial basics seminar for some of these moron reporters…..they are pretty lame?
- wordslinger - Tuesday, Jun 25, 13 @ 4:33 pm:
BR, let’s see if I can help you out:
–No one called the AP writer a liar
–No one said Illinois is in great shape
– No one said we can all be relieved now
– and no one is looking at anything through rose-colored glasses.
What you did, you see, is you created a series of Strawmen and then mightily knocked them down.
Children do that, only they’re usually much better at it.
- Rich Miller - Tuesday, Jun 25, 13 @ 4:34 pm:
===Please give us specific things that are NOT accurate===
Read the freaking post!
Sheesh, man, are you that dumb?
- Norseman - Tuesday, Jun 25, 13 @ 4:35 pm:
The quality of the reporting has been terrible. Most of the problem stems from lazy reporters who don’t bother to research the facts.
- Rich Miller - Tuesday, Jun 25, 13 @ 4:40 pm:
===you created a series of Strawmen and then mightily knocked them down. ===
Correct.
- Rich Miller - Tuesday, Jun 25, 13 @ 4:53 pm:
Also, BR, your “I know you are but what am I” comment pretty much confirms you’re somewhere in the neighborhood of 11 years old.
- wordslinger - Tuesday, Jun 25, 13 @ 4:55 pm:
Robert the Bruce, I think you hit the motivations for most of the major players here, particularly the rating agencies.
Since the crash, they’ve made a big show of being tough on everyone (S&P downgraded the United States, for crying out loud, which is laughably senseless).
They need to look tough. They’ve already settled private investor lawsuits worth hundreds of millions for fraudulent shiny ratings.
Next up is the $5 billion federales lawsuit against S%P. After that, you can bet Moody’s and Fitch will settle on similar terms.
- Rod - Tuesday, Jun 25, 13 @ 5:15 pm:
Rich in part you wrote: “California’s pension reform was almost solely focused on new hires. Illinois did that in 2010. There’s no doubt that California is far better managed than Illinois, but the media constantly ignores the fact that Illinois beat Cali to the punch on prospective pension reform.” Agreed, but in terms of the fiscal stability of Illinois our income tax increase was far less than the one Cal voters agreed to with Proposition 30. According to what I have read they approved a very major income tax surcharge.
At 13.3 percent, the top-tier California income tax is higher than any other state, the steepest it has been since World War II. Proposition 30 also raised the state sales tax from 7.25% to 7.5% for four years, starting Jan. 1, 2013.
So the overall resources of the State of California have increased for more reasons than just pension reform and bond buyers can be more relaxed about their investments. Its not just that California is better managed, they have more money in taxes.
Would the citizens of Illinois have voted up taxes like California did? I doubt it.
- Smitty Irving - Tuesday, Jun 25, 13 @ 7:42 pm:
If one considers AP less a reporting service and more a stenographic service, their stories make much more sense. For example, you don’t expect in-depth reporting, even if it’s necessary for context.
- BR - Tuesday, Jun 25, 13 @ 8:09 pm:
When the owner of the site disagrees and calls posters babies, and dumb, it’s impossible to have an intelligent conversation. Good Luck with your one pony show Rich… I’m out of here…
- lost in the weeds - Tuesday, Jun 25, 13 @ 8:12 pm:
No state has defaulted since the great depression.
- Old and In The Way - Tuesday, Jun 25, 13 @ 8:58 pm:
BR-
Goodbye and good riddance! You might want to try one of the right wing blogs out there. Maybe the Tribune. You know, where reality and logic can be suspended along with critical thinking. You add nothing to the discussion.
You cab be a part of the solution, part of the problem or part of the landscape. Enjoy the view!
- Cincinnatus - Tuesday, Jun 25, 13 @ 9:05 pm:
BR = Bruce Rauner?
- Judgment Day (Road Trip) - Tuesday, Jun 25, 13 @ 10:05 pm:
“Mr. Joffe noticed, “The ratio of debt to gross state product of Illinois is about 6 percent, and it has ratings in the single A range; Ontario, Canada, with a similar population and similar-sized economy, has a debt-to-gross-domestic-product ratio of 39 percent and ratings in the double A range. Something doesn’t quite add up.””
Still researching, but I believe part of the province of Ontario’s debt-to-GDP (gross-domestic-product) ratio of 39 percent revolve around Ontario’s health care obligations as part of provincial costs related to Canada’s national health care system.
I think you are looking at some apple-to-oranges (maybe grapefruits) comparisons.
- Judgment Day (Road Trip) - Tuesday, Jun 25, 13 @ 10:12 pm:
“They need to look tough. They’ve already settled private investor lawsuits worth hundreds of millions for fraudulent shiny ratings.
Next up is the $5 billion federales lawsuit against S%P. After that, you can bet Moody’s and Fitch will settle on similar terms.”
As much as I think it’s justified, the fed’s picked on the worst potential case against S&P. But they had to do SOMETHING, because the Fed’s under current leadership whiffed on everything else (5 year statute of limitations).
But if you’ve read the S&P positions, their audacity is beyond amazing, but honestly, their position is stronger than what the Fed’s are slopping out there. It’s almost like the Fed’s took the weakest position they could find just to say “well, we did something”.
- Lost in the Weeds - Tuesday, Jun 25, 13 @ 10:38 pm:
So let us get rid of 30 year home mortgages and make everyone who wants to buy a house pay 100 percent down.
I mean 30 year mortgages are a creation of the new deal to allow people to borrow so they can buy homes. Who needs to own homes? Let us get rid of this government subsidized program.
Oh wait, we had a system that allowed people with no money down, no income, no job to get a loan to buy a house- so as to increase home ownership. And that took out 40 percent of US citizens wealth in a crash and financial crisis. And it was in part supported by packaging these mortgages into triple A rated bonds, rated by the same bond companies that now lower the rating of some Illinois bonds to single A.
- Taxpayer - Wednesday, Jun 26, 13 @ 5:18 am:
Make that $72 from the pocket from the half of Illinois residents that pay taxes.
- biased observer - Wednesday, Jun 26, 13 @ 8:24 am:
if you are going to get on this site and comment, you just have to be prepared to go against a couple dozen insider lefties with lots of free time. I think many of them consider it part of their actual job to get on here and post. further one has to realize many people who post on here are responding to union emails and notifications to get on this website and comment.
people know that many insiders read this blog and accordingly there seems to be organized efforts to get across agendas.
rich, and many of the posters on here, have a very good grasp of the issues Illinois faces. one just has to realize that there is a massive over representation of progressives and democrats on this site, many of whom have vested interests.
I would in fact encourage any republican or indepedant or politician not worried about catering to any special interests to get on here and follow this website for a few months and engage in repartee with the posters on here as an excellent preparation for the campaign trail, issue preparation, etc.
might want to keep that in mind, BR.
not always fun, though.