103 Comments - Anonymous - Thursday, Jun 9, 16 @ 10:28 am: This does not create a good business climate Gov. Rauner. - Soccermom - Thursday, Jun 9, 16 @ 10:28 am: If the Governor doesn’t give up his extreme agenda and pass a budget, we’re going to wind up with a bond rating that goes on beyond zebra. Soccerdad just asked whether the rating agencies have ever been forced to use Hebrew letters… - TwoFeetThick - Thursday, Jun 9, 16 @ 10:29 am: Rauner’s plan is proceeding right on track. Any bets that he’ll further diss Illinois right before the upcoming bond sale? Ahhhh, I can smell the money! - Huh? - Thursday, Jun 9, 16 @ 10:30 am: 1.4% - I don’t work for the bond rating agencies. OW - Governors own the down ratings. - anon - Thursday, Jun 9, 16 @ 10:32 am: Political gridlock? It takes two to tango, partisans to the contrary notwithstanding. Besides, when downgrades happened on Quinn’s watch, Rauner attributed all the blame to the governor. - Dee Lay - Thursday, Jun 9, 16 @ 10:33 am: Madigan and the bond rating agencies he controls….. - independent - Thursday, Jun 9, 16 @ 10:34 am: Good going Governor!!!!! What a way to run a State. - Sir Reel - Thursday, Jun 9, 16 @ 10:34 am: Duh - Soccermom - Thursday, Jun 9, 16 @ 10:35 am: Can I just point out that this costs us, the taxpayers, millions and millions of dollars? That it siphons off money that could be used to invest in infrastructure — and create jobs - -here in Illinois and sends those dollars to enrich outside investors? This is real — and it further enriches Rauner’s wealthy pals at our expense. - Norseman - Thursday, Jun 9, 16 @ 10:40 am: It’s the budget, s… - Flynn's mom - Thursday, Jun 9, 16 @ 10:40 am: How does that help the Turnaround Agenda?? - up2now - Thursday, Jun 9, 16 @ 10:41 am: I really, really think the governor’s plan is to crash and burn the state. - Fusion - Thursday, Jun 9, 16 @ 10:43 am: ==It added that without a budget plan to offset a revenue loss from 2015’s rollback of income tax rates, Illinois’ chronic backlog of unpaid bills could reach prior peak levels of about $10 billion in the coming months.== Yep. Lower taxes does NOT cause job creators to create a whole bunch of new jobs, thereby creating additional taxpayers, thereby increasing revenues to fund the government. This does not happen. Conservatives want you to believe this happens, but it is not true. The only things that lower taxes create is debt, increased bill backlogs, and underfunded pensions. That’s it. Lower taxes do NOT create jobs and an overall increase in tax revenues due to additional taxpayers paying into the system. This doesn’t happen, but conservatives peddle this nonsense every day, negatively impacting policy discussions and negotiations. And as a result, we find ourselves in the situation we are in. Ridiculous. - Shemp - Thursday, Jun 9, 16 @ 10:45 am: It is likely going to crash and burn with or without the Governor. We were heading down this path long before his election. Even if Quinn were in and the inc tax was 5%, we’d still be bleeding. - RNUG - Thursday, Jun 9, 16 @ 10:48 am: Everyone should have known this was coming. As Rich keeps saying, find another way. I laid out one possible path forward yesterday. There are others. But the bottom line is increased revenue (taxes) and fiscal constraint … even if you have to handcuff the State from new spending. - Lucky Pierre - Thursday, Jun 9, 16 @ 10:48 am: How is it “extreme” to have some restrictions on prevailing wage like 40 + other states do?. Same with some restrictions on collective bargaining like Chicago and many other states do. Illinois is “extreme” by our anti business- pro trial lawyer policies- and our unemployment and outward migration numbers prove it. - PalumbrasWay - Thursday, Jun 9, 16 @ 10:51 am: > Yep. Lower taxes does NOT cause job creators to create a whole bunch of new jobs, thereby creating additional taxpayers, thereby increasing revenues to fund the government. This does not happen. Conservatives want you to believe this happens, but it is not true. Tell that to the states of FL, TX who are almost consistent job creation states with growing populous (even when you net out the baby boom retirement effect). It’s amazing to me the twisted logic pro-high tax people will twist themselves into to try to justify raising taxes in IL. By your logic, the highest tax rates should be the highest growth areas. The fact belie your arguments. > The only things that lower taxes create is debt, increased bill backlogs, and underfunded pensions Why aren’t low tax states swimming in the kind of pension debt that IL is then? It’s a nonsensical argument. - blue dog dem - Thursday, Jun 9, 16 @ 10:54 am: RNUG, future spending? C’mon. I thought we were buds..? Give Old Blue about $2 bil in current spending and I can go along with increased revenue. If you and I can get together, I think we could do it….. then we tax the hell out of them Oreos and we got er licked. - illinois manufacturer - Thursday, Jun 9, 16 @ 10:54 am: If you so hate Illinois move to Florida or Texas then - 47th Ward - Thursday, Jun 9, 16 @ 10:55 am: ===How is it “extreme” to have some restrictions on prevailing wage like 40 + other states do?=== Well, the fact that you can’t find 60 votes in the House and 30 votes in the Senate for this idea is a good sign. That should tell you a little something about what Illinoisans want and what they don’t want (hint: they don’t want to work for lower wages). - TwoFeetThick - Thursday, Jun 9, 16 @ 10:56 am: Huh. It seems my post are being moderated. That’s ok, but someone really ought to look into it. - A Jack - Thursday, Jun 9, 16 @ 10:56 am: I am aghast. Not one turn around agenda item mentioned as an item that would help increase Illinois’ bond rating, not a one. - Lucky Pierre - Thursday, Jun 9, 16 @ 10:57 am: One reason low tax states aren’t swimming in pension debt is they don’t have 12,000 people with over $100,00 annual pensions - The Captain - Thursday, Jun 9, 16 @ 10:58 am: Rauner blames Madigan “We paid for the whole piano but we’ve only learned how to play this one note so far.” - the Rauner administration - Soccermom - Thursday, Jun 9, 16 @ 10:59 am: From Rauner’s campaign website: Reality: Pat Quinn Has Seen Illinois’ Credit Rating Downgraded 13 Times, And Our GDP Growth Is Among The Worst In The Midwest Under Quinn, Illinois’ Credit Rating Has Been Downgraded 13 Times. “Moody’s Investors Service downgraded Illinois’ credit rating to “A3″ from “A2″ after the General Assembly failed to move forward on pension reform before the end of the spring legislative session. The rating agency also says it has a negative outlook on Illinois’ credit: ‘The negative outlook reflects our expectation that Illinois’ pension liabilities will continue to grow, in the absence of substantive reform efforts, and that annual funding requirements will become unmanageable, particularly if no steps are taken to address the loss of revenue from expiring income tax increases in 2015.’ This was Illinois’ 13th credit downgrade under Gov. Pat Quinn.” (Ted Dabrowski, “Moody’s downgrades Illinois credit rating: 13th credit downgrade under Quinn,” Illinois Policy Institute, 6/6/13) - Fusion - Thursday, Jun 9, 16 @ 11:00 am: @PalumbrasWay, How do you propose we pay the many, many, many state vendors that we owe billions and billions of dollars to? It takes money. How does the government bring in money? Taxes. ==Why aren’t low tax states swimming in the kind of pension debt that IL is then?== Illinois is in pension debt because we were undertaxed at a 3% for a very long time, and as a result, when the GA and governors needed to “balance” the budget, they just wouldn’t fund the pensions. But again, it’s because we were undertaxing. We undertax now at a low 3.75% rate, but it was even lower at 3% before. - TwoFeetThick - Thursday, Jun 9, 16 @ 11:00 am: To clarify, someone ought to look into what I’m posting about, not why the posts are being moderated. I suspect I know why they’re being blocked. - Soccermom - Thursday, Jun 9, 16 @ 11:00 am: Incidentally, Rich, I think it’s time to retire the “Rauner blames Madigan” headline. “In other news, the sky remained blue this morning…” - oldman - Thursday, Jun 9, 16 @ 11:00 am: I suggest Rauner develop a realistic comprehensive budget plan to solve this issue and quit the sniping - Oswego Willy - Thursday, Jun 9, 16 @ 11:01 am: - Huh? - Yep “Under Pat Quinn, the state’s bond rating fell 13 times” To the Update… “Pat Quinn failed… ” Welp, Bruce Rauner failed. Right, Eric Zorn… - Formerly Known As... - Thursday, Jun 9, 16 @ 11:02 am: ==Illinois’ chronic backlog of unpaid bills could reach prior peak levels of about $10 billion in the coming months== The Madigan budget would have gotten the backlog to $15 Bill. Should have just passed and signed that /s - Keyrock - Thursday, Jun 9, 16 @ 11:02 am: I believe it should be: “Rauner and the bond rating agencies he controls.” - Gruntled University Employee - Thursday, Jun 9, 16 @ 11:04 am: The only thing that creates jobs is demand. Always did, always will. - PalumbrasWay - Thursday, Jun 9, 16 @ 11:04 am: > How do you propose we pay the many, many, many state vendors that we owe billions and billions of dollars to? It takes money. How does the government bring in money? Taxes. Duh. The least of the problem the state has is the backlog of bills. These are short-term debt issues that pale in comparison to the long term fiscal health of the State. If you are so upset about the fiscal health of IL, you should be far more aghast at the perverted Madigan maneuver to push through SB2048 which is the equivalent of over $100 B in debt on IL residents. > Illinois is in pension debt because we were undertaxed at a 3% for a very long time, and as a result, when the GA and governors needed to “balance” the budget, they just wouldn’t fund the pensions. But again, it’s because we were undertaxing. We undertax now at a low 3.75% rate, but it was even lower at 3% before. No. IL does not lack in revenue, it is excessive pension commitments and spending. IL doesn’t rank as the 5th highest tax burden state and carry a pension load that dwarfs everyone else in the nation because it just didn’t generate enough revenue. That’s absurd. - John Reynolds - Thursday, Jun 9, 16 @ 11:04 am: @palumbras: What are sales tax rates in those states? Taxes on communication? Property taxes? Retirement income? What is the total overall tax rate, on everything, in the states you mention? - AC - Thursday, Jun 9, 16 @ 11:05 am: To me, this suggests a solution that isn’t the least tax increase politically expedient and the smallest reductions in spending so as to minimize political consequences. Instead, it suggests a significant tax increase and a careful look at spending. At this rate our borrowing costs might eventually crowd out our ability to care for the most vulnerable. Also, a tax increase that is postponed will be larger than one implementated more quickly, yet will only have the same impact. Illinois is taking too much financial risk by assuming there won’t be another recession or some other costly calamity by continuing to pile up bills without a plan to pay them. None of this makes Illinois an attractive place for new business to relocate to. We are measurably in worse financial shape than we would have been had we continued the 5% income tax. - Formerly Known As... - Thursday, Jun 9, 16 @ 11:05 am: ==Downgraded 13 Times== That makes what? 10 more to tie the Quinn-Cullerton-Madigan term for the record? /s Is that even possible before hitting =junk= status? - Soccermom - Thursday, Jun 9, 16 @ 11:06 am: To be clear, my point is that, when the bond rating fell under Governor Quinn, Rauner blamed Quinn. When it falls under Governor Rauner, Rauner blames Madigan. You wear this one, Bruce. You did this on purpose. You are not worthy of the office you purchased. - Lucky Pierre - Thursday, Jun 9, 16 @ 11:07 am: 47th Ward the legislature sometimes reflects the will of their donors (labor unions and trial lawyers) and not their constituents.Local control actually polls very well. Most people do not follow the nuances of Springfield (lucky for the politicians) and the fact they can’t pass it does not mean it is not a good idea. If so many other states are having much greater economic growth than we are we might want to try to implement the policies that are allowing this - lake county democrat - Thursday, Jun 9, 16 @ 11:08 am: The median income in Illinois is $57,444. I’m guessing most CapitolFax readers make more (I do). We have a flat tax. Just raising taxes and cutting spending without even willing to barter turnaround agenda items for less tax cuts under the current flat tax regime aren’t just hurting the 1%. It’s putting a disproportionate burden on the working class, as the tax hikes will be a bigger percentage of their income (and surely will be taken from things we consider more necessities/less luxuries than people at the top). I’m dubious about the suggestions of introducing some progressivity through legislation passing Constitutional muster, but if you could trade that for some of the anti-union elements in Rauner’s TA that, for example, would be worth consideration. - Give Me A Break - Thursday, Jun 9, 16 @ 11:10 am: I’ve came to the conclusion, no member of the GOP in Illinois can start a sentence without first saying, Mike Madigan. I bet at a drive window they start their order with “Mike Madigan” and then proceed to state their order. - Triple fat - Thursday, Jun 9, 16 @ 11:11 am: Soccermom - I wish they would use Hebrew letters and follow the Torah’s Holiness Code. If they would - the State’s debts would be wiped clean every 7 years during the Jubilee. - PalumbrasWay - Thursday, Jun 9, 16 @ 11:11 am: > What are sales tax rates in those states? Taxes on communication? Property taxes? Retirement income? Go ahead and look it up and do your own due diligence rather than demand that I spoon feed you the data. IL is in transition right now because of the expiration of the Quinn/Madigan tax rates. But it still projects to be a top 10 tax burden state. People are leaving the state for a reason and it isn’t because Bruce Rauner refuses to turn on the spending spigot in Springfield. The State had the highest unemployment rate in the Midwest pre-Rauner according to BLS. - A Jack - Thursday, Jun 9, 16 @ 11:12 am: Rauner, Rauner, Rauner, didn’t your parents teach you that blaming other people for your failures is not acceptable? It’s your budget to propose and spend, not the Speaker’s. His job is to allocate the money you request. If you don’t request money, he is going to give you what he thinks you need. If you don’t need as much as he gives you, you are free to line item veto or reduce or simply not spend it. Why does everyone understand this besides the Governor? - northshore cynic - Thursday, Jun 9, 16 @ 11:12 am: Is it true that Rauner just hired Goldman Sachs to sell Chicago to Indiana? - Norseman - Thursday, Jun 9, 16 @ 11:13 am: I agree with Soccermom. So for Rauner’s blame Madigan rhetoric we simply type: RRBM which will stand for Rauner Response Blame Madigan. P.S. Do we need the GOP Party echo? - Belle - Thursday, Jun 9, 16 @ 11:14 am: Madgian caused the dinosaurs to leave IL - Big Joe - Thursday, Jun 9, 16 @ 11:14 am: Another reason low tax states aren’t swimming in pension debt is they never skipped out on paying their annual payments into the system. - Me too - Thursday, Jun 9, 16 @ 11:14 am: Florida has tourism and Texas has oil. That’s why they don’t have income taxes. Care to guess what the sales tax is in Florida? They sock it to tourists, not just their residents, so the overall tax burden on residents is lower. Really, I don’t want to live in Texas, or Florida. Texas is filled with “don’t mess with Texas” types who annoy the crap out of me, and Florida is filled with old folks who shouldn’t be driving anymore on the roads, not to mention it’s going to be underwater in the next few decades. Illinois has to raise taxes. That’s the only way to have a balanced budget and improve our bond ratings. Full stop. It isn’t a trade for Rauner to say he’ll let the dems vote to increase taxes in return for screwing over their constituencies. Whatever. Taxes could have remained at 5% before Rauner wasted another ten billion dollars holding out for his 1.4%. Now we are looking at 6 or 7, if we can’t get a constitutional ammendment allowing a graduated tax. You can thank Rauner that you saved 1.25% on your taxes this year (he did demand the general assembly not raise taxes as governor elect), while spending at last year’s levels. He needs to get it through his thick skull that a budget that is 3 billion out of whack that funds Higher Ed, social services, and K-12 would have been a heck of a lot better than shafting all of them and spending 6 billion more. This year it is the same. If he was smart, he’d sign the budget, refuse to release some line items (effectively cutting them, when a line item veto could be overturned with a majority vote), and worry about the turnaround agenda items when Rome isn’t burning around him. After the election, we can raise taxes to cover the budget with Republican votes, or wait until January when the threshold is lower again. Rauner has a budget he could have signed. It was the only budget on the table. By vetoing it, he let the threshold go up for a budget bill, effectively guaranteeing there won’t be one. Maybe Rauner will finally see that it is more fiscally responsible to put 3 billion on a tab, then to put ten billion. There is no option right now to have a balanced budget as there is no additional revenue. 1.4% won’t do squat, so I am not hopeful. - Fusion - Thursday, Jun 9, 16 @ 11:14 am: @PalumbrasWay, Please re-read this post from just last week: https://capitolfax.com/2016/06/03/to-the-numbers/ - sideline watcher - Thursday, Jun 9, 16 @ 11:15 am: “It is likely going to crash and burn with or without the Governor. We were heading down this path long before his election. Even if Quinn were in and the inc tax was 5%, we’d still be bleeding.” Not true. Making full pension payments, paying vendors on time, funding services, honoring contracts is not bleeding. This situation is created by the roll back of income taxes and an entire party who doesn’t want to deal with that very real fact. By your logic, we should be swimming in jobs from those awesome job creators that were just waiting for Illinois to roll back that 67% job killing Quinncometax that was passed under the cover of darkness by tax and spend Democrats! Hmmmm….so what happened when you got what you asked for? “Tell that to the states of FL, TX who are almost consistent job creation states with growing populous (even when you net out the baby boom retirement effect). It’s amazing to me the twisted logic pro-high tax people will twist themselves into to try to justify raising taxes in IL. By your logic, the highest tax rates should be the highest growth areas. The fact belie your arguments.” When you can figure out how to import the weather and beaches and oil from Florida and Texas then you might be on to something. By your logic, no one would live in a high tax state. There’s still quite a lot of people in New York and California. LOL! - northsider (the original) - Thursday, Jun 9, 16 @ 11:19 am: From Moody’s ” The rating downgrade reflects continuing budget imbalance due to political gridlock that for more than a year has kept Illinois from addressing revenue lost due to income tax cuts that took effect in January 2015.” January 2015. Thanks Rauner. - AlabamaShake - Thursday, Jun 9, 16 @ 11:20 am: Seriously. Who calls him Mike Madigan? Does that poll better than Michael? Or Speaker? - PalumbrasWay - Thursday, Jun 9, 16 @ 11:20 am: @Fusion Go read my comment in that thread. Eric Zorn’s column is a bunch of garbage. If you believe those cherrypicked numbers, I’d like to sell you some AAA Grade IL debt. - Anonymous - Thursday, Jun 9, 16 @ 11:21 am: “Every rank-and-file Republican who blindly followed the Governor down this path is directly responsible for the downgrade.” Fixed it for you. - Ducky LaMoore - Thursday, Jun 9, 16 @ 11:26 am: I feel like Bruce Rauner must be just a little kid. Now Brucie, why didn’t you take out the garbage? Because it is Mikey’s fault the garbage is full. Brucie, why don’t you make your bed. No! Mikey will just mess it up. Brucie, please take the dog for a walk. No, it’s Mikey’s fault the dog isn’t walked. Brucie, why didn’t you eat your vegetables? Because they were harvested by union workers. Grow up, and give us all a break. - Huh? - Thursday, Jun 9, 16 @ 11:31 am: “Bruce Rauner caused this credit downgrade. He has been driving Illinois into a financial ditch for the last 18 months and just led the charge to increase Illinois’ debt by another $7 billion. With the exception of the K-12 education bill, Governor Rauner has vetoed all of the appropriation bills that fund the budget, and save the pension system since Day One. Bruce Rauner has insisted on his personal agenda that has nothing to do with the budget and used every tool available to him to prevent passage of a budget that will help this state. Rather than negotiate, the Governor is campaigning around the State and blaming others for his failures. Bruce Rauner owns this credit downgrade.” Fixed it for you. - Fusion - Thursday, Jun 9, 16 @ 11:34 am: @PalumbrasWay, Unfortunately for those of us living in reality, we don’t get to use unicorns and pixie dust to fix the state’s problems. If you haven’t moved to FL or TX yet, maybe you should run for a House seat. You and Sandack would be quite a team! - Anon221 - Thursday, Jun 9, 16 @ 11:35 am: From yesterday’s presser: http://livestream.com/blueroomstream/events/5555187 26:54- “There’s so much rhetoric now. There’s all this mudslinging…You can tell the election season has started…This personal attack stuff is pretty irrelevant.” 29:30- “Do a budget (in air quotes) means raising taxes.” (Is THAT why he won’t provide the GA with a balanced budget of his own???) 31:40- “You’ve heard some pretty outrageous things said. It’s…It’s a distraction.” “Political spin and attacks and verbal…verbal sparring…that’s all lovely, but it’s pretty irrelevant. People should be able to move it aside. I can certainly move it aside.” Moody’s obviously doesn’t quite see the situation through the same lens… - Anonymous - Thursday, Jun 9, 16 @ 11:37 am: Me too. Sales tax in most of Florida is 6 to 7 percent. Cook County hits us with a 10% sales tax! We need less spending in Illinois! - AC - Thursday, Jun 9, 16 @ 11:43 am: ==We need less spending in Illinois!== I’d love to see a serious, detailed budget proposal that actually did that. - Oswego Willy - Thursday, Jun 9, 16 @ 11:44 am: Type all the “But… But Madigan!” All you want. As - Soccermom - cites… Rauner owns the Downgrade. Period. End of the story. Pat Quinn failed… Bruce Rauner failed. Sorry. If you don’t like it, go fake cry at a fake CPS school, LOL - illinois manufacturer - Thursday, Jun 9, 16 @ 11:46 am: We would be in better shape if we got the deal those states get on medicaid - John Reynolds - Thursday, Jun 9, 16 @ 11:52 am: @palumbras: You made the statement, you provide your own support. - sideline watcher - Thursday, Jun 9, 16 @ 11:52 am: Huh +1 - Demoralized - Thursday, Jun 9, 16 @ 11:54 am: This Governor is once again playing the victim. He’s been Governor for a year and a half. You think he might just be a little bit responsible for stuff that happens. It amazes me every time he opens his mouth and shouts out “Because Madigan!” Is this Governor telling all of us that he is that inept and that incapable of governing? He’s the Governor of the state for crying out loud and he continues to assert that his role is apparently meaningless. If he is that incapable of being the Governor then maybe he should quit because apparently he can’t do the job. His continued victimhood is really pathetic. - Bulbous1 - Thursday, Jun 9, 16 @ 11:55 am: I feel like I’m in a Robocop movie. City can’t pay on the loan so the corporation moves in and takes over the city..or in our case, the State. We become another line in a mega-corporation’s budget. - Ratso Rizzo - Thursday, Jun 9, 16 @ 11:56 am: Rauner is a one-termer who will go down as one of the worst governors in Illinois history. He makes you yearn for Old Mr Potato Head. - sal-says - Thursday, Jun 9, 16 @ 12:08 pm: Wait…What??? Raunner has bad mouthed IL regularly, and I recall him trying to get bond ratings lowered. Am I having another nightmare. - Archiesmom - Thursday, Jun 9, 16 @ 12:09 pm: I am so bloody tired of governing by dueling press releases. It will be a huge relief after the election. A huge mess, but maybe it will be unaccompanied by as many “blame Rauner/Madigan/Cullerton/Democrats/Republicans” diatribes. Sigh… - Soccermom - Thursday, Jun 9, 16 @ 12:10 pm: LP — “Local control” my aunt Fanny, You mean those same local controllers who passed out huge end-of-career bumps to school administrators to jack up their pensions, knowing that the rest of the state would be on the hook to pay for them? Yeah, that worked out great. Let me google “moral hazard” for you…. - Norseman - Thursday, Jun 9, 16 @ 12:24 pm: Kudos to Treasurer Michael Frerichs for his reasonable response. P.S. Shave the beard - aargh. - RNUG - Thursday, Jun 9, 16 @ 12:26 pm: - blue dog dem - We’re both fiscal conservatives, maybe with slightly different views on fixing things. I’m sure we can even have a few beverages together. - RNUG - Thursday, Jun 9, 16 @ 12:31 pm: -AC_ You are on it today! +1 - wordslinger - Thursday, Jun 9, 16 @ 12:41 pm: Despite the current manufactured fiscal crisis, Illinois GO bondholders and buyers are the last ones who should be crying. In fact, they can smell-the-meat-a-cookin’. By law and continuing appropriation, they get paid first, and they get first-crack at every single dime that enters the state Treasury. That revenue provides exponential coverage to the state’s bonded indebtedness. It’s not even close. There is no risk. Under current law, the state’s GO rating should be AAA. The rating agencies know this, but grifters-gonna-grift, when given a reasonable chance. The downgrades set an artificially high interest rate when the state goes to market. But you watch — despite all the hollerin’, the next sale will sell out in 20 minutes or less and be oversubscribed by a factor of five, at least. - Qui Tam - Thursday, Jun 9, 16 @ 12:46 pm: =Governor Rauner has been pushing for reforms that would grow our economy, balance the budget, and save the pension system since Day One= I haven’t seen the “reforms” that would accomplish any of the above. Can anyone lay this out in a plausible way? - RNUG - Thursday, Jun 9, 16 @ 12:47 pm: - wordslinger - Yes. Follow the money … or should I say the 1.4% money? - illinois manufacturer - Thursday, Jun 9, 16 @ 12:50 pm: Word that is why I think we should find a banker to do it in Europe. There are countries and issuers far worse than us at negative rates. - Anon221 - Thursday, Jun 9, 16 @ 12:53 pm: Qui Tam- Rauner said an emphatic YES at the presser (around 28:00) yesterday in words only, no substance. You just have to believe! /s - JS Mill - Thursday, Jun 9, 16 @ 12:56 pm: =You mean those same local controllers who passed out huge end-of-career bumps to school administrators to jack up their pensions, knowing that the rest of the state would be on the hook to pay for them? = A couple of thoughts on that comment- 1)The exact same “bumps” were provided for teachers, only more of them. Yes, most (not all) teachers made less but the aggregate was much higher. 2) The genesis of the “end of career bump” was actually to help cover the cost of skyrocketing health care premiums. Many educators retired before being medicare eligible and had to find private healthcare or pay for state insurance to bridge that time. The advent of the Teacher’s Retirement Insurance Program (TRIP) made that less of an issue. People like me will pay for insurance that I will never receive, as well as the all of the lost SSI that I paid into the system. Many districts are moving away from even the 6% bump, an rightly so. The 20% bumps were over the top and objectionable. Still, according to authoritative research, the end of career “bumps” account for about 4%-6% of the total pension debt. On an annual basis, the AAI is the single biggest cost driver even as annual pension costs are going down. With respect.. - cdog - Thursday, Jun 9, 16 @ 1:03 pm: In my humble opinion, this downgrade is a premeditated means to The End. The flipflops the last week of May and the subsequent Destruction Tour was designed to trigger this. It’s a good day to be a hedge fund owner/manager with first in line privileges for June 16. - RNUG - Thursday, Jun 9, 16 @ 1:04 pm: == On an annual basis, the AAI is the single biggest cost driver even as annual pension costs are going down. == No. The “interest” on the pension debt is the biggest driver, especially since the State has started to reduce the expected future returns to reflect the still sluggish national economy. IF something like $75B - $80B of the shortfall wasn’t from missed payments and earnings, THEN I would agree with you on the AAI. We have a debt problem … not a benefit problem. - wordslinger - Thursday, Jun 9, 16 @ 1:07 pm: –Word that is why I think we should find a banker to do it in Europe. There are countries and issuers far worse than us at negative rates.– I think the federales should end the requirement that state and local governments have to pay these rating agency grifters before going to market. There’s more than enough disclosure available without relying on these “independents.” They’ve had no credibility since Enron and AAA sub-prime MBS. - cdog - Thursday, Jun 9, 16 @ 1:09 pm: The Lucky Monsieur Pierre says, “One reason low tax states aren’t swimming in pension debt is they don’t have 12,000 people with over $100,00 annual pensions.” So LP is obviously for a retirement tax which could repatriate those pension funds to the General Revenue Fund where they can be recycled to pay for Rauner’s agencies’ bill backlog. - AC - Thursday, Jun 9, 16 @ 1:20 pm: Thanks RNUG! I look forward to the day when the serious mechanics of the states spending and revenue are being discussed by the decision makers. - Huh? - Thursday, Jun 9, 16 @ 1:29 pm: At some point, institutional investors will not be able to buy our bonds. RNUG has a better handle on when that will occur. My point is that having a junk bond rating is not something to aspire to. Unfortunately, 1.4% doesn’t see the adverse effects of his actions, nor does he care. - Arthur Andersen - Thursday, Jun 9, 16 @ 1:47 pm: Huh, I wouldn’t worry about that any time soon. I’m with Word here-Illinois GO debt is a safe, good buy for almost any bond buyer. JSM, to be fair, the end of career bumps abated only after districts were required by law to pay the tab for amounts greater than 6% annually. Heck, back in the day, the bumps for administrators were so high in some states that the IRS enacted the 20% cap for qualified plans. With respect. - PalumbrasWay - Thursday, Jun 9, 16 @ 1:48 pm: @john reynolds Tax Foundation rates IL 5th in total tax burden. I’ve been digging into their methodology and seems fairly sound to me. I’m not going to sit and parse out communications tax and run numbers to compare that to other states for some anonymous poster on a blog, free of charge. Get off your ass and down your own statistical analysis. - Soccermom - Thursday, Jun 9, 16 @ 2:01 pm: Thanks, AA. I know that my mom didn’t get a 20 percent bump the year before she retired…. - Soccertease - Thursday, Jun 9, 16 @ 2:27 pm: I worked and did some research on the pension debt in the early 1990’s while working for Dawn Clark Netsch. I believe the prediction then was for pension insolvency by 2020. We’re right on schedule. I equally blame all governors and legislative leaders since we started underfunding the pension systems, - RNUG - Thursday, Jun 9, 16 @ 2:27 pm: The bumps have gotten a bad rap, especially when they were running 20% plus. But no one has mentioned one of the reasons they exist. It has to do with school district staff planning. As I understand it, teachers who make an irrevocable decision to retire in 2 years (I think that is the time period) are the ones who receive the bumps. Absent some incentive to keep the district informed about teachers employment intentions, the district could have teachers retire with almost zero notice and be stuck scrambling to fill positions. This way the districts can send out less layoff notices each spring, and they can assure some of their brightest prospects there will be openings next year or the year after. Maybe the future planning ability isn’t worth the cost of the bumps, but from a district perspective it makes perfect sense since they only have the higher salaries for a year or two; the increased pension cost (if they stay under the cap) is on the State. - HangingOn - Thursday, Jun 9, 16 @ 2:34 pm: Isn’t The Tax Foundation heavily bankrolled by the Koch Brothers? Or did I look up the wrong thing? - JS Mill - Thursday, Jun 9, 16 @ 2:48 pm: =But no one has mentioned one of the reasons they exist. It has to do with school district staff planning. As I understand it, teachers who make an irrevocable decision to retire in 2 years (I think that is the time period) are the ones who receive the bumps.= There is truth to that, but in the current conditions we do not have to incentivize people to retire. Educators are retiring in big numbers. We are also able to predict retirements with relative accuracy based on years of service. The 6% increase is typically a provision on the contract. I have seen the provision last as long as 4 years and as short as 2. When people tended to stay on longer it was an important planning tool. These days anyone with any sense is retiring as soon as they can. - JS Mill - Thursday, Jun 9, 16 @ 2:53 pm: =No. The “interest” on the pension debt is the biggest driver= AAI is the single biggest driver of the annual cost per Eric Madair. Meaning the roughly $1.6-$1.8 billion that is the year to year cost. I am not making myself very clear today. I need a beer and a nap. As I have stated many times, the annual cost is affordable and therefor not a benefit problem. Your are 100% correct, it is a debt issue. Take away the debt payment, all other things remaining the same, and the budget would be balanced or better given that the debt payment is in the $6 billion dollar realm. - Triple fat - Thursday, Jun 9, 16 @ 2:57 pm: palumbrasway - do you live in Chicago? Cook county? Don’t you think the tax burden in city of Chicago is the main driver of Illinois’ tax burden ranking? I know I have a pretty sweet tax burden down here in Deck’s Prairie. - Arthur Andersen - Thursday, Jun 9, 16 @ 3:09 pm: Soccertease, is there something you know that the rest of us don’t about the pensions? Barring a secret revelation, like Madigan has been siphoning off 10 percent a year for himself (hypothetical and snark, kids) there is NO WAY the pensions will be “insolvent by 2020″ and it’s irresponsible to post that without backup. Be logical-the Funds have over $60 billion in assets today. If they don’t get a dime from the State in the next four years and break even in the markets, there is still half that amount left at current contribution and payout rates. - Norseman - Thursday, Jun 9, 16 @ 4:04 pm: Excellent comment AA. It will probably fall on deaf ears, but foolish statements need to be called out. - RNUG - Thursday, Jun 9, 16 @ 4:57 pm: -Word-, You follow the bond markets closer than I do. Tell me if I have my tin-foil hat on too tight. Have the elite that run the world financial markets decided that the current mostly non-growth environment is here to stay for an extended period of time and is Rauner deliberately trying to get Illinois bonds down to junk status so all the investment firms / pension funds that own them will have to dump them at fire sale prices and then the 1.4% can snap them up at a major discount? It makes a weird kind of logical sense. Or am I just overheated from mowing the grass? - Anonymous - Thursday, Jun 9, 16 @ 5:22 pm: RNUG, I’m generally not a believer in grand conspiracies among elites. There are plenty of grifter schemes among small numbers of well-placed individuals. Rauner’s a rich dude, but he’s certainly not among the planet’s elite. He can bad-mouth CPS before it goes to market, but I doubt that moves the needle. The muni market is rather small in the great scheme of things, at about $4 trillion. But for a classic interest-rate manipulation scheme, I’d check out the LIBOR scandal. A handful of bankers lied and cheated to set the interest rate underpinning $375 trillion in derivatives, to buck up their own derivative holdings. I think the rating agencies got much tougher on all debt after their role in the crash of the world economy. They gave AAA ratings to securities that they could not possibly have a clue as to their actual creditworthiness or the values of the underlying assets. They were just creating a new market for themselves, but their actions were a direct contributor to the crash. Banks were holding worthless paper that they had been making loans on at a ratio of 50-1. They couldn’t begin to cover their own bets. - Arthur Andersen - Thursday, Jun 9, 16 @ 9:44 pm: Anon 5:22, that post was one of the most spot-on and insightful comments on finance I’ve read here in a long time. Pick yourself a nickname and come back and join us frequently. - illinois manufacturer - Thursday, Jun 9, 16 @ 10:02 pm: I would say the elites central bankers are in a panic that we are in no growth for various reasons..lack of new tech maens trade is a negative see Gordons History of American growth. I think thehave paniced to NIRP and all its doing is creating asset bubbles. That is why we should shop around globally on rates. Give Illinois money and you will lose less - Soccertease - Thursday, Jun 9, 16 @ 11:14 pm: AA & Norseman: The point is that the Comptroller in the 1990’s was trying to emphasize the importance of the state’s employer actuarially required contributions that were not made. I often have said that the state’s pension crisis could be managed with a reasonable employer contribution going forward. - Norseman - Thursday, Jun 9, 16 @ 11:55 pm: Soccertease, noting a historical quote is fine, but we are not on schedule to fufill that prediction. Sorry, comments for this post are now closed.