Capitol Fax.com - Your Illinois News Radar » The “irony” is lost on me
SUBSCRIBE to Capitol Fax      Advertise Here      Mobile Version     Exclusive Subscriber Content     Updated Posts    Contact
CapitolFax.com
To subscribe to Capitol Fax, click here.
The “irony” is lost on me

Friday, Jul 14, 2017

* AP

Illinois lawmakers who recently ended the longest fiscal standoff of any state since the Great Depression are counting on an ironic strategy to dig out of mountains of debt: borrowing even more money.

It’s an unorthodox approach, considering deficit spending largely created the mess, and Illinois’ worst-in-the-nation credit rating makes borrowing inordinately expensive. However, supporters say it’s the best way to begin to erase $14.6 billion in overdue payments to vendors and service providers.

Bills that are 90 or more days past due incur 12 percent in late-payment fees. By paying off a chunk of that at a time with the sale of bond proceeds, the state could cut that rate in half.

“We are being smothered by our liability and our indebtedness, not only in the state and trying to deal with the budget, but with the people we owe money,” said Democratic Sen. Donne Trotter, of Chicago, the assistant majority leader who sponsored the measure.

Trotter said it currently takes Illinois about 200 days to pay a bill, but his plan would reduce that to as few as 60 days.

The Democratic-controlled General Assembly endorsed the budget — and a $6 billion borrowing scheme — over Republican Gov. Bruce Rauner’s vetoes. However, it’s unclear whether Rauner will actually use the borrowing authority given to him. He has said nothing about it in the 10 days since the budget was passed, and his spokeswoman, Eleni Demertzis, declined to comment on Thursday.

It’s not necessarily “unorthodox.” For two years, the state spent more than it was taking in, under judicial orders and executive branch contracts and leases. Revenues now balance with spending, but businesses and not-for-profits are owed billions. Continuing to borrow from them is irresponsible and forces continued and unnecessary hardships. It’s therefore better (and in many cases cheaper) to borrow on the bond markets.

- Posted by Rich Miller        

31 Comments
  1. - Hamlet's Ghost - Friday, Jul 14, 17 @ 9:42 am:

    Since when is it unorthodox to refinance existing debt at a lower interest rate?


  2. - ArchPundit - Friday, Jul 14, 17 @ 9:44 am:

    ===Since when is it unorthodox to refinance existing debt at a lower interest rate?

    Exactly. This is obvious thing to do.


  3. - lake county democrat - Friday, Jul 14, 17 @ 9:45 am:

    In Canada, Justin Trudeau led his party back into power on a campaign platform of increase the federal budget deficit by borrowing at historically relatively low interest rates and spending it on infrastructure.


  4. - Henry Francis - Friday, Jul 14, 17 @ 9:47 am:

    Surely an Ivy League educated finance expert bidnessman can see how this makes financial sense? Right? Won’t this help Illinois get more competitive? And then we can be compassionate.


  5. - Winnin' - Friday, Jul 14, 17 @ 9:47 am:

    But…many well-connected middle men who are paying those businesses an reaping the benefit of those high interest rates will lose their gravy train.


  6. - Generic Drone - Friday, Jul 14, 17 @ 9:48 am:

    Its done on mortgages all the time. Non story.


  7. - Last Bull Moose - Friday, Jul 14, 17 @ 9:49 am:

    When you refinance your mortgage to pay off your credit card debt, that is smart money management. Then you need to limit the use of credit cards, another part of smart money management.


  8. - Roman - Friday, Jul 14, 17 @ 9:51 am:

    It’s no fun for a reporter to write a story about government doing exactly what it should do. That won’t sell papers or earn clicks. So a false narrative is created.

    Journalism continues to wither in Illinois.


  9. - Oswego Willy - Friday, Jul 14, 17 @ 9:53 am:

    You refi on the house to fix the foundation of the structure.

    That’s ironic?


  10. - Biscuit Head - Friday, Jul 14, 17 @ 9:56 am:

    What’s occuring here requires an adult understanding of finance. And opposition to it can easily be condensed to an oversimplified quip or sound bite.

    Therefore the “media” and obstructionists can easily misinform a significant part of the public. (See also: “fooling some of the people all of the time”)


  11. - wordslinger - Friday, Jul 14, 17 @ 9:57 am:

    The only losers in this plan are the flush, clouted debt buyers.

    They’ve been buying vendor receivables at a discount, then collecting the big juice when the late payments roll in.

    The arithmetic for refinancing the backlog benefits taxpayers and Illinois vendors owed money. It would take some crazy petulance for Rauner to not do it.


  12. - justacitizen - Friday, Jul 14, 17 @ 10:00 am:

    Dave Ramsey would not like Illinois tactic either. Beans and rice, rice and beans until you’re out of debt.


  13. - Streator Curmudgeon - Friday, Jul 14, 17 @ 10:05 am:

    Irony is wrecking the economy of Illinois to make it more attractive to business.


  14. - Biker - Friday, Jul 14, 17 @ 10:05 am:

    It’s clear that business economics can’t hold a candle to a good ideological story. Best lesson I’ve had in finance is to understand the investment opportunity of reducing high interest rates on debt. So many people live with 30 year mortgages and 30 year student loans without attempting to pay off anything early, and it will trap an entire generation in financial limbo. We’ve normalized terrible financial decision making to the point that 12% interest vs. 7% interest isn’t even a clear decision.


  15. - Phil King - Friday, Jul 14, 17 @ 10:07 am:

    You don’t see the irony of borrowing to pay off borrowing? It’s a self defeating cycle.

    There are only two ways out of this mess:

    1) Cur spending to be BELLOW current revenues and use the surplus to pay down debt
    2) Grow the economy so we have SUSTAIABLE new revenues (which just got that much harder thanks to the 32% income tax hike).


  16. - Ahoy! - Friday, Jul 14, 17 @ 10:08 am:

    If your friend loaned you $10,000 at a 12% interest rate and your friend was facing financial collapse, wouldn’t the right thing to do be to go to a bank, get a loan for $10,000 at 4.5% and pay your friend off?

    This has the advantage of being:
    1. The morally right thing to do.
    2. The financially right thing to do.

    Who in the world would argue against this besides people who can’t do math.


  17. - Hamlet's Ghost - Friday, Jul 14, 17 @ 10:11 am:

    @Phil King

    I see perfidy in paying above market interest rates to clouted insiders to advance an agenda that seeks to dismantle government.


  18. - ??? - Friday, Jul 14, 17 @ 10:12 am:

    Speaking of “bellowing,” Phil - please stop with the capitalized words.


  19. - Arock - Friday, Jul 14, 17 @ 10:17 am:

    Agreed that it is better to pay at a lower rate if you can get one but also prudent to look for more areas to cut spending and use those savings as well to pay off the debt. The three billion in cuts is what was being spent under the court ordered decree not from what the actual budget would have been so now is the time to look to cut and pay off old debt.

    To the “What’s occurring here requires an adult understanding of finance.”- those same adults that failed to pay pension obligations and ran up the pension debt? Those same adults that are forcing tax payers to pay a higher rate and watch the pension debt continue to increase. According to the Sun-Times that interest payment of $7 billion a year continues to grow and will be at $16 billion before you know it. Because of the Ramp agreement that the Great Wizard was part of in 95.


  20. - the Patriot - Friday, Jul 14, 17 @ 10:18 am:

    Ok, take a finance class.

    The issue is not the interest rate, it is the time. Yes, borrowing at 12% is stupid, but so is long term borrowing for short term financing. You may save %, but pay more interest.

    This is deciding to put your electric bill on a 20 year mortgage. You save %, but pay more interest.

    At least now we won’t have to worry about what history will say about Madigan, because this type of stuff ensure they will still be paying off his mistakes for another generation.


  21. - WhoKnew - Friday, Jul 14, 17 @ 10:25 am:

    Borrowing at a reduced rate will save a lot of interest, no doubt.
    Injecting 6 Billion into the Illinois economy should also help with tax receipts.
    The velocity of money, people!


  22. - wordslinger - Friday, Jul 14, 17 @ 10:48 am:

    Phil, I’m sorry I missed all your “fiscal conservative” posts the last two years while the state was deliberately increasing its borrowing from vendors by more than $10 billion.

    Because of that involuntary lending forced upon them, those vendors have let go thousands of workers, drawn down capital reserves, tapped lines of credit or even shut down.

    How’s that for an economic growth strategy?


  23. - Robert the Bruce - Friday, Jul 14, 17 @ 10:50 am:

    Possibly Rauner is trying to see if the state can welch entirely.


  24. - DuPage - Friday, Jul 14, 17 @ 11:31 am:

    This should have been done several years ago when interest rates were at their lowest, and before the downgrades. Paying 8% pension debt with 2% state bonds would have been a very good move.


  25. - RNUG - Friday, Jul 14, 17 @ 12:12 pm:

    == Paying 8% pension debt with 2% state bonds would have been a very good move. ==

    1) the discussion is about borrowing to pay accounts payable, not pension debt

    2) on the pension debt, will never happen. Right now the State just owes itself, and can manipulate the payments as wanted / needed. Once you bond it to the private sector, you have a fixed payment schedule you have to meet.


  26. - Hieronymus - Friday, Jul 14, 17 @ 12:18 pm:

    @DuPage 11:31am

    Yeah, but those pesky bondholders have an unreasonable expectation on being paid both interest and principal right on time and with the political clout to back up that expectation; whereas, it might just be possible to arrange a future default on the demonized retirees. /s


  27. - Phil King - Friday, Jul 14, 17 @ 12:59 pm:

    wordslinger,

    Businesses selling to the state were hit by the impasse, but our economic problems are a lot deeper than that. What percentage of GDP do you think is accounted for by State vendors? I don’t know, but it aint much.

    The bigger problems are high property taxes (main contributor to overall high tax burden), excessive professional licensing, and outrageous worker’s comp costs.

    Private markets, most of which don’t interact with the state, are being strangled in IL. If Rauner had been able to get some meaningful reforms done, it would have been more than worth 2 1/2 years of impasse.


  28. - Rich Miller - Friday, Jul 14, 17 @ 1:06 pm:

    ===What percentage of GDP do you think is accounted for by State vendors? ===

    If you figure it at $15 billion, that’s 1.9 percent of GSP.


  29. - VanillaMan - Friday, Jul 14, 17 @ 1:18 pm:

    If all of Rauner’s agenda was enacted, it would not even cover the cost of the bill backlog.

    The Governor flushed away billions. He wasted billions more than he promised to save.

    Conservative? Rauner vetoed budgets that were billions less than what we ended paying because of his vetoes. His vetoes wasted billions.

    Nothing - absolutely nothing would have been worth the billions lost due to the impasse.

    You have no idea what you are talking about. At all.


  30. - Phil King - Friday, Jul 14, 17 @ 2:05 pm:

    ==If you figure it at $15 billion, that’s 1.9 percent of GSP. ==

    That’s just the unpaid portion, not including delayed, but fair enough to look at as the negative effect of the impasse.

    So if the other 98% of GSP is being held back by structural economic problems, is the trade off not worth it? Our state is losing population, businesses, jobs, taxpayers. We’re losing Congressional representation in Washington with each census as a result.

    I don’t doubt that the impasse hurt people, particularly social services, but continued inaction on our structural problems will hurt many more.


  31. - Oswego Willy - Friday, Jul 14, 17 @ 2:09 pm:

    ===So if the other 98% of GSP is being held back by structural economic problems, is the trade off not worth it? ===

    1.4% growth or $500+ million for destroying Labor, Social Services and Higher Ed?

    Nah, it’s not worth it.

    Get better numbers. Get back to everyone.


Sorry, comments for this post are now closed.


* "Men" dropped from Democratic group's name
* Union membership rises here, declines in neighboring states
* Question of the day
* *** UPDATED x1 - Assessor: Kennedy screwed up his example *** Assessor claims Kennedy's plan has been prohibited by state courts for 70 years
* Republican with primary opponent wants to kick undocumented kids out of health care program
* Martwick talks possible money-saving ideas for pensions
* Madigan on Kennedy: "He speaks for himself"
* *** UPDATED x2 - Biss, Pritzker respond *** Kennedy asked about Rauner praise
* Andy Shaw to step down from BGA top job
* Donne Trotter's legacy
* Ives calls Rauner property tax EO "pandering, ineffective"
* Illinois is one of the least affected states during federal shutdown
* *** UPDATED x3 - Ruiz responds to Raoul - Raoul responds without addressing the charge - Ruiz claims Raoul bragged about delaying a bill to elect Chicago school board *** CTU backs Raoul, NNU backs Biss
* Mendoza releases first "debt transparency report"
* RGA rips Pritzker over Blagojevich coverage
* Madigan tells audience he rejected a 2015 deal proposed by Rauner
* Today's number: 11 Illinois women in 200 years
* Mark Brown and Eric Zorn on Chris Kennedy
* Citizen Action backs Pritzker, Evanston backs Biss, Kennedy to unveil property tax reform plan
* SUBSCRIBERS ONLY - Campaign updates
* SUBSCRIBERS ONLY - Today's edition of Capitol Fax (use all CAPS in password)
* Yesterday's stories

Support CapitolFax.com
Visit our advertisers...

...............

...............

...............

...............
<


Loading


* State pays $1 billion in late-payment charges -.....
* Illinois Gov. Bruce Rauner: Cut taxes, 'wastefu.....
* Rauner: Cut taxes, 'wasteful spending' to curb .....


* William Cousins, prominent in Illinois law, dead at 90
* Officer who killed 2 charged with misdemeanors for bar fight
* Rauner: Cut taxes, 'wasteful spending' to curb deficit
* Early morning fire in suburban Chicago kills 2
* The Latest: Rauner will 'step-down' tax hike to close gap
* Illinois lawmakers hold hearing on marijuana legalization
* Agency: East Chicago's inaction may have endangered families
* Chicago's south and west sides lack access to pharmacies
* Some Illinois hospitals brace for Medicaid funding cuts
* Helicopter crash near St. Louis; 2 suffer minor injuries

* Legionella bacteria possibly in Capitol Complex water system
* Rauner wants to 'step-down' income tax increase
* Sangamon County should get first dibs on state jobs, lawmaker says
* Report: State agencies holding nearly $2.5 billion in bills
* Illinois lawmakers hold hearing on marijuana legalization
* Illinois hunters harvest 2 percent more deer than last year
* New session will bring new efforts at pension reform
* New report shows state agencies holding nearly $2.5 billion in bills
* Rauner order bars lawmakers from property-tax appeals
* Outdoor sports participants hoping for larger cut in farm bill

* Test
* State insurance chief gets new national slot
* Raoul, Biss, Garcia land significant endorsements
* Senate moves to end shutdown, setting up another immigration fight
* Here's some expert advice for Chicago job-seekers


* 2 killed, 7 wounded in Monday shootings across Chicago
* 8.2-magnitude earthquake in Alaska prompts tsunami warning
* Police: Man fatally shot in South Chicago
* Person critically injured in Lake Shore Drive crash on South Side
* Man shot in shoulder in Little Village
* Dear Abby: One of my two men definitely loves me back
* Illinois falls to No. 6 Michigan State 87-74, stays winless in Big Ten
* Gronkowski on mend as Patriots begin Super Bowl preparations
* Horoscope for Jan. 23, 2018
* 2 wounded in East Garfield Park shooting


* At least 16 injured in volcano eruption near Japan ski resort, officials say
* 20 years after committing Kane County murder, man found guilty of armed robbery in ambush beating
* Bulls let 18-point lead slip, fall to Pelicans in double overtime
* Lineup shakeup no help as Blackhawks get shut out for 3rd straight loss
* Illinois coach Brad Underwood 'fighting for culture' after 87-74 loss to Michigan State
* Jury finds ex-Milwaukee Co. Sheriff David Clarke did not violate man's free speech with taunting Facebook posts
* Limited strikes on North Korea would be an unlimited disaster
* Government faces critical 'brain drain' of sanctions experts
* Man killed, 3 wounded in city shootings, including attack on Lake Shore Drive
* Shutdown deal paves way for Senate to take up immigration, but will House and Trump follow?


» State Pays $1 Billion In Late-Payment Charges
» CHA To Add More Mixed-Income Housing In Bronzeville
» National Study Hammers Illinois Budget Practices
» Hundreds Of Thousands Gathered For Women's March In Chicago
» Women's March Chicago Stays on Message - Get to the Polls
» Chicago Schools Chief: Cost A Driver In Special Ed Overhaul
» One Year Later, Women’s March Demands More Than Attendance
» State Week: Education Funding, Pritzker-Blagojevich, Rauner-Duke
» Sheriff Offers To Help Review Police Shootings In Suburban Cook County
» A Prescription For Fruits And Veggies: One Solution To Food Insecurity in Illinois


* Legionella bacteria possibly in Capitol Complex water system
* IBHE: There is a need for bold changes for Illinois' higher education system
* Rauner wants to 'step-down' income tax increase
* Sangamon County should get first dibs on state jobs, lawmaker says
* Report: State agencies holding nearly $2.5 billion in bills
* Illinois lawmakers hold hearing on marijuana legalization
* Illinois hunters harvest 2 percent more deer than last year
* New session will bring new efforts at pension reform
* New report shows state agencies holding nearly $2.5 billion in bills
* Their View: Is civics still taught in our schools?


* Neighbors hope to fix arch damaged in crash
* Area Calendar 1/23/18
* Underwood: 'Felt like we could pressure them'
* Notes: Illini defense gives Spartans trouble
* Nichols working on being 'every day guy'
* EICC offers scholarship app help
* Bennett Williams
* Evelyn R. Brockmeyer
* Gary D. “Mick” Jones
* Clarence Royce White


* Mavs slow recent slide with season sweep of Wizards, 98-75
* As shutdown eases federal workers fear prospect of another
* Cabusao, Schwartz lead Jacobs to win
* Cosby jokes in 1st show since 2015 he 'used to be' comedian
* Waukegan man dies after being shot early Sunday

* Bipartisan Illinois criticism follows Trum...
* Shutdown Stalemate As Immigration Negotiat...
* Morning Spin: Stories to watch in Chicago ...
* Letter: Talk to tax preparer about GOP tax...
* 'Time' Magazine's Powerful Cover Features ...
* Rep. Hultgren: It is Not Safe for Salvador...
* Hultgren makes strong mark on nation's new...
* Dissident artist Ai Weiwei and US Rep. Ran...
* Our view: End patronage at Algonquin Towns...
* This RSS feed URL is deprecated

* This RSS feed URL is deprecated...
* GOP Senators Think Trump Said 'Shithouse' ......
* The debate over DACA: a guide to the numbe......

* This RSS feed URL is deprecated...
* Sen. Tammy Duckworth Talks About Her Trip ......

* One Foggy Uptown Eve
* Tax Season Volunteers Sought
* Join Uptown Arts Center At Opening Reception On Sunday
* Django at 108; or That Toddlin' Town
* The Commuter is the first great movie of 2018
* Illinois's late payment charges on its bills add up to $1 billion, and other Chicago news
* Michael Pfeiffer, Former Crew Server, Missing
* EXTRA: Shutdown ends, GOP at fault
* From the archive: When a Reader staffer dreamed of blue-faced superstardom
* Majority of south- and west-siders feel Chicago media ‘too negative’ about their neighborhoods


* Illinois Awarded Funds to Offer Advanced Training on Detecting Impaired Driving
* Illinois EPA Announces Upcoming Household Hazardous Waste Collection Events
* IEMA Highlights Emergency Preparedness for People with Access and Functional Needs in May - Ready Illinois website offers preparedness tips for people, caregivers
* First Lady Launches Illinois Family Connects
* Governor and Lt. Governor Unveil 2016 Journal of Local Government Shared Service Best Practices

  
* Lenovo details a bunch of new education-focused Windows laptops and Chromebooks
* Acer unveils two refreshed Chromebook lines for schools and everyday laptop users
* Stop waiting and build your first iOS 11 app today for only $10!
* LG G6 has Android 8.0 Oreo update coming in Europe ‘within the first half’ of 2018
* Buy a Moto Z2 Force, get Alexa Moto Mod and Amazon Music Unlimited free
* Connection speed now posted with Wi-Fi network listings on Android 8.1
* Verizon BOGO deal on Galaxy S8, LG V30, Moto Z2 Force, Pixel 2 starts tomorrow

* Burger third among top third-base prospects
* Kopech, Jimenez among White Sox NRIs
* Baseball America top 100, Sox-Brewers rumors, and other reading
* Advocating for retired non-numbers
* Getting ready for Soxfest 2018
* White Sox seeking new flagship radio home
* Engel working to steady barrel in Year 2


Main Menu
Home
Illinois
YouTube
Pundit rankings
Obama
Subscriber Content
Durbin
Burris
Blagojevich Trial
Advertising
Updated Posts
Polls

Archives
January 2018
December 2017
November 2017
October 2017
September 2017
August 2017
July 2017
June 2017
May 2017
April 2017
March 2017
February 2017
January 2017
December 2016
November 2016
October 2016
September 2016
August 2016
July 2016
June 2016
May 2016
April 2016
March 2016
February 2016
January 2016
December 2015
November 2015
October 2015
September 2015
August 2015
July 2015
June 2015
May 2015
April 2015
March 2015
February 2015
January 2015
December 2014
November 2014
October 2014
September 2014
August 2014
July 2014
June 2014
May 2014
April 2014
March 2014
February 2014
January 2014
December 2013
November 2013
October 2013
September 2013
August 2013
July 2013
June 2013
May 2013
April 2013
March 2013
February 2013
January 2013
December 2012
November 2012
October 2012
September 2012
August 2012
July 2012
June 2012
May 2012
April 2012
March 2012
February 2012
January 2012
December 2011
November 2011
October 2011
September 2011
August 2011
July 2011
June 2011
May 2011
April 2011
March 2011
February 2011
January 2011
December 2010
November 2010
October 2010
September 2010
August 2010
July 2010
June 2010
May 2010
April 2010
March 2010
February 2010
January 2010
December 2009
November 2009
October 2009
September 2009
August 2009
July 2009
June 2009
May 2009
April 2009
March 2009
February 2009
January 2009
December 2008
November 2008
October 2008
September 2008
August 2008
July 2008
June 2008
May 2008
April 2008
March 2008
February 2008
January 2008
December 2007
November 2007
October 2007
September 2007
August 2007
July 2007
June 2007
May 2007
April 2007
March 2007
February 2007
January 2007
December 2006
November 2006
October 2006
September 2006
August 2006
July 2006
June 2006
May 2006
April 2006
March 2006
February 2006
January 2006
December 2005
April 2005
March 2005
February 2005
January 2005
December 2004
November 2004
October 2004

Blog*Spot Archives
November 2005
October 2005
September 2005
August 2005
July 2005
June 2005
May 2005

Syndication

RSS Feed 2.0
Comments RSS 2.0
WordPress




Hosted by MCS SUBSCRIBE to Capitol Fax Advertise Here Mobile Version Contact Rich Miller