* From the Tribune earlier this week…
Democratic Comptroller Susana Mendoza is again raising the pressure on Republican Gov. Bruce Rauner, calling on him to move forward with a proposal that would allow the state to borrow $6 billion to begin paying down Illinois’ massive pile of unpaid bills. […]
At an unrelated news conference at the Thompson Center, Rauner said the borrowing plan was “not an optimal answer” and suggested he’s looking to work on new plans. Democrats who control the General Assembly, though, might not be interested in renegotiating a budget they approved to break the stalemate last month.
“We will be working with the General Assembly on proposals to actually have an appropriation to pay down debt and have a plan to reduce it and also to have reforms so we don’t stay in this position — where we actually have truly balanced budgets today and going forward,” Rauner said.
Rauner was unable to win changes including freezing property taxes, curbing workers’ compensation costs and weakening union rights. He said, though, that his proposals are “the only answer for our indebtedness, and going out and borrowing more is not going to help the problem.”
There is $6 billion in new financing authority in the budget package, but even optimistic projections say the state could only borrow maybe $3 billion.
That being said, it almost sounds like the governor wants to use the state’s bill backlog as “leverage” to finally get some of his reforms passed.
* Let’s back up to this passage from the governor’s FY18 budget book…
Bill Backlog
With a history of unbalanced budgets and the budget impasse, the state has accumulated $11 billion in unpaid bills. The Governor is willing to work with the legislature to sell bonds or take other actions to reduce the backlog of bills owed by the state in conjunction with an overall balanced budget agreement. Financing would enable the state to stop accruing high interest on some unpaid bills.
So, he was all for a borrowing program for unpaid bills back then. And he was right because, as the comptroller often notes, the state is paying $2 million a day in interest on its unpaid bills.
* And remember when the governor signed on to the Republicans’ “Capitol Compromise” plan?…
“The comprehensive balanced budget we are offering today will provide care for our state’s most vulnerable citizens,” said Deputy Republican Leader Patti Bellock. “With last week’s court ruling on the $2 billion backlog of unpaid Medicaid bills, it is critically important we take immediate action to address this backlog. Our plan includes more than $4 billion in bonding to help pay off old bills. We must address this crisis now. The consequences of not taking action now would be devastating to human services.”
So, why the sudden change in tone?
As we’ve already discussed today, the governor’s policy director Michael Lucci used to be a commenter on this blog when he was with the Illinois Policy Institute. He was a bit of a hothead and occasionally liked to personally insult me, so I eventually got tired of dealing with him and put him into automatic comment moderation. As a “free market” enthusiast, you’d think the Looch would respect a private company owner’s modest rules about decorum.
* Anyway, before Lucci was hired as Rauner’s chief policy guy, he was the Illinois Policy Institute’s chief policy guy and posted several comments on this site about state debt.
This is how Lucci responded July 5th to Rep. Greg Harris’ contention that money should be borrowed to pay down that mountain of overdue bills…
Harris’ plan is to borrow more from the banks and sweep funds to pay $8 bil from the backlog of bills.
In other words, put the debt on a different credit card and drain your liquidity.
This is exactly what a debt crisis looks like.
In other words, he prefers owing money to struggling social service providers and business owners at insane interest rates rather than borrowing money on the market.
* On July 5th, when Gov. Rauner vowed to stop a veto override and shrugged off warnings that Illinois could be downgraded to junk bond status, Lucci wrote…
Illinois is in a debt crisis.
In a debt crisis, what is good for Wall St. is bad for the people.
It’s worth noting that Dems carried 5 pieces of legislation to bail out the banks this spring. So we know where they stand.
https://www.illinoispolicy.org/why-are-illinois-democrats-preparing-to-bail-out-bankers-and-cash-strapped-local-governments/
* Also on July 5th, on a post I did about looking at the tax hike in a different way, Lucci wrote…
Illinois has a debt crisis, and this tax hike is addressing a cash-flow issue. And you’re cheerleading it. And it solves nothing but a political cash-flow issue. The debt crisis worsens by the day.
But glad to see another “tax-eater” (that’s you, Rich) is getting to work campaigning on behalf of the tax increase. Someone’s gotta do it.
So, the debt caused by the impasse is merely a “political cash-flow issue.”
* Keep in mind that this gentleman is now the governor’s top policy advisor and was hired 6 days after he posted those comments.
Lucci isn’t wrong about the state’s long-term debt, of course. The state absolutely has to get a handle on that and this budget didn’t do it. Heck, as I’ve said before, it didn’t even adequately address the shorter-term debt from the impasse and didn’t adequately fund government’s current spending levels.
But, from his comments (and there are more), he seems to not care a whit about the plight of providers, vendors, state leaseholders, etc. who are owed billions of dollars by the state government despite contracts signed by the governor, nor about the huge resulting state interest payments.
So, pardon me if I’m a bit suspicious about how the governor seems to now be brushing aside questions on refinancing that debt.
* Related…
* GOP Lawmaker Urges Rauner To Resolve Bill Backlog with Bonds: “Unless there’s some alternative, then I strongly encourage the governor to take advantage of the borrowing authority that he has and lower those old bills and start eating away at these outrageous interest charges that we have built up.”
- Anon221 - Thursday, Aug 10, 17 @ 12:09 pm:
Just one more in the multitude of reasons not to re-elect Rauner. And, I still wonder, how many of his friends and promoters ( as well as the Rauner household) are making money off the ever higher bond interest rates when, with intent, these “leverages” are done.
- Anonymous - Thursday, Aug 10, 17 @ 12:10 pm:
Refinancing your debt to the benefit of taxpayers is only a legislative issue if you do not have the authority to do it. Once you are given the authority its a governance issue. Not leverage.
- J IL - Thursday, Aug 10, 17 @ 12:13 pm:
I thought I read where he has to authorize the borrowing by the end of the year per the legislation that was approved. If that is the case, seems like the leverage argument weakens significantly.
- Ducky LaMoore - Thursday, Aug 10, 17 @ 12:15 pm:
It’s hard to be constructive when the plan is destruction.
- wordslinger - Thursday, Aug 10, 17 @ 12:15 pm:
There is no rational argument against refinancing existing debt at a lower interest rate. Any fool can see that.
Lucci’s catch phrases are just shallow spin, not reasonable policy. I’m sure his finance and ethics professors at Notre Dame are proud.
Rauner now is just pursuing squeeze the beast by means available to him. By his actions, from Day One, he simply wants to put as many of these “collectivist” do-gooders out of business as he can.
And he’s willing to lie and sign contracts in bad faith to do so.
- Norseman - Thursday, Aug 10, 17 @ 12:15 pm:
Are we looking at an economic Nero decree to try and leverage some win? Logic and rational thinking is discarded for the cause.
- Free Set of Steak Knives - Thursday, Aug 10, 17 @ 12:17 pm:
Now that you have published his comments, can The Looch also have his tooth back?
Well played.
Mike? You still there? Response?
- One hand //ing - Thursday, Aug 10, 17 @ 12:18 pm:
The bill backlog IS borrowing. The penalties the state pays out are the interest. but in this case the interest payments are much higher than a conventional financing plan. the “lenders” are social service agencies, school, and vendors. And if the lenders don’t want to make the loan, their only option is to shut down.
- Anonymous - Thursday, Aug 10, 17 @ 12:21 pm:
If the goal is to run up so much debt that bankruptcy begins to look like an attractive option, then refinancing debt at more affordable rates is not a next step.
- Anon - Thursday, Aug 10, 17 @ 12:22 pm:
The fact that the legislature never seriously dealt with the backlog in the budget, or adjusted during the time we were accumulating $15 billion in unpaid bills shows just how un-serious everyone involved is about actually dealing with the root problem.
Parsing about what credit card to put the bills on is just whistling past the grave yard while we keep ignoring the fact that all the smoke and mirrors in the world aren’t going to change the fact we have a major spending/revenue problem.
There is no road left to kick the can down, we are at a dead end.
- Juvenal - Thursday, Aug 10, 17 @ 12:25 pm:
It is impossible to square Mr. Lucci’s position with Mr. Rauner’s attacks on Comptroller Mendoza, or with Leslie Munger’s handwritten nigh about state vendors.
In Mr. Lucci’s words, The Ounce of Prevention, Inc. is one of those “tax-eaters.” You have to wonder how Diana Rauner feels about that characterization.
In the words of Oswego Willy:
Right?
Exactly right.
- anon2 - Thursday, Aug 10, 17 @ 12:25 pm:
=== There is no rational argument against refinancing existing debt at a lower interest rate.===
We sure haven’t heard one from either the Gov or the Looch.
- Anon - Thursday, Aug 10, 17 @ 12:33 pm:
If they had stopped the bill backlog from occurring in the first place when they saw it happening we could have avoided both the $15 billion, and the hundreds of millions (probably billions) of interest cost all the borrowing will cause on the money that should have never been spent in the first place without a plan to pay for it.
It is disturbing how that aspect of the fiasco never seems to enter the conversation as something we should all find exceptionally alarming.
- Keyrock - Thursday, Aug 10, 17 @ 12:34 pm:
There was no rational reason when Quinn was governor, either. But the General Assembly didn’t do it.
- wordslinger - Thursday, Aug 10, 17 @ 12:40 pm:
Anon, the bill backlog was $4.5B when Rauner took office,
Yet he kept on signing contracts and leases while vetoing budgets that couldn’t be overridden and refusing to deal with revenue or spending at all.
Governor is the most powerful office in this state, by far, for good or ill, despite what Rauner’s excuse-makers tell you.
- Chicago Guy - Thursday, Aug 10, 17 @ 12:40 pm:
Anon - I agree that we should be upset about how we got to this fiscal mess in the first place. From my point of view it was due to a Governor who wouldn’t fulfill his constitutional duty to proposed a balanced budget. He wanted to play political “got you” games rather than govern.
- Arock - Thursday, Aug 10, 17 @ 12:44 pm:
What’s the daily interest payment on the pension debt? $15 to $20 million a day? How much is the lack of reforms costing us each day in jobs and out-migration? What was the rational for not paying pension debt as it occurred instead of strangling the taxpayers at a later date? What was the rational for holding a bill on the Senate Presidents desk for two months and creating a crisis? Why did it take 20 years to fix the mistake of the last school funding mistake? Why won’t OW admit he is a Madigoon as are the majority of commentators on this site.
- Oswego Willy - Thursday, Aug 10, 17 @ 12:47 pm:
===Why won’t … admit he is a Madigoon as are the majority of commentators on this site.===
I’m not.
I’m a Republican, not a Raunerite, like Ms. Wheeler, for example.
Why make it about me? No better arguments out ther?
- LTSW - Thursday, Aug 10, 17 @ 12:49 pm:
The current situation allows the state to pay the interest payments at their convenience. If bonding is used to pay down the backlog, the bondholder’s gain leverage over the state because the debt service has to be paid timely. At some point in time the patchwork network of social service agencies will go under. Likely to be replaced with vendors more to the administrations likening.
- Montrose - Thursday, Aug 10, 17 @ 12:50 pm:
“What’s the daily interest payment on the pension debt? $15 to $20 million a day? How much is the lack of reforms costing us each day in jobs and out-migration? What was the rational for not paying pension debt as it occurred instead of strangling the taxpayers at a later date? What was the rational for holding a bill on the Senate Presidents desk for two months and creating a crisis? Why did it take 20 years to fix the mistake of the last school funding mistake? Why won’t OW admit he is a Madigoon as are the majority of commentators on this site.”
Thanks for sharing your questions. Do you have anything to say about the post’s topic?
- Demise - Thursday, Aug 10, 17 @ 12:54 pm:
So, Arock, the justification for not saving money now is that the state didn’t save money before? The governor can’t do something logical now because his opponents did illogical things before?
- Waterfall - Thursday, Aug 10, 17 @ 12:57 pm:
A lot of very good points being made here but still haven’t seen anything close to a compelling reason why the Governor would not refinance this debt to save taxpayers millions while he has the opportunity.
- Will Caskey - Thursday, Aug 10, 17 @ 1:00 pm:
As someone I’m pretty sure is under auto moderation myself, it’s an entirely fair and healthy practice
- Anon - Thursday, Aug 10, 17 @ 1:01 pm:
I think the real reason why they aren’t selling the bonds is the staff over at GOMB. I don’t think they know what they’re doing, especially the staff responsible for debt administration.
Rich, I hadn’t seen any reports suggesting the state could borrow only $3 billion. Where did you see that?
- RNUG - Thursday, Aug 10, 17 @ 1:01 pm:
There is one, and only one, semi-legitimate reason for not refinancing the bill backlog … and it’s the same reason the State will never bond out the pension debt.
If you bond it out, you HAVE to make the payments on time / as scheduled. If you just keep owing it to individual companies, you can keep deferring it if / when you need to (like using the cash to pay favored software consultants instead). Of course, that game worked better when the Governor could control the Comptroller.
So yes, it IS all about cash flow …
- Anon - Thursday, Aug 10, 17 @ 1:09 pm:
RNUG-
Very smart my friend.
The problem going forward is going to be that short of bonding things out the spending obligations are going to overwhelm the state’s ability to make payments.
Much of the slight of hand easy slush fund type stuff that worked 10-20 years ago has dried up, and the leaders haven’t adapted to the new environment which makes many of the tried and true games inoperable anymore.
It almost has the feel of the end stages of a ponzi scheme where it was all so easy in the beginning, but at a certain tipping point you keep needing a royal flush every hand or everything goes bust.
- Small town taxpayer - Thursday, Aug 10, 17 @ 1:09 pm:
Refinancing your debt at a lower interest rate is only of partial benefit to taxpayers. The real solution for taxpayers is to pay the debt off and cut interest payments to zero. As I see it, paying any interest to anyone only helps the lenders.
- Joe M - Thursday, Aug 10, 17 @ 1:10 pm:
More proof that IPI and former IPI folks are running the show.
- Jocko - Thursday, Aug 10, 17 @ 1:13 pm:
Bruce “Henry Hill” Rauner.
And then finally, when there’s nothing left, when you can’t borrow another buck from the bank or buy another case of booze, you bust the joint out.
- Free Set of Steak Knives - Thursday, Aug 10, 17 @ 1:14 pm:
He’s going to try to hold the borrowing hostage in order to get his Turnaround Agenda.
Second verse, same as the first!
- Oldman - Thursday, Aug 10, 17 @ 1:14 pm:
This is absurd. My wife had medical bills in August 2015 at an in network provider and the state , as of this morning, has not paid. It makes no fiscal sense at 9-12% interest to not use the bonding authority.
- Anon221 - Thursday, Aug 10, 17 @ 1:19 pm:
Anonymous @ 12:10 pm:
“Refinancing your debt to the benefit of taxpayers is only a legislative issue if you do not have the authority to do it. Once you are given the authority it’s a governance issue. Not leverage.”
You make it sound like Rauner can’t walk and chew gum at the same time. He has the authority to issue the bonds, he can use his governance to do so, he chooses not to in order leverage reforms he wants. It’s not like this is some new pattern for Rauner, and there are many quotes of his to back this pattern up.
- Arthur Andersen - Thursday, Aug 10, 17 @ 1:22 pm:
I agree with RNUG. As I wrote the other day, there’s no appropriation needed to pay $2 million a day in late payment penalties, but there sure will need to be one for the debt service on $3 or $6 billion of debt.
- Anonymous - Thursday, Aug 10, 17 @ 1:23 pm:
RNUG hits the spot.
Any social service providers out there — have you been approached by the administration about taking a haircut on what’s owed in consideration for future contracts?
- Joe M - Thursday, Aug 10, 17 @ 1:24 pm:
IPI/Rauner, would rather pursue their ideas of reducing state government by half, state university appropriations by half, eliminating most social programs funded by the state, cut the income tax rate to 3%, etc. etc. — than do something to save money that is doable.
- wondering - Thursday, Aug 10, 17 @ 1:27 pm:
Tanking the state has been and continues to be the Rauner strategy
- VanillaMan - Thursday, Aug 10, 17 @ 1:28 pm:
What is bothersome is how completely detached Lucci is from real world governing. His ideas come straight out of a collegiate debating club. It’s all politics and ideology to him. Not reality. Lucci exposes himself as someone unconcerned about citizens and reality. No one, but an uninformed bubblehead would dismiss hundreds of organizations and thousands of people like they’re useless collateral, like he does. He is being guided by voices, not facts, figures or evidense.
Rauner has to get real people in policy positions who’ve done more than attend college and spout off their lolitical theories. Lucci needs to experience the real world.
What a mope of a guy. Not worth a nickle.
- VanillaMan - Thursday, Aug 10, 17 @ 1:31 pm:
An arrogant mope.
- Nick Name - Thursday, Aug 10, 17 @ 1:33 pm:
“Rauner now is just pursuing squeeze the beast by means available to him.”
Exactly. Robbed of his main plan to wreck the state via no budgets, he’s now set on wrecking the state by refusing to deal with the bill backlog. Plan B, Plan A: what’s the difference so long as he gets to squeeze.
- Honeybear - Thursday, Aug 10, 17 @ 1:37 pm:
Honestly I hate it when people show don’t know about government finance/taxation use examples from their personal finances to solve enooudly complex problems….”simple” as they say.
But in this case regular folk know too well that you secure the best rate possible.
Only an extremely privileged person or one executing an extreme heinous act of perfidy would not understand this and act to save our state money
So which is it!
Privilege or Perfidy
Or both?
- Trapped in the 'burbs - Thursday, Aug 10, 17 @ 1:40 pm:
Again, Rauner and his superstars attack instead of informing us of a plan or plans. Most moderate people in this state accept that we had to raise taxes but wanted spending cuts and a clear plan going forward to dig out of the hole. Instead, we dug the hole deeper, accomplished nothing and now have a new set of far right incompetents trying to bully a flawed message. Odd, how they go after OW because he stays focused on reality. Here’s the deal Raunerites, you have to stop committing unforced mistakes. Also, you probably need to stay off of this site and stick to commercials. Commercials are seen, endured or tolerated without feedback. A post on a blog site inhabited by people who are really engaged in the politics of the state and think for themselves is not a good forum for hucksters, liars and goofs. Step up your game or control the venue. You will not be able to bully the CF aficionados into thoughtless submission. Your lack of a coherent plan continues to drive the Rauner administration toward epic failure where the best epitaph may be that he didn’t get indicted. Now would be a great time to articulate your plans going forward. It is late in the game but you could make up a lot of ground if you commit to governing with an understanding that the democrats control the house and senate. What are you expecting from the mass exodus of GOP legislators that are leaving because of their governor? Hmmm, I wonder what leverage you have to get their votes. Maybe it’s time to ask somebody with some institutional knowledge and some credibility for help. You continue lose credibility.
- Sue - Thursday, Aug 10, 17 @ 1:44 pm:
The Dems are already posturing for the next tax increase which they will claim is necessary to pay off the Rauner debt. But we all know based on the Cullerton statement the recent bump leaves us will a 2.3 billion deficit. By the time the fat boy is out of office the tax rate will be 7 plus to pay for all of his programs he is announcing
- VanillaMan - Thursday, Aug 10, 17 @ 1:47 pm:
A lot of ridiculous assumptions there, Sue.
Baloney
- Oswego Willy - Thursday, Aug 10, 17 @ 1:52 pm:
This is when - RNUG - takes us to where the reality meets the insanity…
===If you bond it out, you HAVE to make the payments on time / as scheduled. If you just keep owing it to individual companies, you can keep deferring it if / when you need to (like using the cash to pay favored software consultants instead). Of course, that game worked better when the Governor could control the Comptroller.
So yes, it IS all about cash flow …===
Every day, you’d have to think Rauner would even take GA seat losses in 2016 if he could have a “Redo” on Munger-Mendoza.
When I need clarity on the operating of budgetary monies, I begin with - RNUG -… and don’t get me started on his pension work.
“If you bond it out, you HAVE to make the payments on time / as scheduled. If you just keep owing it to individual companies, you can keep deferring it if / when you need to (like using the cash to pay favored software consultants instead). Of course, that game worked better when the Governor could control the Comptroller.
So yes, it IS all about cash flow …”
That’s good stuff.
- JoanP - Thursday, Aug 10, 17 @ 1:57 pm:
@ SmallTownTaxpayer -
“Refinancing your debt at a lower interest rate is only of partial benefit to taxpayers. The real solution for taxpayers is to pay the debt off and cut interest payments to zero. As I see it, paying any interest to anyone only helps the lenders. ”
Sure, but if you can’t afford to pay the debt off, it makes total sense to reduce the amount of interest you pay. That’s why, for example, people refinance their mortgages. Using your logic, no one would ever refinance their debt. They’d just wait until they could pay it off in one fell swoop. Which, for most people, is an unlikely proposition. Just as it is for the State of Illinois.
- Timmeh - Thursday, Aug 10, 17 @ 2:02 pm:
==Refinancing your debt at a lower interest rate is only of partial benefit to taxpayers. The real solution for taxpayers is to pay the debt off and cut interest payments to zero. As I see it, paying any interest to anyone only helps the lenders.==
Where are we going to get the $14B to pay this off right now?
- Anon - Thursday, Aug 10, 17 @ 2:15 pm:
Sue-
You are way low. The tax rate right now should probably be 7% if we wanted to truly balance the state budget as it sits.
Factoring in how much the future pension/interest on debt payments within the next 10-15 years will crowd out the general fund and realistically the state is going to have to get on a glide path to something near a 10% income tax at the minimum if it is ever going to realistically meet it’s obligations without having the entire budget essentially be nothing but pension/debt/school payments.
I still don’t think the “everything is fine, just keep spending” crowd truly understands the devestation that the pension/interest obligations are going to wreak on the general fund in the near future.
We will have to keep raising taxes just to meet prior obligations, giving tax payers nothing new in the process for their ever increasing tax bill. Yet some are already lining up all sorts of new spending. It is mind numbing how out of touch the political class is in this state.
- Chicago Cynic - Thursday, Aug 10, 17 @ 2:17 pm:
#BestTeamInAmerica strikes again.
- Oswego Willy - Thursday, Aug 10, 17 @ 2:26 pm:
(Tips cap to - Trapped in the ‘burbs -)
I think what most telling about BTIA(tm) and the differences with them an the “Superstars” is that the Superstars had a conscious towards, “in the end”, good governance must win out.
The BTIA(tm) embrace the destruction and trying to make things better is always second to the Agenda, no matter the damage being done in real time or long after.
What Diana Rauner and Bruce Rauner wanted in this change was to have unfeeling workers tondo as much damage as possible, without a conscious…
… and to have it “sold” to the Winnetka Cocktail Crowd… as Diana Rauner and Bruce Rauner faking a caring for Illinois, while the IPI hires continue the Agenda march, as unfeeling as possible, and caring less and less about Illinois
That’s what this is…
… that and - RNUG -’s point on cash flow.
- Anonymous - Thursday, Aug 10, 17 @ 2:27 pm:
All a prelude to the next tax increase, because the last one was not large enough, to pay down the debt. Pritzkar and Madigan will hike it.
- pawn - Thursday, Aug 10, 17 @ 2:31 pm:
So Sue, What is your plan to make providers and others whole, who entered into contracts that the State freely issued, and who are NOT in the business of financing state government? Providers are unwilling lenders. Why not shift to willing lenders? Either way the debt is the same, and in some cases, by shifting to willing lenders, the debt can be smaller by reducing the interest penalties.
Or, as I suspect is your real intention, to you think the state should just wait until providers declare bankruptcy and go out of business, in the hopes that the state will never have to make good on that debt?
Tell the truth. What is your plan?
- VanillaMan - Thursday, Aug 10, 17 @ 2:31 pm:
==The tax rate right now should probably be 7% if we wanted to truly balance the state budget as it sits.==
That assumes that no other options are pursued. There are other financing options if the State pursues it. No one wants 7% income taxes. There are taxable sources that are not tapped and need to be.
- Sue - Thursday, Aug 10, 17 @ 2:43 pm:
Vanilla ManA Tauner has tried other options- like taking on the AFCSME contract. If you haven’t noticed the Inion controlled SDem party stopped him
- Anon - Thursday, Aug 10, 17 @ 2:44 pm:
Vanillaman-
They have taxed all the low hanging fruit already that won’t get them thrown out of office.
Any revenue source that they haven’t come after already is one they are never coming after, because we would have seen it by now if it was viable.
You really believe Madigan is going to ever sign off on coming after retirement income? Not in this lifetime.
That is why they are going to have to keep coming back to the income tax, because for the type of revenue we need that is the only place that can generate enough of it to meet our objectives.
Property taxes are sky high so those are hitting their upward bound. Much higher on the business tax and we will see even more flee.
It has to be the income tax, because even if we held all other spending stagnant for the next 5-10 years increased pension costs alone would dictate the need to find billions more in revenue from the general fund.
- tobias846 - Thursday, Aug 10, 17 @ 2:46 pm:
I can see Rauner assuming that social service providers will go under, and he’ll never have to pay them. But quite a bit of the bill backlog is owed to health care companies, including some very large ones. They aren’t going to go away. There is also a pending class-action lawsuit over the state’s failure to pay health insurance claims; that hasn’t gone away either.
It’s quite possible that Rauner assumes that the state can welsh on much of the bill backlog without consequence. But I also tend to agree with the “leverage” theory as well.
- PragmaticR - Thursday, Aug 10, 17 @ 2:50 pm:
==There are taxable sources that are not tapped and need to be.==
Tax retirement income and lower income tax rate to 4.75%. The previous generation voted for politicians that did not raise the revenue necessary to fund the pension plans. Retirees are largely insulated from the shared sacrifice imposed by the income tax increase.
- Anonymous - Thursday, Aug 10, 17 @ 2:50 pm:
Yea Vanilla Man, like raise the tax on food and tax all liquid beverages by the ounce including, water.
- Oswego Willy - Thursday, Aug 10, 17 @ 2:51 pm:
===Tax retirement income===
How easy will that be?
- Anonymous - Thursday, Aug 10, 17 @ 2:52 pm:
Raise and tax everything, Yea that will solve all our problems. Snark
- Anonymous - Thursday, Aug 10, 17 @ 2:55 pm:
Nothing like the state taking part of a persons retirement income, to make a senior voter feel angry at election time.
- wordslinger - Thursday, Aug 10, 17 @ 2:56 pm:
–So Sue, What is your plan to make providers and others whole, who entered into contracts that the State freely issued, and who are NOT in the business of financing state government? –
Same as Rauner’s. Squeeze them long enough and hopefully they go out of business and you pay them nothing.
That’s what passes for “fiscal conservatism” in some circles.
Used to be called “chronic deadbeatism.”
- Sue - Thursday, Aug 10, 17 @ 3:02 pm:
Illinois has a 120 plus billion pension hole growing at 8 percent a year. Absent fixing that the State is on a path toward fiscal insolvency. Not a single Democratic office holder is willing to acknowledge this FACT. Nothing they do will address the States’s long term fiscal problem absent finding a pension solution and paying it off isn’t an option unless you think the population is willing to stomach California levels of taxation. What was just done with tbd recent tax increase was laughable in terms of addressing the issues we confront
- wordslinger - Thursday, Aug 10, 17 @ 3:04 pm:
Sue, what would you suggest, in light of Supreme Court rulings?
- Sue - Thursday, Aug 10, 17 @ 3:07 pm:
Word - my plan would include the astate imposing a 5 year salary freeze across the entire public sector- increasing employee health care costs paid by the employee- ending all employer pension pickups but then having the school districts make additional pension contributions equal to the pick up savings-
- tobias846 - Thursday, Aug 10, 17 @ 3:08 pm:
So, Sue, what’s your solution? Somehow I suspect it involves defying the state constitution and walking away from the pension debt. Or maybe, like Kristen McQueary, hoping for a natural disaster.
- wordslinger - Thursday, Aug 10, 17 @ 3:10 pm:
Sue, your plan does nothing about the current unfunded liability.
- tobias846 - Thursday, Aug 10, 17 @ 3:11 pm:
Ah, I missed Sue’s pension solution by one minute. My bad.
Seems to me that what Sue suggests would only deal with future pension debt, not the current obligations (which the Supreme Court has already ruled out).
- Sue - Thursday, Aug 10, 17 @ 3:15 pm:
Word- you may have a reading deficiency- if the schools make a pension contribution equal to the pick- up then TRS gets double payments. I am saying stop the pick-ups make the employees pay for their own contributions but have the Districts match the payments- the schools would be making the same dollar amount of payments but it would be on top of the teacher contributions. It’s likely to be an extra billion a year
- Skeptic - Thursday, Aug 10, 17 @ 3:17 pm:
“my plan would include the astate imposing a 5 year salary freeze” I’d go for that. After the last 4 years of no raises, I’d get mine next year instead of having to wait indefinitely.
- wordslinger - Thursday, Aug 10, 17 @ 3:30 pm:
Sue, let’s see if my reading deficiency can interpret your clear and concise writing:
You’re proposing employees pay more going forward (nearly 900 school districts renegotiating contracts) and that the “savings” to school districts be state mandated to go toward the current unfunded TRS liability?
And school districts get their money from where? Leprechauns with pots of gold?
You’re not reducing the liability, you’re just transferring it from state taxes to the property tax rolls.
Everyone outside Chicago cool with that “solution?”
- blue dog dem - Thursday, Aug 10, 17 @ 3:41 pm:
I told ya’ll the other day. Three years to the next income tax increase on the WPAMC. Its what pols from both sides of the aisle do.
- Arthur Andersen - Thursday, Aug 10, 17 @ 3:44 pm:
Sue, enlighten me as to how the State can impose a “5 year hiring freeze on the entire public sector” where the State is not the employer?
I’m all ears.
- Sue - Thursday, Aug 10, 17 @ 3:52 pm:
AA- it’s called legislation. The State could readily impose such a mandate but good luck with that
- Sue - Thursday, Aug 10, 17 @ 3:55 pm:
Word- it wouldn’t increase adistrict spending one cent. They are all doing the puck- ups as of now. The legislature could prohibit that and free up the Districts to use the savings to fund the pension liability
- Arthur Andersen - Thursday, Aug 10, 17 @ 3:59 pm:
Sue, they are not “all doing the pickups now.” Over 60 percent? Yes. 100 percent? Not even close.
You don’t score a 65 on an exam and get to call it an A+. Geez.
- wordslinger - Thursday, Aug 10, 17 @ 3:59 pm:
Sue, it’s still a transfer of the unfunded liability from the state to school districts.
That’s a long-term claim on property taxes, rather than state taxes.
- Sue - Thursday, Aug 10, 17 @ 4:04 pm:
Word- you damn well know that in 2019 Madigan is going to transfer the liability to the Districts. He has a choice dramatically raise State income taxes or dovthe transfer. What do you think he is going to do
- wordslinger - Thursday, Aug 10, 17 @ 4:08 pm:
Sue, my crystal ball is broken.
I’m also not a believer in the almighty 3-D Chessmaster as some are.
I’d guess an attempt to transfer the unfunded TRS liability to the property tax rolls would be a Century Club winner.
- Skeptic - Thursday, Aug 10, 17 @ 4:09 pm:
Sue: So you’re saying Madigan can single-handedly pass legislation through the House and the Senate and have it signed into law? How does that work?
- PragmaticR - Thursday, Aug 10, 17 @ 4:16 pm:
===Tax retirement income===
===How easy will that be?===
OW, I agree with your implicit comment that taxing retirment income will not be easy. However, it might eventually become the least objectionable option. In general, business and individuals should prefer a larger tax base with a lower tax rate. There is nothing wrong with shared sacrifice. In addition, the likely relocation response of more retirees to other states would eventually reduce state Medicaid spending on nursing home care. Is there another plan that would raise revenue, lower income tax rates, and slow the growth of Medicaid spending?
- Sue - Thursday, Aug 10, 17 @ 4:21 pm:
Given the Supreme act- the only way to drive down the actuarial unfunded liability is to control future salaries for both teachers and admin- if it is truly an emergency(it is) then you need emergency measures. Legislate no increases upon expiration of existing contracts. It’s legal
- Sue - Thursday, Aug 10, 17 @ 4:21 pm:
CT
- Sue - Thursday, Aug 10, 17 @ 4:22 pm:
If Madigan has a Dem Gov he can do what he wants on the liability transfer
- wordslinger - Thursday, Aug 10, 17 @ 4:27 pm:
Sue, you remind me of those who, for many years, claimed every action the allegedly all-powerful Madigan made was to get Lisa Madigan elected governor.
- Liberty - Thursday, Aug 10, 17 @ 4:28 pm:
Sue the actuarial calculations include salary growth. No salary growth, fewer dollars into the system and earlier retirements.
- Earnest - Thursday, Aug 10, 17 @ 4:31 pm:
>another plan
>in 2019
>Three years to the next
>All a prelude to the next
One thing is certain: the bipartisan FY18 budget and permanent tax increase has generated more hypothetical future tax increases than any budget in history. It has made for a nice change of pace from the focus on blaming people for the past. Here in the present, we added an avoidable $2 million to the pile today and will apparently continue to do so. I’d like that to stop, please.
- Skeptic - Thursday, Aug 10, 17 @ 4:36 pm:
“Legislate no increases upon expiration of existing contracts” Ah, so you oppose local control? So you must be in favor of prevailing wage then? That non-sequitor aside, it strikes me as wrong that the State can tell a county how much to pay its employees. I’d like to see where it says that’s legal.
- Waterfall - Thursday, Aug 10, 17 @ 4:45 pm:
Pay the bills you owe if you can. The legislature has provided an avenue to pay a large pot of bills and save money.
This isn’t about punishing Democrats. You’re punishing business owners. Employers. Partners.
To choose not to pay off bills when you have the ability to pay off bills is frankly immoral. And you can save hundreds of millions in the process.
- RNUG - Thursday, Aug 10, 17 @ 4:51 pm:
While it is far from.a complete solution, Sue is on to something about the pickup of the employee portion by the school district. The unions managed to get that because the State was (supposed to be) doing the employer portion.
And the easier way to implement it is just subtract any school district employee pickup directly from any State school aid and send it straight to the TRS pension fund. As soon as the school districts start L ding money, they will decide on their own to end the employee pickup.
And yes, this is one of the few times I’m partially agreeing with -Sue-.
- pawn - Thursday, Aug 10, 17 @ 4:52 pm:
And in all of Sue’s back and forth about pensions, no answer yet for human service providers and their role as unwilling lenders. What is your strategy here, Sue? Why not refinance these bills at a lower interest rate?
Or do you want, as I suggested, these providers simply to wither under the burden of their unpaid bills, essentially providing the state with 2 years of service for free? What is your solution?
- WhoKnew - Thursday, Aug 10, 17 @ 4:57 pm:
At 2 million a day, isn’t it safe to say that well over 1 billion of the 14 plus is solely from interest!
- Sue - Thursday, Aug 10, 17 @ 4:58 pm:
Pawn- those bills are going to get paid- better that expenditures never occurred but they were
- Sue - Thursday, Aug 10, 17 @ 5:01 pm:
Skeptic- so you have never heard of wage price controls. The State has police powers and in an emergency like this it should use them
- VanillaMan - Thursday, Aug 10, 17 @ 5:12 pm:
Great - now she’s claiming we have to declare an emergency and use police powers? What emergency are we having? Mass political cowardice? Whiskey Ring II?
- pawn - Thursday, Aug 10, 17 @ 5:23 pm:
Sue, when will they be paid?
Providers are unable to make it without revenue. If they have to go to Court of Claims, it could take YEARS for them to be paid. My org has had a claim pending in C of C for two years now with no action on it.
- RNUG - Thursday, Aug 10, 17 @ 5:57 pm:
== The State has police powers and in an emergency like this it should use them ==
Good luck on that one. A snowball has a better chance in hell. The State tried to argue police powers on the failed pension “reform” bill; didn’t fly. The current IL SC knows the State’s financial problems is a self-created mess.
- RNUG - Thursday, Aug 10, 17 @ 5:59 pm:
== My org has had a claim pending in C of C for two years now with no action on it. ==
All the Court of Claims can.do is affirm the State owes the debt. It still doesn’t get paid without an appropriation.
- tobias846 - Thursday, Aug 10, 17 @ 6:27 pm:
Ah, yes, “police powers,” AKA the Lizzie Borden defense: “I killed my parents. Have pity on me, for I am an orphan.”
- PragmaticR - Thursday, Aug 10, 17 @ 6:43 pm:
Liabilities due to underfunded pension plans have become a sideshow in this context. Issue bonds, pay bills, and save hundreds of millions in interest as stated by Waterfall, pawn, WhoKnew, and others. This step would have large positive impact on economy in the short term. The remainder will have to wait until there is a credible negotiating partner in the Governor’s office. I note that Georgia, a state dominated by a fiscally conservative Republican party, has an tax rate of 6% on income above $10,000.
- Arthur Andersen - Thursday, Aug 10, 17 @ 6:57 pm:
Sue, you just don’t get it. As RNUG succinctly pointed out, claiming police powers is a non-starter. Moreover, salary growth does not drive unfunded liability growth; it’s a relatively minor factor compared to Interest on the unfunded and investment performance. It’s also likely going to be offset by the apparent in of increased lifespans that have affected valuations in recent years. Of course, since I seriously doubt that you have read an actuarial valuation report, you wouldn’t know this.
I guess you also missed that Madigan’s cost shift proposals have dealt with shifting normal cost, not the unfunded.
I find it perplexing that you start out with wanting to shaft the entire public sector, but you always come back to bashing TRS and teachers. Why? Get paddled as a kid? Turned down for a TRS job?
- wordslinger - Thursday, Aug 10, 17 @ 7:00 pm:
–I note that Georgia, a state dominated by a fiscally conservative Republican party, has an tax rate of 6% on income above $10,000.–
Iowa, 6.12% over $12,664; max rate 8.98% over $63,316.
Wisconsin, 5.84% over $11,120; 6.27% over $22,230; max rate 7.65% over $244,750.
Missouri, 6% above $9,000.
Indiana, 3.23%, plus county income tax ranging from .3% to 3.38% (most between 1.5% and 2.5%).
- Sue - Thursday, Aug 10, 17 @ 7:56 pm:
You guys never fail to amaze- add in Illinois RE taxes and we are way over these other states. There is a reason they say Illinois is the highest taxed State it’s because they include RE and sales taxes.
- PragmaticR - Thursday, Aug 10, 17 @ 9:42 pm:
The high RE taxes in the Chicago suburbs do not pay for downstate K-12 education or cover state contributions to TRS, SERS, or SURS. The state government does not have sufficient revenue to pay for statewide responsibilities in a manner similar to neighboring states. RE tax rates will decline once the state actually supports K-12 education appropriately.
- Taylor Swift Obsession - Thursday, Aug 10, 17 @ 9:57 pm:
Anon 1:01
Taking shots at the budget office? Shake it off.
The GOMB debt staff is solid…the best they’ve ever been. They just got better this year. If they get the go ahead to sell $6 billion, they will knock it down.
Personally, I hope they close the $6 billion sale on December 13….Taylor’s 28th birthday. That sounds about wright. Yipeeeeeee
- Pawn - Thursday, Aug 10, 17 @ 11:33 pm:
RNUG: believe me… I know this.
Sue: still waiting for an honest response about real debt willfully incurred by the state to unwilling lenders. All your screeds about taxes have so far generated no response to e question “why not refinance debt at a lower interest rate using willing lenders?”