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*** UPDATED x1 *** S&P asks then doesn’t answer: “Is fiscal stabilization on the horizon for Illinois?”

Thursday, Feb 25, 2021 - Posted by Rich Miller

* S&P looks at the governor’s budget, but won’t yet evaluate its credit rating, so the question it asks isn’t really answered…

S&P Global Ratings acknowledges that this is only a budget proposal and there is uncertainty about the pace of economic recovery and prospects for additional federal stimulus. Future credit direction will be evaluated as greater clarity is available on these key issues.

* Key takeaways…

- Although Illinois ‘proposed fiscal 2022 general fund operating budget is slightly smaller than the previous year’s proposal, and balanced in terms of current-year obligations, we do not view it as structurally balanced due to the treatment of pension obligations.
- Pension contributions are budgeted to fully meet increasing statutorily set amounts but are still less than actuarially determined amounts.
- The state expects to close fiscal 2021 with a small surplus, after prepaying the next fiscal year’s municipal liquidity fund’s debt service.
- Illinois has a bill backlog, limiting flexibility, but this is markedly reduced from this time last year.
- The COVID-19 pandemic continues to affect state economic activity with unemployment through December 2020 above the national average, with 2021 activity improving employment conditions.

* Potential risks…

Federal uncertainty: The budget does not rely on additional federal aid, but educational enhancements and further efforts to retire MLF borrowing obligations early could be aided by further stimulus. Should additional aid materialize, the state could adjust budget expectations.

Pensions remain a high fixed cost: Included in the budget is $9.4 billion for general fund contributions to the state’s various pension systems. This is a $739 million increase over the previous budget contribution. The statutory contributions are forecast to continue to increase, but the state projects its share of the budget will remain at about 25% of expenditures through 2045.

Challenge in changing tax structure: The fiscal 2022 budget relies on changing business tax provisions to generate an estimated $932 million in additional revenues. Legislative scrutiny of the tax-structure proposal could limit change and revenue projections.

Prolonged economic disruption: Outside the timing of vaccine distributions, any long-term permanent changes in business, travel, or consumer patterns in and around Chicago will likely have a material effect on the state’s economic recovery.

* Capital program debt…

We view Illinois’ general obligation (GO) debt burden positively. With more than 75% of GO debt retired in 10 years and the state in the third year of a long-term $45 billion Rebuild Illinois capital improvement plan, it is expected to maintain debt ratios at similar levels. As of Feb. 1, 2021, the state has $27.2 billion of fixed-rate GO debt outstanding and $2.845 billion of GO MLF debt, equating to debt per capita of about $2,375, which we consider moderate.

*** UPDATE *** Something weird is going on. Check out this press release, which doesn’t seem to be written by the same people who wrote the actual report…

Illinois’ Proposed Fiscal 2022 Budget Could Signal The State Is Turning The Corner, Report Says

BOSTON (S&P Global Ratings) Feb. 25, 2021—The Illinois governor’s proposed fiscal 2022 general fund operating budget could be a small step toward putting the state on firmer financial footing, S&P Global Ratings said today in a report titled “Is Fiscal Stabilization On The Horizon For Illinois?”.

The $41.7 billion general fund budget is slightly smaller than the initial $42 billion budget proposed last year before the COVID-19 pandemic began, and $1.8 billion or 4.2% less than the estimated final spend in fiscal 2021. The introduced budget is designed to generate a $120 million surplus.

However, the state still faces fiscal challenges, including a significant bill backlog, underfunded pension plans, and the ongoing effects of the pandemic.

“Although Illinois’ proposed fiscal 2022 general fund operating budget is slightly smaller than the previous year’s proposal, and balanced in terms of current-year obligations, we do not view it as structurally balanced due to the treatment of pension obligations,” said S&P Global Ratings credit analyst Geoff Buswick.

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*** UPDATED x1 - Welch responds *** ILGOP pounces on Welch’s mention of graduated income tax idea

Thursday, Feb 25, 2021 - Posted by Rich Miller

* Background is here if you need it. ILGOP press release…

ICYMI: Speaker Welch’s first priority is a tax hike

Just one month into the job, new Speaker of the House Chris Welch has proposed that Illinois Democrats should try again to pass a constitutional amendment implementing a progressive income tax.

Chicago Tribune…

“We have to tell the voters what we’re going to do with that money,” Welch said during a virtual event hosted by the Economic Club of Chicago. “I certainly think tying that new revenue to pensions would be a winner.”

ILGOP Spokesman Joe Hackler responded, saying, “What the new Speaker doesn’t understand is that the people of Illinois did not reject the Madigan-Pritzker tax hike amendment because they were confused on what the revenue would be used for. They rejected the tax hike amendment because new revenue would be sent to Springfield to be squandered by the same corrupt politicians and Democratic party that got us into this financial crisis in the first place.”

Speaker Welch’s ill-conceived proposal not only shows a lack of judgment, but it also reveals his true priority: paying off those inside state government while the rest of us pick up the tab.

As more and more former elected officials and insiders are indicted as part of former Speaker Madigan’s corruption scheme (including just last night), Democrats in Springfield continue to plead for more money. The reality is that the Madigan-Pritzker tax hike amendment was defeated overwhelmingly last year because Illinoisans don’t trust the corrupt insider system that has controlled state government for years.

Sometimes, it takes a while before new leaders fully appreciate how every word they say will be examined and even twisted. Welch never said it was his first priority, for instance, but he walked right into this.

Even so, the ILGOP appears to prefer magic fairy dust to actual solutions. “Just make it go away and never bother us again” is not a constitutional option here.

*** UPDATE *** Sean Anderson on behalf of Speaker Welch…

As usual on this subject, Illinois Republicans have nothing constructive to offer because their only solution is to cut programs and services for underserved populations and communities of color. They can send their little press releases to play petty politics, but the Speaker is focused on having serious conversations to find solutions that benefit working class people across the state.

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Angie Guerrero Cuellar becomes third person to represent the 22nd House District in a week

Thursday, Feb 25, 2021 - Posted by Rich Miller

* The Democratic committeepersons of the 22nd House District appointed Angie Guerrero Cuellar to the open seat this morning without debate. Cuellar was supported by Ald. Silvana Tabares at Sunday’s meeting. 13th Ward Democratic Committeeperson Mike Madigan announced yesterday he would also be supporting her after the abrupt resignation of his own candidate, three-day apppointed state Rep. Ed Kodatt. After the meeting, Madigan spoke briefly with reporters…

Q: Was it a lack of vetting?

A: The events developed as they developed. The action of the committee taken on Sunday was nullified because of the resignation, creating a vacancy, and so today we fill the vacancy. I don’t plan to speak to background questions. I don’t plan to speak to the background questions.

Q: You’re normally very meticulous…

A: I think that proper questions were asked, proper questions were asked.

Q: Proper questions were asked or weren’t?

A: They were, the answer is yes. As I said, the events developed, Mr. Kodatt resigned creating the vacancy, today we filled the vacancy. I’m interested in moving forward with Angie Guerrero Cuellar. She’s been anchored in the community. As you can read from her resume, she’s worked with various community organizations in the Southwest Side of Chicago. Therefore, she’s had good experience and understanding of the needs and the desires of the people of the Southwest Side.

Q: People have a certain social media life that some of us older folks don’t. Is that something you’ve neglected to look at, their social media and what might have been evident had his name been put out there ahead of time, a little more vetting.

A: His name was put out in advance like everybody else. It was a complete circulation of resumes. Every resume that was submitted…

Q: That morning. It wasn’t until that morning. It wasn’t enough time for folks to really take a look at who he was.

Q: So, when you say questions were asked, does that mean the answers were not true.

A: See, I’m not going to get into that. I’m just not going to speak about…

Q: When did you first learn about the…

A: A little bit ago. A little bit ago.

Q: Was it after he was named, though?

A: Yes.

Q: People like Pritzker and Sen. Durbin, they blame you for the failure of the Fair Tax or Democrats have a disappointing election day…

A: I’m not going there. I’m not going there. I’m not going there.

Q: Why not?

A: Because I don’t want to?

Q: Is what happened to Mr. Kodatt another manifestation of the cancel culture? Are you concerned about that?

A: What culture?

Q: Cancel culture.

A: Uh-huh. Really. [Looks puzzled at the question.]

Q: The new chairman is going to be selected. Do you have a preference of who that would be?

A: You know what, I’m anxious to move out of here and wish all of you a good day. [Walks away.]

Subscribers know more about why and how the questions were asked and what happened after they were asked.

Cuellar is a resident of the 13th Ward.

…Adding… Bill Wheelhouse recently wrote about his experience covering Madigan at the Statehouse…

He appeared unflappable. I never witnessed a heated exchange with a reporter. He might make a wry comment about a news outlet with a smile on his face. At most, his anger might lead him to ignore a question. He was honest in answering the questions he did answer, but what would sound like a good answer to a question, was, upon further reflection, often an answer that could be interpreted more than one way, which made it hard to determine if he flipped on an issue or was dishonest. […]

One evening, I was lucky enough to catch Madigan alone walking back to his office, asking about some controversial legislation. It was an adversarial but polite exchange. He kept walking at the same pace. He was not trying to run away like many others seem to do when questioned by a reporter. Yet he never directly answered the question. We got to his office door, and he calmly, matter-of-factly, shut it in my face. That is what it was like to cover Madigan.