* I told subscribers to expect this earlier today. Press release…
Governor JB Pritzker hailed the state’s improved bond rating from S&P Global Ratings on Thursday, the second such rating upgrade in recent days. The announcement follows Moody’s credit upgrade and Fitch’s upgraded credit outlook for the state—a trifecta of good news from the three major credit rating agencies.
Since taking office, Gov. Pritzker has tirelessly focused on strong and responsible fiscal management, working with the General Assembly to hold the line on spending while making key investments in programs working families rely on while continuing to strengthen Illinois’ fiscal outlook.
“A well-known proverb states, a journey of a thousand miles begins with a single step. Throughout my administration we’ve remained steadfast in our goal to return Illinois to fiscal stability. That has meant making responsible decisions step by step, day by day, working closely with our partners in state government,” said Governor JB Pritzker. “These responsible decisions are paying dividends, as evidenced by today’s upgrade from S&P, last week’s upgrade from Moody’s and our outlook rise to positive by Fitch. My administration has worked diligently to make real progress, the rating agencies are acknowledging our progress and we remain committed to further strengthening Illinois’ fiscal standing.”
S&P last upgraded the state’s bonds in July 1997 and today’s upgrade analysis credited “improved liquidity,” “demonstrated operational controls during the COVID-19 pandemic” and an “improving economic condition” in making the rating change.
“Throughout the pandemic, the state has been able to deliver needed services and programs, both traditional governmental and pandemic-response-related without meaningfully changing the debt profile,” S&P stated.
The Governor noted all the positive reports from the top rating agencies are the result of many leaders working cooperatively in the best interest of Illinois’ taxpayers, especially thanking Speaker Welch, President Harmon, Leader Greg Harris, Senator Sims, Comptroller Mendoza and Treasurer Frerichs for their continued partnership.
S&P upgraded Illinois’ rating on its General Obligation bonds from BBB- to BBB with a stable outlook also upgraded the Metropolitan Pier and Exposition Authority ratings to BBB+ from BBB based on the state’s support. Build Illinois bonds were upgraded to BBB+ from BBB.
Last week Moody’s upgraded Illinois’ rating on its General Obligation bonds from Baa3 with a stable outlook to Baa2 with a stable outlook, and also upgraded the Metropolitan Pier and Exposition Authority ratings to Baa3 from Ba1 based on the state’s support. Build Illinois bonds were upgraded to Baa2 from Baa3.
In an updated credit analysis issued by Moody’s released Wednesday, the rating agency noted last week’s credit upgrade was supported by a material improvement in the state’s finances, demonstrated by the ability to repay emergency Federal Reserve borrowings promptly and keep unpaid bills in check at a low level.
“One of the most striking developments in recent months was the state’s reduction of a “backlog” of unpaid bills, underscoring the improvement in the state’s finances,” Moody’s wrote.
The rating of a state’s bonds is a measure of their credit quality. A higher bond rating generally means the state can borrow at a lower interest rate, saving taxpayers millions of dollars.
…Adding… Speaker Chris Welch…
For the first time in decades, Illinois has received not one, but two bond rating upgrades. I am incredibly proud of our state’s responsible financial choices that continue to improve our fiscal standing, as well as put hardworking Illinoisans and their families first. These are the types of positive changes you see when government leadership is truly working for the people they represent.
…Adding… Comptroller Mendoza…
“S&P’s upgrade of the state’s credit rating is further evidence that Illinois is moving in the right direction. Upgrades are good news because they mean lower costs for taxpayers on the bonds that we use to build roads, bridges, schools and other projects. A top priority of mine as comptroller has been paying down the state’s bill backlog, knowing that credit rating agencies would recognize our hard work. From a high of $16.7 billion during the prior administration’s budget impasse, that backlog is down to $2.9 billion today.
“As the state comptroller, my priority continues to be managing the state’s bill backlog and providing evidence to the credit rating agencies that Illinois is an excellent investment and is on a path to financial stability and certainty.”
…Adding… Senate President Harmon…
This is further proof we are on the right track in balancing our fiscal realities with the real-world needs of working men and women. We are moving Illinois forward by paying our debts while at the same time investing in education, health care, child care and other key programs people need to get ahead.
*** UPDATE *** From the S&P report…
The adopted fiscal 2022 $44.3 billion general funds budget is similarly sized to the fiscal 2021 spending and is designed to generate an $88 million surplus. In addition, the fiscal 2022 budget anticipates using $2.8 billion in federal American Rescue Plan (ARP) funding for pandemic-related purposes, $1.8 billion for economic recovery and other pandemic needs, and $1 billion for capital. The capital money will be split approximately $575 million for project types specifically authorized in the ARP guidelines (broadband, water, and sewer) and the remaining $425 million on other projects once the reimbursement rules are finalized. That leaves $5.3 billion for additional uses to be determined through the ARP spending deadline of Dec. 31, 2024. The plan for spending the ARP money is ongoing but looks to be aimed at pandemic expenses, supporting economic development, and aiding small businesses affected by the pandemic.
Although Illinois’ fiscal 2022 general fund budget is flat compared with the previous year’s spend, 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 of $9.4 billion are budgeted to fully meet increasing statutorily set amounts but are still less than actuarially determined amounts. We view the difference between the statutorily set contribution amounts and our defined minimum funding progress as a structural gap.
Illinois’ bill backlog remains, but according to the state comptroller at the end of fiscal 2021 was approximately $2.6 billion, the lowest level in more than a decade. As of July 7, the bill backlog was $2.9 billion, but such variation is expected. Continued reduction in these liabilities could give the state needed budgetary flexibility and help it avoid unnecessary interest charges. We expect the state’s focus will remain on paying the past-due obligations (although most are now less than 45 days’ delinquent), before shifting to establishing a reserve for future recessions.
The remaining $5.3 billion in ARP funds come with some use limitations, such as a prohibition on using this money to resolve pension-funding deficiencies, depositing into rainy day reserves, and paying back the MLF; the federal funds could be used to replace lost revenue, repay part of the $4.2 billion borrowed from the federal government for unemployment payments, or further reduce the bill backlog.
Credit weaknesses supporting the ‘BBB-’ rating include:
• An almost empty budget stabilization fund that would further limit budgetary flexibility;
• The remaining bill backlog;
• Pension funding practices where the statutory pension funding is designed to attain a 90% funded status in 2045, which is one of the least conservative funding methodologies in the nation among peers; and
• A recurring practice of relatively late audit reports. The audit for the fiscal year ended June 2019 was not released until April 2020 and the fiscal 2020 audit is still not published. Although not required for us to consider an upgrade, a return to a more abbreviated audit release period would be in line with that of higher-rated peers.
Credit strengths include:
• On the revenue side of the budget, various tax revenues have held up stronger than forecast during the depths of the economic trough, and the receipt of unbudgeted federal stimulus to help bridge the gap to a fully functioning economy;
• On the expenditure side of the budget, whereas in the recent past the state has hesitated to make expenditure cuts during times of fiscal stress, the administration made more than $700 million in budget cuts and freezes in fiscal 2021 during the budget year. Not all cuts and freezes were general fund-related, but the recurring actions indicate a potential change in practice;
• Overall, the budget, aside from the inherent pension gap between the statutory funding and actuarial recommendations, during this current period of favorable and improving economic conditions is seeing improved structural balance; and
• The political gridlock that stymied governance a few fiscal years ago has dissipated.
The stable outlook reflects the expected strength of the liquidity position, continued economic recovery, and regular revenue and expenditure reporting and budgetary control usage.
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* Sun-Times…
The gift of immunization against COVID-19 is about to get significantly sweeter for four Illinois residents — and a million times sweeter for one of them.
The state will draw the first four winners of its coronavirus vaccination lottery Thursday, making one inoculated adult $1 million richer and providing $150,000 scholarships to three minors who have gotten their jabs.
It’s the first of nine weekly drawings being held throughout the summer as an incentive to get more people to roll up their sleeves. A total of $7 million in cash prizes will be doled out to adults, and $3 million in scholarships will go to kids aged 12-17.
Thursday’s prizes include one of only three $1 million jackpots in the lottery.
* Press release…
As Illinois continues to lead the Midwest in vaccinating its residents, Governor Pritzker announced a new pilot program offering a range of incentives to state employees who work in direct care facilities and receive at least one dose of the vaccine. The Illinois Department of Human Services (IDHS), the Illinois Department of Veterans’ Affairs (IDVA), the Illinois Department of Juvenile Justice (IDJJ) and the Illinois Department of Corrections (IDOC) announced the drawings to eligible employees in late June and will announce winners on July 19.
Dozens of frontline employees will be chosen in drawings conducted by the Illinois Lottery. Lucky winners will receive:
• Cash bonuses: ranging from $5,000 to $10,000
• State prizes: a choice among lifetime hunting and fishing licenses, Abraham Lincoln Presidential Museum passes or memberships, and State Fair admissions and concert passes
• Airline vouchers: first-class tickets to any domestic U.S. destination or coach tickets to any international destination on American Airlines
• Sports tickets: home game tickets to cheer on the Chicago Bears, Chicago Cubs, Chicago Fire FC and St. Louis Cardinals
“Our state employees have worked tirelessly on the frontlines throughout the pandemic and I’m thrilled to announce this new opportunity to encourage them to get vaccinated,” said Governor JB Pritzker. “By further increasing state employee vaccination rates, we’re not just protecting our staff, we’re protecting our vulnerable residents in state facilities and our surrounding communities. Getting vaccinated is truly how we protect ourselves from new variants and put this pandemic behind us.”
“While our vaccination rates in Illinois are good, we cannot let our guard down,” said IDPH Director Dr. Ngozi Ezike. “Across Illinois, we are seeing COVID-19 variants that spread more easily and quickly, and are more dangerous. Right now, the vaccines available have proven to be effective against these variants. However, if the virus is allowed to further circulate, it can and will mutate further. Getting vaccinated now can help stop the spread and mutation of the virus, and protect you and those around you.”
From the onset of the pandemic, frontline state employees have protected Illinois’ most vulnerable residents from IDHS developmental centers and psychiatric hospitals to IDVA veterans’ homes to IDJJ and IDOC facilities. To recognize their ongoing service to the state, employees who have taken at least one COVID-19 vaccine dose by July 12, 2021, will be entered into the free drawing. State agencies announced the drawings to eligible employees in late June.
More at the link. No comment from AFSCME was included, so I reached out. Here’s Anders Lindall…
Our union welcomes this incentive to encourage everyone to protect themselves, their families and their communities by getting vaccinated. Safe and highly effective, the vaccines are the road back to normalcy: Seeing family and friends, going to movies and restaurants, traveling and more. That’s why since December we’ve been doing everything possible to reduce barriers to access for AFSCME members and to help overcome hesitancy by providing accurate information on the importance of vaccination.
*** UPDATE *** Press release…
The first winners of Illinois’ $10 million ‘All In for the Win’ vaccine lottery have been chosen in the first drawings conducted by the Illinois Lottery.
“Getting vaccinated is your shot to save lives and win big,” said Governor JB Pritzker. “Especially with more dangerous variants spreading, getting vaccinated is the best way to protect yourself from COVID-19. I’m excited we’re able to offer enticing prizes to reward residents for getting the shot.”
“With 10 million additional reasons to get a COVID-19 vaccine, we hope to increase the number of Illinoisans who make the importance choice to secure the best protection against COVID-19 by getting vaccinated,” said IDPH Director Dr. Ngozi Ezike. “We are seeing an increase in the test positivity rate in Illinois. With the more contagious Delta variant circulating, we need more people to be fully vaccinated to better control this pandemic.”
The Illinois Department of Public Health will be notifying winners by phone or email starting this afternoon. The first round of winners are from the following locations across Illinois:
$1 million cash prize: Chicago
$150,000 scholarship: DeKalb County
$150,000 scholarship: Suburban Cook County
$150,000 scholarship: Chicago
Illinoisans from those cities and counties should keep their phones on and check their emails regularly to find out if they’ve won. IDPH will call from 312-814-3524 and or email from DPH.communications@illinois.gov. No personal information will be requested in the initial phone or email notification. Winners will have seven days to securely complete, sign and send the authorization form to IDPH to accept their prizes. The Illinois Lottery will then guide winners through the claims process. Winners will be announced eight days after each draw unless they choose to remain anonymous.
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Pritzker filming TV ads in small-town Illinois
Wednesday, Jul 7, 2021 - Posted by Rich Miller
* Rochelle News-Leader…
Gov. JB Pritzker visited the ‘Hub City’ on Thursday afternoon.
Pritzker was in town visiting Kennay Farms Distilling with a film crew in tow. He recognized the distillery for its work early in the COVID-19 pandemic when it adapted to making hand sanitizer rather than spirits. A member of Pritzker’s video team reached out to Kennay Farms Owner Rick Kennay and asked in the days before to set up a tour and interview, Aubrey Quinn, in charge of marketing at the distillery, said.
“It was a pretty cool experience,” Quinn said. “We were pleased they picked us out. We felt pretty special. It was cool to meet them. They were shooting video for four hours. They wanted to see products bottled. We bottled a single barrel whiskey. They filmed shots around the tasting room and we walked across the street to eat lunch. It was casual. We talked about the transition that we made last year.”
Quinn said that when the Kennays made the choice to switch to hand sanitizer last year, they didn’t think they would still see the impact and recognition over a year later. The family enjoyed bringing in the people that did the work to be recognized on Thursday. […]
Rochelle Mayor John Bearrows spent about five hours with Pritzker during his visit. He was sworn to secrecy upon learning the Governor would be coming to town three days earlier. They ate lunch together at Acres Bistro.
* Coal Country Times…
Governor J.B. Pritzker was in Staunton on Wednesday June 30, to shoot a commercial and talk to local business owners and residents. Pritzker and his crew shot the commercial at the Blackbird Bakery and Cafe, which is described as an ‘artisan cafe and bakery’ established by Harry and Emily Paul, and located on East Main Street.
Ashli Pernicka, who is currently both a baker and helping to run the front of house, answered some questions over her break regarding the Governors visit. When asked if the staff at Blackbird Bakery knew about the Governor’s visit beforehand she replied, “just a few days in advance we got some phone calls about it, asking if we were willing to have him come down and film a commercial here, about small businesses and his response to the pandemic, and just Emily and Harry’s story over the past year, so we did know about it.” Pernicka added, “we had some people we had told about it, close family and friends… but nobody really knew about it.”
Harry Paul, who co-owns the bakery with his wife, Emily and is a baker, took some time to answer questions about the visit as well. When asked how he felt the visit went, Paul replied, “it went well, it was fun, he was a nice guy and he was here for a couple hours.”
Gov. Pritzker sat down with the Paul’s to ask some questions about their life, family, and business. Paul says, “He just asked us about our business and how we did with the pandemic, and how we’re doing now. He was very complimentary and was looking around, checking out our place, and Staunton. I know he walked down the street a little bit too.”
…Adding… Hilarious…
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* For decades now, every time there’s a Chicago crime spike, some politician demands that the National Guard be called up. Republican gubernatorial candidate Gary Rabine is no exception to this hard and fast rule…
“As the leader of our state, Governor Pritzker needs to take a more active role in what is happening in our City,” Rabine said. “Real leaders get involved to solve the tough problems. They get their hands dirty. They work endlessly until they find resolution. We have blood in the streets. This is real life, Illinois citizens are being shot and killed at record numbers, this is a war zone. We need the Governor of our state to be an engaged leader who is involved and who will give problems of this magnitude the sense of urgency they deserve.”
Last weekend in Chicago there was a record-breaking weekend for violence as more than 104 people were shot with 19 fatalities. At least 13 of the people shot were children. Rabine said bad policies that are ruining policing have created these unforgivable outcomes.
“We have a Governor who not only is doing little to make our state safe, but he is also actively working to bring chaos and crime to our neighborhoods,” Rabine said. His Prisoner Review Board has used the pandemic as an excuse to release hundreds and hundreds of inmates – many of whom are violent offenders in Illinois communities. He signed into law a so-called ‘police reform’ bill that will only serve to make our communities and our police less safe. Gov. Pritzker must see the national news coverage of our City, depicting our City as a war zone. The lack of safety and security to our communities is unexceptable”
Rabine said it is time for Pritzker and the state to step up and lead to protect the citizens of Illinois. When it comes to real leadership, Pritzker doesn’t know what that looks like, he apparently has never had to lead in a crisis.
“If I were Governor, I would lead an urgent initiative to solve this dier problem,” Rabine said. “I would be putting major pressure on Mayor Lightfoot to get this situation resolved and when that doesn’t work, I would look at activating the National Guard to help clean up the streets and make the City safer. I would personally be doing everything I could to give the families of Chicago, Illinois the safety and security they deserve. Our communities deserve better than this massive lack of leadership currently displayed.”
I generally let this go, but I couldn’t help but notice the large number of typos in that release.
…Adding… Rabine’s spokesperson just called to say he inadvertently sent out the wrong version of the release. Click here.
Anyway, local crime is usually considered a local issue, but there are items in the new state budget that address local crime.
* Meanwhile, Rabine’s campaign bused in protesters to today’s Biden event. Pics from a subscriber…
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*** UPDATED x1 *** Another fiscal turning point
Wednesday, Jul 7, 2021 - Posted by Rich Miller
* My weekly syndicated newspaper column…
You cannot on the one hand constantly harp about decades of Illinois credit rating downgrades and then blithely dismiss the first bit of good Illinois rating news since George Ryan was governor.
It’s OK to step away from the “Illinois is awful” screaming for a moment in the wake of last week’s upgrade of Illinois’ bond rating by Moody’s Investors Service. While not the end of our problems by any means, this signals yet another important fiscal turning point.
Illinois’ long credit ratings slide began in May of 2003, when both Moody’s and Fitch dinged the state’s grade. The last upgrade the state was granted before last week’s action was 21 years ago, in June of 2000. The last time Moody’s upgraded Illinois’ rating was June of 1998. House Speaker Chris Welch had just barely graduated law school at the time.
The state’s credit rating was downgraded a total of 24 times starting in 2003. Eight of those downgrades, a third, came during just 20 months of former Gov. Bruce Rauner’s fiscally catastrophic administration. To say he had an outsized impact would be putting it mildly.
The climb back began in 2017, when some Republicans joined Democrats to pass an income tax hike over Rauner’s veto. It was a turning point. The downgrades all but stopped.
Just remember those above two paragraphs when Rauner’s impasse cheerleaders try to dismiss this Moody’s upgrade. We’d be in a far worse spot right now had they and Rauner won.
And, yes, of course the federal government has played a huge role in Illinois’ fiscal rebound over the past year or so. It has repeatedly pumped up the economy, which unexpectedly boosted Illinois’ coffers to the point where it didn’t need to use federal funds to patch its budget holes or tap federal aid to pay back federal borrowing.
The state did so well that it ended the fiscal year, which concluded on June 30, with an expected $2 billion surplus. That surplus will allow it to pay off $2 billion in pandemic-related borrowing this fiscal year.
According to the Committee for a Responsible Federal Budget, Congress has committed $126 billion to Illinois, mostly to the private sector, with about a third of the total in loans.
The airline industry in Illinois alone will receive almost $16 billion, about twice what the state government received this spring from the American Rescue Plan Act.
But it’s not like Illinois got a special deal out of Uncle Sam. The aid has been distributed fairly evenly among the states. California ended its fiscal year with an $80 billion surplus.
Prudently, most of that $8.127 billion in federal money for Illinois’ government hasn’t been appropriated. $1 billion was spent on one-time capital appropriations and $1.8 billion was spent on mostly one-time grants or temporary aid allowed by the federal government.
That leaves more than $5.3 billion in reserve. The hope in many states is that the federal government will wipe out their huge unemployment insurance trust fund debts. If not, some of that $5.3 billion might be used here to cover some of Illinois’ hole, sparing employers a gigantic tax hike.
Senate Appropriations Committee Chair Elgie Sims has been telling me for weeks that he was confident the new state budget would result in a credit rating upgrade.
Sims is not only a budget expert (joining the Senate’s budget staff after graduating from college in 1993), but he’s also a bond lawyer. He knows what the industry is looking for, and he and many others did what they could to deliberately produce a well-received budget.
Illinois has been one step away from junk bond territory since the Rauner days, so, no matter what you think of the New York rating agencies, the urgent importance of upgrades cannot be overstated.
“We stayed the course, we did not do anything irresponsible with that federal money, we paid down all that debt,” which Sims said is exactly what the ratings agencies wanted to see.
Rating agencies also prefer sustainable state revenues. The new budget permanently closes $655 million in corporate tax “loopholes,” as the governor calls them. Gov. J.B. Pritzker noted last week the move helps permanently pare down the state’s still-large structural deficit, which passing the progressive income tax last year could’ve all but eliminated.
Obviously, this federal boost won’t last. And Moody’s warned that pension and other state obligations “could exert growing pressure as the impact of federal support dissipates, barring significant revenue increases or other fiscal changes.”
But now they have some time to tackle the problems.
*** UPDATE *** Bond Buyer…
Reaction has spanned the spectrum with market participants mostly saying it was deserved given the state’s fiscal progress and its COVID-19 pandemic recovery. Some said the upgrade was expected, a reason for the state’s narrowing spreads over the past few months. But they are quick to underline that’s the near-term view and chronic pension strains, past decisions that favored one-shots, an ongoing structural imbalance and out-migration weigh heavily on the state’s fiscal foundation.
“I think it’s important to bear in the mind Illinois is still the lowest-rated state” and “no one has waived a wand” and erased the state’s high liabilities, governances challenges and financial operating difficulties, Moody’s lead analyst Ted Hampton said in an interview last week. “But I think what’s going on now really represents the first very strong positive movement — positive enough to warrant an upgrade. It is to some extent a turning of the tide but the state still has a long way to go to look like the bulk of other states.” […]
Illinois should see some direct benefit when it next enters the market by drawing a broader base of buyers as some can’t purchase bonds at the Baa3 level and could help some hold on to the bonds. “To the extent that some buyers have an incrementally higher floor of credit quality” the state could draw more interest, Mousseau said.
“I think that the Moody’s upgrade will help the state GO and other related credits get better pricing when they next sell bonds,” said John Ceffalio, senior municipal research analyst at CreditSights Inc. “If Illinois continues on this credit path, which I expect, then it will lead to further positive ratings actions during fiscal 2022.”
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