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* In which I agree with the Illinois Policy Institute…

Illinois businesses are poised to take advantage of investment crowdfunding in the wake of legislation that passed out of the Illinois Senate in unanimous fashion on May 20. House Bill 3429, which also passed unanimously in the Illinois House of Representatives, will now move to Gov. Bruce Rauner’s desk.

With the governor’s signature, Illinois will become home to the most competitive crowdfunding regulations in the nation. […]

The JOBS Act dictated that investment crowdfunding could be done by creating intrastate exemptions – meaning Illinois businesses could only raise money from Illinois residents – and put the onus on state lawmakers to develop crowdfunding exemptions for their states before constituents could use this type of financing. Pending the governor’s approval, Illinois will become the 19th state to pass a crowdfunding exemption.

The bill will give Illinoisans the highest investment limits of any regulatory framework for crowdfunding in the country. It would also allow an especially broad pool of eligible investors while ensuring flexibility from the Secretary of State’s office to help with customizing the rules in order to avoid stumbling blocks appearing in other states. The rules of the game for crowdfunding in Illinois include:

* Companies with audited financials can raise up to $4 million per year
* Companies with unaudited financials can raise up to $1 million per year
* Accredited investors can invest as much as they want in each offering
* Unaccredited investors can invest up to $5,000 per year in each offering

This innovative form of funding is described by economist John Berlau as “finance of the people, by the people, for the people.” For this reason, as well as crowdfunding’s explosive potential for economic growth in a state with a moribund business climate, investment crowdfunding has been a key element of the Illinois Policy Institute’s legislative agenda for entrepreneurs, which was developed in September 2014.

…Adding… However, buyer (investor) beware.

* In which I disagree with the same group…

Under state law, local governments in Illinois don’t have the power to make necessary reforms to their pension systems. Even in the most extreme cases of fiscal instability, bankruptcy is not an option. This leaves local officials with few options, and often leaves taxpayers stuck paying higher taxes and fees when local governments don’t make spending cuts.

Local governments should have more control over how they operate. That means having the option to file for bankruptcy and it also means having the ability to reform local pension systems. A recent piece of legislation filed by state Rep. Ron Sandack, R-Downers Grove, would address the former.

Sandack’s proposal would give Illinois municipalities the option to file for bankruptcy. “I know what difficulty it is being in charge of a municipality … with ever-increasing police and fire pensions and very little in the form of power to do anything about it,” Sandack said. The goal of the proposal is simply to give towns in Illinois an additional tool that may be used to help control local finances.

As Sandack correctly points out, pensions are a driving factor in the conversation over municipal bankruptcy in Illinois. Municipalities across the state are struggling under the weight of rapidly increasing pension costs. Just between 2000 and 2010, the aggregate unfunded pension liabilities for local pension systems in Illinois grew to more than $12 billion from $1 billion.

We’ve seen time and again that municipal bankruptcies tend to give bondholders a haircut and barely touch pension payments. In these uncertain times, when the governor is pushing to slash half of local governments’ revenue sharing and freeze local property taxes and with no pension solution in sight, if you want to tank just about every municipal credit rating in this state, then go ahead and pass that bill.

posted by Rich Miller
Tuesday, May 26, 15 @ 10:36 am

Comments

Mayor Sandack would’ve called ‘Don’ Sandack an Owl too.

For the Owl, it’s not about helping munis, since as a mayor he would’ve been against most, if not all of Rauner’s dismantling.

Rauner is scared of Uihline and Griffin and Rauner.

In reality, the Owl Sandack was the first to be co-opted…after the SSM vote, “Who” would’ve guessed?

Comment by Oswego Willy Tuesday, May 26, 15 @ 10:42 am
“We’ve seen time and again that muncipal bankruptcies tend to give bondholders a haircut and barely touch pension payments.”

And Rich probably understates it — Are there any examples of municipal bankruptcies where the cuts to pension payments weren’t dwarfed by the cuts to bondholders?

– MrJM

(And yes, I did google it.)

Comment by MrJM Tuesday, May 26, 15 @ 10:44 am
=== if you want to tank just about every municipal credit rating in this state, then go ahead and pass that bill. ===

Since their goal is to sink the ship, I expect the IPI to keep pushing for this legislation, but hopefully your advice will be heeded by more rational minds, Rich.

Comment by Juvenal Tuesday, May 26, 15 @ 10:44 am
And you and your negative nelly posters said nothin’ good was happenin’

Comment by Anonin' Tuesday, May 26, 15 @ 10:46 am
Yikes!

“Rauner is scared of Uihline and Griffin and Rauner.”

The Owl is scared… of Uihline and Griffin and Rauner.

Comment by Oswego Willy Tuesday, May 26, 15 @ 10:49 am
Gee, I thought IPI and the Illinois GOP were “conservatives.”

The concept of bankruptcy in America is to advance capitalism by encouraging risk. You won’t end up in the street for taking a reasonable chance.

It’s not meant for destructive hare-brained schemes by going governmental concerns to punish people you don’t like.

Comment by Wordslinger Tuesday, May 26, 15 @ 10:53 am
== We’ve seen time and again that muncipal bankruptcies tend to give bondholders a haircut and barely touch pension payments. In these uncertain times, when the governor is pushing to slash half of local governments’ revenue sharing and freeze local property taxes and with no pension solution in sight, if you want to tank just about every municipal credit rating in this state, then go ahead and pass that bill. ==

Perfect summation!

Comment by RNUG Tuesday, May 26, 15 @ 11:01 am
Not going to happen unless there is a pension exclusion which can be done. The SC pension ruling stated the legislature cannot legislate anything that violates the constitution.

Comment by Liberty Tuesday, May 26, 15 @ 11:02 am
Bankruptcy protection was a great “Liberal” reform in its day. It counters some of the severities of a pure “free market.”

Wouldn’t expect IPI to know the history of conservatism. They are about something else entirely. Protection of acquired wealth and power.

Comment by walker Tuesday, May 26, 15 @ 11:05 am
Gizmodo on crowdfunding:

== Crowdfunding is a great way to raise money. It’s also a great way to hardcore scam people, and we’re looking for the worst swindles, hoodwinks, and old-fashioned ponzi schemes populating the teeming and poorly-regulated underbelly of the money-grubbing dream industry that you’ve seen. ==

http://gizmodo.com/we-want-to-hear-about-the-worst-crowdfunding-scams-and-1700473596

Comment by Bill White Tuesday, May 26, 15 @ 11:18 am
They (IPI) are about something else entirely. Protection of acquired wealth and power.

That’s why I can’t figure out the BK love…seems like a bond haircut would be of more concern to the 1% than the outside chance a muni BK would obtain a marginal pension haircut.

Comment by Six Degrees of Separation Tuesday, May 26, 15 @ 11:23 am
There’s another choice, which is “do nothing”.

Then by default you end up having to hollow out all existing operations and cut staff to keep feeding the retirement funding needs.

You only have so many options….

Btw, talked this weekend to a very tiny business that does outsourcing for local governments here in IL. It’s anecdotal, but in the last 3 months, they have been contacted by 5 different units of local government about potential outsourcing business.

That ‘revenue sharing’ reduction (Fwiw, they all fully expect some substantial level of cut) has really focused these folks into taking a very hard look at their revenue/expenditure picture, lots of places are going to be changing the way they are doing business.

And in their world, that means a lot less staffing and a lot more contract work/outsourcing.

You do what you got to do.

Comment by Judgment Day (on the road) Tuesday, May 26, 15 @ 11:27 am
Six Degrees–the IPI doesn’t do research. They do ideology. They assume pensions will get scalped and bondholders will be paid.

Comment by Concerned Tuesday, May 26, 15 @ 12:52 pm
everyone please read this truth and absorb it
_______________
- Wordslinger - Tuesday, May 26, 15 @ 10:53 am:

Gee, I thought IPI and the Illinois GOP were “conservatives.”

The concept of bankruptcy in America is to advance capitalism by encouraging risk. You won’t end up in the street for taking a reasonable chance.

It’s not meant for destructive hare-brained schemes by going governmental concerns to punish people you don’t like

Comment by zonz Tuesday, May 26, 15 @ 1:04 pm
Conservatives used to define “fiscal responsibility” as living within your means and paying your bills. Today it means bankruptcy. I’m confident Sandack calls himself a fiscal conservative.

Comment by nona Tuesday, May 26, 15 @ 1:47 pm
==used to define “fiscal responsibility”==

This isn’t about fiscal responsibility. It about ways to cut pensions. Plain and simple.

Comment by Demoralized Tuesday, May 26, 15 @ 2:40 pm
Fearmingering packed into legislation.

How about a law that puts municipailites into a receivership scenerio where their finances are controlled by an independent board if they hit certain financial warning stages.

Comment by Ghost Tuesday, May 26, 15 @ 3:14 pm
Doesn’t the state still have The Financially Distressed City Law and The Local Financial Planning and Supervision Act?
Before running to the fed BK courts, seems the state has some tools to manage imminent meltdowns.
At least a state controlled municipal meltdown would have some voter oversight, instead of turning it over to a federal judge, a creditors’ committee and the lawyers in BK court.

Comment by Cook County Commoner Tuesday, May 26, 15 @ 3:37 pm
@Dem

=This isn’t about fiscal responsibility. It about ways to cut pensions. Plain and simple.=

Sorry, Dem, but minimizing pension obligations that are devastating the state IS about fiscal responsibility. Somebody’s ox is gonna get gored. No way the primary beneficiary of bad decisions by Springfield and school boards should be left off the hook. Taxpayers will probably have to take a hit for electing pols who are the real villains here, but no way those in the pension programs should be held harmless if there are constitutional means to do otherwise.

Comment by Arizona Bob Tuesday, May 26, 15 @ 4:42 pm