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Loan plan emerges

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Illinois

A House committee Tuesday advanced a bill to provide money due to local governments from gaming revenue and fuel taxes, but the day ended with the state apparently no closer to resolving its months-long budget impasse.

The House Executive Committee gave its approval to a $1.9 billion bill that authorizes money to be paid to local governments from money that does not involve general state taxes. […]

“(It) is another attempt by the Democratic majority to piecemeal together a budget that will force a tax hike on hardworking families without any meaningful reforms,” said Rauner spokeswoman Catherine Kelly. […]

“This is money that will not be spent by the state government,” [House Speaker Michael Madigan] said. “Therefore we plan to advance that bill in the House.”

* Meanwhile, the Rauner administration has an alternate plan…

Republican Gov. Bruce Rauner’s administration floated a plan that would allow the Illinois Finance Authority to offer towns low-interest loans that could be repaid when the money raised by the gas tax and a 911 surcharge on phone bills is eventually sent out. […]

The proposal would not require legislative approval. It emerged after Democratic lawmakers advanced a competing plan that would release the gas tax and 911 surcharge money, plus $1 billion to the Illinois Lottery, which stopped paying out on winnings of more than $600 this month, saying its checking account ran dry.

Democratic House Speaker Michael Madigan said he was not familiar with the Rauner administration’s proposal but expected the broader bill to come before the House for a vote when lawmakers return Nov. 10.

The Democratic legislation has the backing of the Illinois Municipal League, which represents local governments. “Our position is there is no need to take a loan when the state should pay the money that’s owed,” said Brad Cole, the group’s executive director.

The idea might be to get that loan money out the door before the House returns to Springfield next month and therefore spare Republican members from the embarrassment of voting against their local governments.

But there are plenty of other non-GRF approps in that bill, including money for breast cancer victims, grants to the Special Olympics, and lots of stuff for veterans.

And there’s also a new approp bill out there, which would fund programs for the State Fire Marshal (including the University of Illinois’ Fire Service Institute), Sudden Infant Death Syndrome and breast and cervical cancer screenings.

posted by Rich Miller
Wednesday, Oct 21, 15 @ 10:07 am

Comments

It’s only a bit less embarrassing to make your local government pay interest to cover disbursements that are due to them even though the money is just sitting in a fund waiting to be paid out.

Comment by Philo Wednesday, Oct 21, 15 @ 10:16 am
That’s insane.

Pay juice on loans backed by pass-through revenues, rather than just, you know, pass through the revenues?

This guy is a “businessman?”

Is the administration working with any particular underwriters, bond counsel or financial advisors on this nonsense?

Because I can smell the meat-a-cookin’.

Comment by Wordslinger Wednesday, Oct 21, 15 @ 10:19 am
but a low interest loan is still a cost, they have to lat the interest which would be a worse deal then if they just got the money.

Comment by Ghost Wednesday, Oct 21, 15 @ 10:19 am
Are these interest-free loans? If not, how much is it going to cost local governments?

Comment by DuPage Wednesday, Oct 21, 15 @ 10:19 am
Just knew Rauner had some new use for the IFA, with his recent appointments. The IFA was meant to be the source of innovative and supplemental funding outside of the normal spending to run government. Any port in a storm, I guess, but what other things will now be unfunded because the money will be lent to local governments..

Comment by walker Wednesday, Oct 21, 15 @ 10:20 am
Catherine Kelly…our own Chatty Cathy who plays the same stuck record over, and over and over again. I don’t understand why the Gov. believes that cities should have to take out loans for money that is owed them by the state. Money like the 911 funds which have already been collected through our phone bills and the state is merely suppose to pass those collected funds to local governments.

Comment by Former Hoosier Wednesday, Oct 21, 15 @ 10:20 am
–This guy is a “businessman?”–

Sure. So was Tony Soprano.

Comment by a drop in Wednesday, Oct 21, 15 @ 10:22 am
Dear Muni’s,

I have a deal for you. Although we’re holding your money as hostage to try and bust unions for you, we’ve come up with this great deal. We’re going to let you borrow money to cover the expenses normally covered by the hostage money. Of course, there will be a slight interest charge. But think of all the great benefits of this approach. You get to cover expenses at a minimal increase in cost and we’ll continue to battle to free you from the yoke of union tyranny.

We’ll be in touch with your loan agreements.

Signed, Bruce

Comment by Norseman Wednesday, Oct 21, 15 @ 10:22 am
–This guy is a “businessman?”– Businesses exist to make a profit. He sees and opportunity.

Comment by Skeptic Wednesday, Oct 21, 15 @ 10:23 am
If the state has money to issue loans how does it not have money to just appropriate things?

And charging local govt interest?! I didnt realize Rauners business model for running the state more like a business was the company store model.

Comment by hisgirlfriday Wednesday, Oct 21, 15 @ 10:29 am
Some locals already take loans backed by “anticipation” of their funds coming in. This is taking out a loan to pay another loan. That only delays things until Rauner totally runs the state out of money next spring.

Comment by DuPage Wednesday, Oct 21, 15 @ 10:29 am
Frontline… where are you!

Comment by Anon221 Wednesday, Oct 21, 15 @ 10:33 am
Illinois Finance and Payday Loan Authority.

Comment by Arthur Andersen Wednesday, Oct 21, 15 @ 10:41 am
I suspect there is a plan being developed to “sweep” these funds which is why they don’t want to release the money.

Comment by Dilemma Wednesday, Oct 21, 15 @ 10:43 am
That is operating government by duct tape and band aids. Rauner is like someone trying to stop a leak, but more holes keep popping.

Comment by 360 Degree Turnaround Wednesday, Oct 21, 15 @ 10:44 am
So this is the plan?

No budget for another 4-6 months — maybe longer?

Loans instead? And no sense when they might be paid back?

I’m guessing Rauner has had this plan since before he was elected. There was never any intention — zero — to get a budget — ever. There will never be a budget with Rauner. Is that the plan?

This has to be the single most destructive, nihilistic thing a Governor has done to a state.

Comment by Frenchie Mendoza Wednesday, Oct 21, 15 @ 10:46 am
Won’t the taxpayers end up paying for this loan interest? So Rauner just proposed a back-door tax increase?

Rauner is forcing a future property tax increase for an agenda that has zilch chance of passing? How exactly is this business friendly? Any GOP GA members wish to respond?

Comment by A Jack Wednesday, Oct 21, 15 @ 10:46 am
HGF, IFA doesnt have a pile of money laying around to lend.

The the say I’m reading it, IFA would be a conduit to issue revenue bonds backed by the collected taxes currently being held hostage.

Since the revenues backing those bonds would be subject to appropriation, I wouldn’t count on a great rating, or loan rates, since (this is through the Looking Glass) the purpose of the bonds is to make up for those very same revenues that have been collected but not appropriated.

It’s nuts.

Comment by Wordslinger Wednesday, Oct 21, 15 @ 10:48 am
Don’t forget the extra juice the state will have to pay to borrow the dough, thanks to the recent downgrades.

It’s almost as if somebody is tanking the state just to boost the interest it pays. Who would do such a thing?

Comment by 47th Ward Wednesday, Oct 21, 15 @ 10:57 am
I learned a long time ago how important it is to solve the right problem. To borrow money, when the money owed is right there, is crazy and unnecessary. Good grief, grow up. Grow a pair.

Comment by Langhorne Wednesday, Oct 21, 15 @ 11:00 am
—
To borrow money, when the money owed is right there, is crazy and unnecessary.
—

And risky. You’re putting locals at unnecessary risk — and forcing them, essentially, to be beholden to an agenda-driven, political result — as well as a interest-bearing loan.

Comment by Frenchie Mendoza Wednesday, Oct 21, 15 @ 11:07 am
So let’s get this straight. The Governor is proposing a low-interest loan as an interim step to “help” municipalities because the State isn’t passing through funds that are theirs. That will drive up the cost of local government, something that he’s said he wants to reduce through his Turnaround Agenda.

He also has refused to negotiate a budget which ultimately would provide a permanent fix to the delayed payment problem until he gets what he wants from a list of Turnaround reforms. He’s been pretty adamant that chief among these reforms is a property tax freeze. I’ll bet many of the mayors and county board chairs who supported Governor Rauner a year ago are second guessing that decision.

Comment by GA Watcher Wednesday, Oct 21, 15 @ 11:07 am
you could always borrow the money and never pay it back. that now seems to be an “illinois option”

Comment by sickntired Wednesday, Oct 21, 15 @ 11:14 am
wait until the mayor’s find out they have to pledge their property taxes for the revenue stream to float the bonds– this is a terrible idea

Comment by anon Wednesday, Oct 21, 15 @ 11:14 am
Did Rauner own any stock in any sanitation companies?

I had to ask…

Comment by Southern Illinois Hoopdee Wednesday, Oct 21, 15 @ 11:15 am
Borrowing from a state that owes you money is more difficult to understand than credit default swaps. Why don’t we declare the state a bank and combine the loan scheme with a fractional reserve system to solve our cash flow problems? The FDIC could save us from insolvency when holding the budget hostage reaches its ultimate conclusion. /s

Comment by AC Wednesday, Oct 21, 15 @ 11:19 am
Anon, I don’t think property taxes could be used to float the bonds. I think the only security would be the already collected-taxes that are being held hostage.

Comment by Wordslinger Wednesday, Oct 21, 15 @ 11:21 am
Ok can someone please explain this to me. We don’t have a budget because the gov needs leverage to get his “reforms.” Funds collected from we the people can’t be dispersed because of said leverage. So the gov dons his red cape and offers loans with interest to cover the cost to municipalities of his own leverage, which coincidentally reduces his leverage. Meanwhile the G.A. is proposing a bill to pay the funds which the gov is offering loans to cover, which the gov doesn’t like because it will reduce his leverage.

Meanwhile the gov could have stopped all this by line item veto of the dem budget to focus the leverage on the dems. For that matter he can line item the dem bill to only fund his priorities and with Dunkin and co it will probably stand. Rauner has to be the worst hostage taker ever.

Comment by Mason born Wednesday, Oct 21, 15 @ 11:25 am
Children, sick, and the needy = nah
Mayors, salt trucks, cops = sure

How dare either side even consider such a thing.

Comment by crazybleedingheart Wednesday, Oct 21, 15 @ 11:27 am
Kinda reminds me of the Pullmam era and “Neighborhood”

“We can give you a loan, and you pay us that money back, with interest, with the money you make… from us…”

What a shakedown.

Comment by Oswego Willy Wednesday, Oct 21, 15 @ 11:31 am
What if we take the state fleets of cars, trucks and other vehicles to Pay Day Loans?

Isn’t that how low we’ve gotten with Bruce Rauner as governor?

Comment by VanillaMan Wednesday, Oct 21, 15 @ 11:38 am
“Hurry,” Rauner implored his staff.
“The Democrats are putting together a pass-through bill that takes steam out of our argument. Come up with something.”
Goldberg comes up with strategy to, gasp, require local governments to “borrow” against what is rightfully theirs.
The question is…
Will the IPI, the Tribune and all those editorial writers across the state think this particular borrowing scheme is ok? Will they deviate from their anti-borrowin’ ways?
Will they call a sham a sham?
Stay tuned.

Comment by Austin Blvd Wednesday, Oct 21, 15 @ 11:38 am
Explain how this works if the governor sweeps the funds that he is currently holding hostage which will be pledged to cover the loans that municipalities are taking out from IFA?

Comment by Dance Band on the Titanic Wednesday, Oct 21, 15 @ 11:41 am
Mason, this “loan program” is one of the goofiest things I’ve ever seen come out of government. It’s beyond reason.

I have a hunch that the idea came from a “friend” in the muni bond world. There’s a score to be made for them. Taxpayers and local governments will lose money on the deal.

For crying out loud, the money is sitting with the treasurer right now.

Comment by Wordslinger Wednesday, Oct 21, 15 @ 11:41 am
===It’s almost as if somebody is tanking the state just to boost the interest it pays.====

This. There’s a whole lot of money to be made, with pretty much zero risk. As crazy as it seems, I find it harder to believe that the Governor and his Superstars could be as incompetent as they appear. I’m starting to think this is all part of the plan.

Comment by TwoFeetThick Wednesday, Oct 21, 15 @ 11:46 am
Michael Corleone: “Keep them alive.”
Rocco: “We’ll try.”
Michael Corleone: “Rocco! Alive”

Comment by Austin Blvd Wednesday, Oct 21, 15 @ 11:49 am
OW- Just yesterday I was thinking of “The Company Store”. Guess the “superstars” beat me to it! Maybe a spin-off for your series;)

Comment by Anon221 Wednesday, Oct 21, 15 @ 11:52 am
GA Watcher, and then to top it off they are faced with Rauner’s plan to decrease state support and the loss of revenue due to a property tax freeze.

Comment by Norseman Wednesday, Oct 21, 15 @ 11:54 am
=I’m starting to think this is all part of the plan= Finally starting to see whats up?

Comment by Anonymous Wednesday, Oct 21, 15 @ 12:01 pm
This might be the first huge misstep by the governor.

If you think raising taxes is bad, check out the public’s opinion of borrowing schemes.

“The governor’s billion dollar borrowing scheme is a back door property tax hike just waiting to happen.”

Comment by Juvenal Wednesday, Oct 21, 15 @ 12:07 pm
OK now this sounds like the kind of Local Control you can believe in. Besides pay the “low interest” costs do the cities have to cede their rights to “prompt payment” money? Hope the IML leadership is working to S*can this brainstorm.

Comment by Anonin' Wednesday, Oct 21, 15 @ 12:07 pm
- Anon221 -

Spooky, eh?

In the end, Pullman is a monument for recognizing where people made the difference when they were treated as chattel and the people finally had enough.

There’s “a reason” why Rauner wasn’t “welcomed”, no matter if he was invited or not…

Comment by Oswego Willy Wednesday, Oct 21, 15 @ 12:23 pm
Isn’t “borrowing schemes” a big part of why we’re in this mess with the pensions? Funny how “borrowing schemes” are OK when Rauner is implementing them but not OK when Madigan or the Legislature bring them up. Double standards are the order of the day in this administration.

Comment by Southern Illinois Hoopdee Wednesday, Oct 21, 15 @ 12:25 pm
If Bruce and his wealth-class Bros aren’t chomping at the bit to buy up high return Illinois junk bonds they themselves created through this clusterf**k of a “government” they have, I’ll eat my hat.

Comment by Harvest76 Wednesday, Oct 21, 15 @ 12:30 pm
Just remember local governments, the Governor wants to save you money through his Turnaround Agenda. Fine print includes, charging you interest on money you are already entitled to.

Comment by Tommydanger Wednesday, Oct 21, 15 @ 12:33 pm
===“(It) is another attempt by the Democratic majority to piecemeal together a budget that will force a tax hike on hardworking families without any meaningful reforms,”===

Then maybe the governor should have done his constitutionally mandated duty of drafting a balanced budget. Maybe the governor should have sat back and let the democrats pass their tax hike extension before he took office. Maybe the governor should actually propose some sort of meaningful, yes really meaningful reform, versus the divisive garbage he has demanded before he actually does his job. Maybe, just maybe….

Comment by Ducky LaMoore Wednesday, Oct 21, 15 @ 12:46 pm
just as a point, the dems can piece together whatever they like. the gov has a line item veto and can cut anywhere he thinks its needed and then veto the tax increase of the dems if thats his preference

Comment by Ghost Wednesday, Oct 21, 15 @ 12:55 pm
the gov also didnt mention how much he would make on the vig…..

Comment by Ghost Wednesday, Oct 21, 15 @ 1:01 pm
Great idea Bruce Pullman!

Comment by Flynn's mom Wednesday, Oct 21, 15 @ 1:11 pm
It is easy to recognize desperation because those who become desperate also often become illogical to the point of appearing insane- this idea meets the definition of insane therefore desperate therefore……….

Comment by Ghost of Ernie Banks Wednesday, Oct 21, 15 @ 2:17 pm
You gotta be kidding me?! To Senators Obwrwies, McConnaughay. Representatives Andersson, Fortner and Wheeler - don’t give in. As I have said before, Springfield has been pick-pocketing municipalities for years and now the Governor is advocating armed robbery.

Comment by GenevaMayor Wednesday, Oct 21, 15 @ 2:34 pm
Wordslinger-probably could pledge general fund portion of property tax bills. Suicide for most, but doable for a few with dedicated reserves. What a waste of taxpayers dollars, bond counsel,disclosure costs,bond distribution costs. This guy Rauner is a real hawk when it comes to guarding expenses.

Comment by Blue dog dem Wednesday, Oct 21, 15 @ 2:35 pm
Please someone explain why anyone would think this is a good idea? Where are the trolls to back up that this is all because Madigan?

Comment by DuPage Bard Wednesday, Oct 21, 15 @ 4:02 pm
Unconscionable!!! Pass through the monies that municipalities are entitled to! Many towns pay for road salt with MFT funds - could be a dicey winter!

Comment by One Word Wednesday, Oct 21, 15 @ 4:18 pm
Who will profit from these low-interest loans?

Comment by Enviro Wednesday, Oct 21, 15 @ 4:39 pm
These are loans to towns that could be repaid when the money raised by the gas tax and a 911 surcharge on phone bills is eventually sent out.

But doesn’t the government need the revenue from the gas tax and other taxes to pay for other expenses, debts, pensions, etc???

Comment by Enviro Wednesday, Oct 21, 15 @ 4:41 pm
Loaning the money to your creditor that you owe and your creditor pays you, the debtor, interest? That is crazy. Did I miss something?

Comment by burbanite Wednesday, Oct 21, 15 @ 4:44 pm
Who else but a vulture capitalist could think of such an idea. Gee, the huckster wants you to have $ in his bank (state collection) and then you (taxpayers) get to PAY to take out the $ that you put there. WOW, the demented mind of vulture capitalists!

Comment by IL17Progressive Wednesday, Oct 21, 15 @ 4:44 pm
You have got to be kidding us Mr Rouner! Not sure what you are smoking but I think you are supposed to have a prescription for that stuff!

Comment by Mayor who Wednesday, Oct 21, 15 @ 4:44 pm
So the state gives a loan to the locals so that they can pay interest to the state until the state gives them money to pay off the loans from the state?

Comment by The wingman Wednesday, Oct 21, 15 @ 4:53 pm
As an aside, anyone who says there is no waste left in State Government should check out the Fire Service Institute, aka Retired Fire Chiefs’ Patronage Association.

Comment by Arthur Andersen Wednesday, Oct 21, 15 @ 5:31 pm
Maybe I’m off base but I see this a bit differently.

It’s all about cash on hand and cash flow; that’s the way a corporate raider or bust-out specialist would look at it. It doesn’t matter what pocket it is in (or supposed to be in); it’s hard cash. It’s a way to use the municipalities’ cash to pay the state’s bills / keep the state’s cash on hand at somewhat solvent levels / keep the payroll cash going out while also giving the municipalities THEIR cash through borrowing that isn’t really STATE debt.

That’s why Rauner wants the loan program instead of the State having to hand out the cash; the ability to dig the debt hole deeper and create a greater crisis in the near future that could then be leveraged to allow municipal bankruptcies.

Comment by RNUG Wednesday, Oct 21, 15 @ 7:44 pm
Wow RNUG interesting take on it and not how government should be run.

Comment by burbanite Wednesday, Oct 21, 15 @ 9:07 pm
What’s wrong with municipal bankruptcy?

Comment by Tone Wednesday, Oct 21, 15 @ 11:55 pm
Tone, that isn’t the issue, the issue is that the municipalities are owed the money and if they had it they wouldn’t need to go bankrupt. My issue is with forced insolvency.

Comment by burbanite Thursday, Oct 22, 15 @ 6:27 am