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* Back to Pearson’s Tribune story…
Rauner’s budget office projects that without action, the current budget year’s $14.7 billion backlog of bills will grow to at least $27.7 billion by July 2019. That’s the equivalent of what a 7.3-percentage-point hike in the personal income tax rate would generate, with a corresponding increase in the corporate rate.
Yep. And that’s not raising the income tax rate to 7.3 percent. It’s adding a 7.3 percentage point rate hike to the existing tax rate of 3.75 percent. So, you’re looking at a rate of over 11 percent.
Now, such a hike wouldn’t be needed for more than a year to pay off the backlog, so the state wouldn’t really need to actually raise it that high. The plan now is to bond out much of the debt and use some of the tax hike to pay it off and that probably won’t change.
But the longer this goes on, the lower our bond ratings will tumble and, therefore, the more expensive it will be to borrow, so the tax rate hike will have to be higher in two years than it would be now to make the interest payments.
And if we hit junk bond territory and nobody will loan us money? Well, those vendors are gonna be out of luck.
* Also, what a “nice” welcoming present for the next governor, whoever it may be. If it isn’t Rauner, his successor may very well wind up being a one-termer.
posted by Rich Miller
Friday, Mar 24, 17 @ 1:19 pm
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“The plan now is to bond out much of the debt” at the higher junk bond rate.
And there you have it folks. Guess who loves the long term high bond rates?
This is the most significant possible explanation for Rauner’s ooda-loop style of non-governance.
So many willing and unwilling participants in the scheme, too. Very sad, very sad.
Comment by Anonymous Friday, Mar 24, 17 @ 1:26 pm
The backlog is, in effect, borrowing from state contractors to cover the daily nut of state government, however poorly.
Not a very business-friendly environment. Or good for the economy.
In fact, the exploding backlog of bills, the bleeding of public universities and community colleges and the lack of a capital plan are precisely the ways a state government can undermine the economy.
A committed saboteur could not come up with a better strategy or execution to do harm.
Comment by wordslinger Friday, Mar 24, 17 @ 1:27 pm
===And there you have it folks===
Oh, please. Remove your tinfoil hat.
Comment by Rich Miller Friday, Mar 24, 17 @ 1:27 pm
That was me at 1:26
Comment by cdog Friday, Mar 24, 17 @ 1:27 pm
What they are asking is that “appropriation authority” be changed to “spending directive.”
I’ve been doing this for 20 years and never before have I seen the concept of appropriations turned on it’s head as it has during the past 2 years.
Comment by Demoralized Friday, Mar 24, 17 @ 1:36 pm
I think Rauner has reached the point that he is not electable in 2018 no matter how much money he has. Paging Kirk Dillard…only sort of kidding.
Comment by Saluki Friday, Mar 24, 17 @ 1:37 pm
I was in Springfield recently and talked “off the record” with several Dems. They made it clear that a IF something isn’t done before the 2018 election, and IF a Dem Gov is elected in 2018, the income tax WILL be increased in January 2019 and there will be a budget shortly thereafter. They were all very confident and said the same thing.
Comment by KAA-boom Friday, Mar 24, 17 @ 1:42 pm
I’d much rather have a ridiculously high income tax over a short period of time (say 3-5 years) rather than pay high at or near junk bond rates over 30 years. It’d be painful, but they could cut some of the sting for low and middle income folks by raising the earned income credit and the income property tax credit.
Comment by AC Friday, Mar 24, 17 @ 1:51 pm
–than pay high at or near junk bond rates over 30 years. –
It would be crazy to bond out the backlog over 30 years. I’m thinking 10 years max.
Comment by Anonymous Friday, Mar 24, 17 @ 1:53 pm
Reading that Tribune article makes me feel hopelessly naive for ever hoping the Grand Bargain would pass.
I always try to think the best of people, rather than assuming that those who don’t agree with me are evil. But I’m starting to come around to the idea that Rauner’s plan was to wreck the state if he couldn’t get what he wanted. I can’t think of any other explanation for his lack of concern about the bill backlog or the bond rating, or his aloof indifference to the misery and suffering the impasse has caused.
Comment by tobias846 Friday, Mar 24, 17 @ 1:55 pm
When Regan ran for President against Carter in 1976 he asked one simple question - ” Are you better off than you were 4 years ago?” The electorate answered that question with a resounding no. Same principle applies here if Rauner has a decent candidate running against him. I don’t see how anyone can make the argument that we are better off today (in this state) than when this Governor took office.
Comment by Stones Friday, Mar 24, 17 @ 1:57 pm
Stones - that would be 1980.
Comment by Dublin Friday, Mar 24, 17 @ 2:00 pm
===They were all very confident and said the same thing===
Well, yeah. Duh.
But ask them next time what happens if Rauner wins. Check out their blank stares. Then follow up by asking them what happens if the Republicans win the hat draw on the new map? More blank stares.
Comment by Rich Miller Friday, Mar 24, 17 @ 2:02 pm
Thanks Dublin, I stand corrected.
Comment by Stones Friday, Mar 24, 17 @ 2:04 pm
A turnaround agenda that could work
Comment by Almost the Weekend Friday, Mar 24, 17 @ 2:16 pm
I wish the Tribune edit board would read their own paper.
Comment by Anonymous Friday, Mar 24, 17 @ 2:25 pm
Borrowing to pay operating expenses.
Now that’s a sound business practice from our businessman Governor.
Why didn’t I think of it before.
Comment by Sir Reel Friday, Mar 24, 17 @ 2:43 pm
He will not win in 2018. If he is still gov by then.
Raunners’s real problem is that he is no longer a businessman just representing himself & his profits. He is now representing 13 Million share holders. Let’s have a proxy vote & see if he continues to be employed. Let’s not wait til 2018.
Insanity is doing the same thing over & over, expecting different results. Ain’t worked for him in 2 1/2 years. A smart businessman would get cut a deal of what is possible in that time.
Comment by sal-says Friday, Mar 24, 17 @ 3:29 pm
=He will not win in 2018=
He’ll go to one of his 9 mansions.
Comment by Anonymous Friday, Mar 24, 17 @ 4:36 pm