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* Elizabeth Campbell at Bloomberg…

Illinois’s finances are so troubled that investors can make nearly as much money betting on the worst-rated U.S. state as they can on the American Dream mall project, perhaps the most despised structure in New Jersey.

An unfinished, multicolored hulk in the Meadowlands beside the Turnpike, former Governor Chris Christie called it “the ugliest damn building in New Jersey, and maybe America.” Yet bondholders are asking to get paid nearly as much to own Illinois’s debt as they are demanding in return for holding the long-delayed mall’s unrated revenue bonds — a consequence of the state’s perennial budget distress that’s left it teetering near junk grade.

The yield on Illinois general-obligation bonds that mature in 2028 averaged 4.5 percent in March, compared to an average of 4.99 percent on unrated bonds due in 2050 sold for the American Dream mall project, the shopping and entertainment center that’s years behind schedule, according to data compiled by Bloomberg.

Despite the close yields, the state’s debt is still the better bet, according to AllianceBernstein LP, which oversees about $41 billion of municipal fixed income securities. No state has defaulted since the Great Depression, after all, while the shopping mall industry is being challenged by the growth of Internet retailing.

* Finke…

A finance company is suing the Illinois Department of Corrections in federal court because the department missed an annual payment last fall on four prisoner transport buses.

Wells Fargo Equipment Finance Inc. filed the lawsuit this week, saying Corrections has neither made the payment that was due on the buses last year nor turned the buses over to the company as it has demanded.

At the same time, a voucher authorizing the payment for the buses is sitting in Comptroller Susana Mendoza’s office waiting to be paid. Corrections submitted the payment voucher to Mendoza’s office in January, months after the payment was due. Mendoza’s office, which was unaware a lawsuit had been filed, said Corrections has not said the payment is a priority that should move the bill ahead of older bills waiting to be paid.

The lawsuit involves four prisoner transport buses part of a lease-purchase agreement by Corrections. The buses are manufactured by Motor Coach Industries. The company’s website shows the type of bus leased by Corrections is more than 40 feet long and weighs 23 tons. Depending on how the bus is equipped, it can cost from $530,000 to $561,000, the website states. […]

The lawsuit said Corrections defaulted as of Nov. 26, 2017, when it failed to make the $580,000 payment that was due. The lawsuit also said notice was sent to the state on Jan. 16 that Corrections was in default on the bus lease. It said either the lease payment and “associated late fees” be paid or the buses returned to the leasing company.

* Mary Hansen at NPR Illinois…

Planning for the state fair is in full swing, but Illinois has yet to pay all the costs for last year’s fair.

The state still owes the city of Springfield around $109,000 for the fire protection it provided to the fairgrounds in the fiscal year that ended last summer. The same amount for the current fiscal year is due by June.

Springfield budget director Bill McCarty says the fire department will continue to provide protection regardless, but late payments do present challenges. […]

Illinois also operates the state fair in Du Quoin. That town’s finance director, Andrew Croessman, says Illinois owes $20,000 for fire coverage there. The Department of Agriculture has sent a check to Du Quoin, according to a spokeswoman.

* Related…

* Questions dog Illinois Medicaid managed-care switch

posted by Rich Miller
Tuesday, Apr 3, 18 @ 1:55 pm

Comments

Don’t worry. A progressive income tax is coming, and it will fix all of this.

Comment by JB13 Tuesday, Apr 3, 18 @ 2:07 pm
I’m sure the good people of Du Quion can make a solid argument for continuing their state fair. I don’t believe it is good enough to justify it continuing.

Comment by Montrose Tuesday, Apr 3, 18 @ 2:12 pm
It probably kills people like Rauner that we can’t just bankrupt and bust out of debt. We are stuck with it and should work on paying it back. Our pension debt needs to be managed/reamortized so we can pay it as smoothly and reliably as possible. If it takes more revenue, it should be sold as fiscal responsibility (I know, super-hard sell).

But, as a country right now we prioritize giving multibillion-dollar corporations huge tax cuts as opposed to, say, raising the capital gains tax rates, closing corporate loopholes and using money to help states pay their bills. No one can talk states’ irresponsibility when we give multibillion-dollar entities massive tax breaks that are expected to add a trillion dollars or more to debt/deficits.

Comment by Grandson of Man Tuesday, Apr 3, 18 @ 2:16 pm
Everyone knows what a sorry state we are in, yet nobody in a position of power much wants to do anything about it.

Comment by Collinsville Kevin Tuesday, Apr 3, 18 @ 2:21 pm
As long as the state fair remains that far downstate, I’ll never consider going. The Wisconsin State Fair is closer to over 2/3 of Illinois residents anyway. And those cream puffs…

Comment by City Zen Tuesday, Apr 3, 18 @ 2:24 pm
Grandson of man, Don’t try that common sense stuff around here. Illinois is allergic of it.

Comment by Iron Tuesday, Apr 3, 18 @ 2:25 pm
It’s sickening to read comments from Rauner and his supporters justifying theft.

Comment by VanillaMan Tuesday, Apr 3, 18 @ 2:25 pm
== No state has defaulted since the Great Depression … ==

Even then, Arkansas eventually paid off the bonds in full … with a bit of Federal help.

Comment by RNUG Tuesday, Apr 3, 18 @ 2:31 pm
–Despite the close yields, the state’s debt is still the better bet, according to AllianceBernstein LP, which oversees about $41 billion of municipal fixed income securities. No state has defaulted since the Great Depression, after all, while the shopping mall industry is being challenged by the growth of Internet retailing.–

It’s absurd and irrational to think that any state’s GO bond carries the same risk as a revenue bond for a private mall project.

When it comes to GO bonds, the rating agencies claim they are assessing risk, when in reality they’re grading the states on a sliding scale as to fiscal practices. They are not the same thing.

The State of Illinois GO bond is a AAA credit risk by any rational standard. Every dime the state collects from state sources is pledged first to that debt service. The coverage is exponential. The risk is zero. The rating agencies are bloodsucking grifters perverting the market.

Your AAA Enron and subprime MBS paper are still of use in the bathroom.

Comment by wordslinger Tuesday, Apr 3, 18 @ 2:33 pm
City Zen @2:24– I think you are spot on with this analysis. It is unfortunate, but true, that the location of the Illinois State Fair precludes many families from our more heavily populated areas from enjoying a day trip to the fair. If it could be moved to McLean or Champaign County (which would still retain its rural roots) I believe attendance and profits would be boosted considerably.

Comment by Responsa Tuesday, Apr 3, 18 @ 2:35 pm
=== If it could be moved to===

With what money?

Comment by Rich Miller Tuesday, Apr 3, 18 @ 2:36 pm
“If it could be moved”…… Springfield is still the state capitol

Comment by theq Tuesday, Apr 3, 18 @ 2:58 pm
As a state, when will we end the state support of the Perry County Fair in Du Quoin? What a waste of taxpayer dollars.

Comment by Dee Lay Tuesday, Apr 3, 18 @ 3:35 pm
Per court orders pensions are also first in line. It is not inconceivable bondholders will take a haircut. Honest question: Do you own Illinois bonds?

Comment by Mike Royko Tuesday, Apr 3, 18 @ 3:57 pm
==If it could be moved to McLean or Champaign County==

And that helps how? If you’re coming from the Chicagoland area Springfield is only an extra hour.

Comment by Demoralized Tuesday, Apr 3, 18 @ 4:17 pm
Rauner says Mike Madigan is to blame for all of this

Comment by QC Guy Tuesday, Apr 3, 18 @ 4:25 pm
–Per court orders pensions are also first in line.–

What court orders? Show me the court orders that require the state to make full contributions to the pension funds each year.

If you’re referring to the Supremes decisions, you should read them rather than hopping all over your Jump to Conclusions mat. There are no “orders” in any of them in regards to pensions. There are findings of obligation.

GO bonds get first crack at all state revenues by law, continuing appropriation and contract. The comptroller puts aside that cash first every month.

Comment by wordslinger Tuesday, Apr 3, 18 @ 6:33 pm
== There are no “orders” in any of them in regards to pensions. There are findings of obligation. ==

True. The closest any court came was the IFT finding that the pensions must be paid when due.

The court explicitly avoided any finding on exactly how the pensions were to be funded, or any specific funding amount for the actual pension funds.

At best, the court implied they might re-look at the question if and when the persion funds

Comment by RNUG Tuesday, Apr 3, 18 @ 7:14 pm
… if and when the pension funds fail to actually pay the pensions.

Comment by RNUG Tuesday, Apr 3, 18 @ 7:17 pm
–… if and when the pension funds fail to actually pay the pensions.–

RNUG, any ballpark on when those would run dry, if the state went totally nuts and just stopped making any contributions?

Comment by wordslinger Tuesday, Apr 3, 18 @ 7:21 pm
Is it cynical to wonder whether Rauner cronies are investing in Illinois bonds that are paying such high interest rates?

Comment by Anonymous Tuesday, Apr 3, 18 @ 8:11 pm
You don’t have to be a Rauner crony to buy bonds

Comment by Ron Tuesday, Apr 3, 18 @ 8:38 pm
No, but it is nice to have the opportunity created for you.

Comment by Anonymous Tuesday, Apr 3, 18 @ 8:43 pm
word, that “doomsday” calculation is of course highly dependent on how the markets are doing in order to sustain the assets already in the fund.

For example, TRS has about $50 billion in assets, pays out about $5 billion in benefits, collects about a billion in member contributions, and has a return assumption of 7%. At a return of 0%, the till runs dry in 11-13 years depending on growth in payout. At 7%, roughly twice that long.

Comment by Arthur Andersen Tuesday, Apr 3, 18 @ 8:47 pm
AA, thanks so much.

This is what’s fascinating to me. If the state doesn’t put in a dime, and the assets don’t earn a dime, TRS is in crisis in 11-13 years.

What other issue attracts so much hysterical Chicken Little attention based on the assumption that there could be a crisis in 13 years if no contributions are made and absolutely everything goes wrong?

Who knew that the Usual Suspect propaganda machine was so far-sighted?

Or maybe they just want to stick it to public employees?

Comment by wordslinger Tuesday, Apr 3, 18 @ 10:05 pm
== Or maybe they just want to stick it to public employees? ==

More likely, the usual suspects want to spend the state pension contributions on vote buying projects and rewarding their cronies with contracts. Harder to do when you spend a fifth (more or less) of the state budget on somewhat properly funding pensions.

BTW … GARS would be the first fund to go “broke”, possibly in as little as 7 years, depending on the assumptions used.

Comment by RNUG Tuesday, Apr 3, 18 @ 11:15 pm
The TSR pension payment will grow each year with 3% compound COLA and the teachers that are retiring each year going forward will receive more starting out as wages continue to increase. The less money in the fund the less you earn on your assumed 7% return. It is not a supposed doomsday scenario it is a fact that the amount of money needed to fund pension plans will continue to increase as well as the unfunded retiree healthcare. With population decreases and less teachers paying into the system it will probably be bringing in less contributions in the future.

Comment by Stand Tall Wednesday, Apr 4, 18 @ 9:16 am