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* From David Jacobson at Moody’s Investors Service…
On p. 5 of its new Weekly Credit Outlook for Public Finance released today, Moody’s notes the State of Illinois (rated Baa2/negative outlook) has experienced a third consecutive annual population drop in 2016, a credit negative underscoring tepid growth trends that will complicate efforts to enact a balanced budget and keep up with mounting pension funding pressures. From 2013-16 as the national population increased 2.2%, Illinois shrank by 0.6% as thousands of residents departed for other states. Illinois was one of only four states to see population declines each year for the period 2014 through 2016, according to Census Bureau data released on December 20.
Net migration has had a negative impact on populations in 31 states since the last census, while helping population growth primarily in states that serve as retirement havens or that have strong economies. But the case of Illinois appears more severe; its annual outflow of residents steadily worsened during the past three years. Based on the Census Bureau’s state-to-state migration estimates for 2015 (the most recent available), many of the top destination states for those leaving Illinois were adjacent or nearby states, such as Indiana (Aaa/stable) or Michigan (Aa1/stable), which both featured faster job growth. Other top destinations for those leaving Illinois included Arizona (Aa2/stable), California (Aa3/stable) and Florida (Aa1/stable).
Population loss can be a cause, as well as an effect, of economic deterioration. A self-reinforcing cycle of population loss and economic stagnation could greatly complicate Illinois’ efforts to stabilize its finances. Even assuming the state reaches a consensus on addressing its current operating deficit and benefits from steady economic growth, Illinois’ pension funding requirements as a share of budget likely will rise to 30% (from about 23% currently) in coming years.
Moody’s declaration of “credit positive” or “credit negative” does not connote a rating or outlook change. It is indicative of the impact of a distinct event or development as one of many credit factors affecting the issuer.
Pension payments rising to 30 percent of the budget is just downright chilling.
We need a budget and some growth yesterday.
* Related…
* Caterpillar might end machine making at Aurora factory
posted by Rich Miller
Thursday, Jan 5, 17 @ 3:35 pm
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In many states, including Illinois, the population has only grown or been sustained as a result of immigration from other countries. Now many Americans want to keep those immigrants out. And so it goes.
Comment by IllinoisBoi Thursday, Jan 5, 17 @ 3:40 pm
I am very pessimistic. Pension payments will have to be scaled back at least $2 billion. Medicaid will have to be totally revamped and also scaled back by a $2 billion. Difficult to do under Obama but with Republicans rule changes may be made more easily if the state pursues that.
Those two items in the budget are huge. Other social welfare expenditures such as day care will have to be redefined and cut by 20%.
That does not move us forward. It merely slows the slippery slope.
I have argued in the past for a temporary tax increase of 1.5% that would be solely allocated to paying back bills and that would expire January 2019 (end of Rauner unless he is re elected). That time is going by the way and probably no one would support it anyway.
Comment by Federalist Thursday, Jan 5, 17 @ 3:46 pm
“Now many Americans want to keep those immigrants out. And so it goes.”
Immigration that does not bring in immigrants with unique skills or large finances to start productive businesses that hire our citizens and do not just hire more of their friends and relatives back home is meaningless and even counter productive.
Comment by Federalist Thursday, Jan 5, 17 @ 3:50 pm
–Pension payments rising to 30 percent of the budget is just downright chilling.–
Good thing we just have a revenue problem.
Comment by Ahoy! Thursday, Jan 5, 17 @ 3:51 pm
Maybe someone should take Ralph Martire seriously.
1) Income tax increase to 5%
2) 1% Tax on most services
3) Tax retirement income above 75,000
4) cap expenditures
5) pass two-year budget requirement
6) Seek a graduated income tax for long term tax solution.
7) Re-amortize pension debt
Comment by JS Mill Thursday, Jan 5, 17 @ 3:51 pm
Did Moody’s include term limits as a way to reverse this trend? /s
Comment by Ole' Nelson Thursday, Jan 5, 17 @ 4:02 pm
Jinx.
Comment by 47th Ward Thursday, Jan 5, 17 @ 4:03 pm
Rich, I hope I didn’t come off as snarky on your writing, I would edit if I could, I was meant to show snark for those (house members, senators, AFSME) who think we just need to raise taxes and the problem will be solved.
Comment by Ahoy! Thursday, Jan 5, 17 @ 4:03 pm
It would be helpful to change the language from we need a “budget” to we need “higher and reasonable taxes” because that’s the reality.
Voters ultimately need to understand that. So opinion leaders ought to use that language so we know the question is whether we will finally start paying our public bills or continue to pile up more public debt.
There isn’t a spending cut solution. Math, and all that.
Comment by Dan Johnson Thursday, Jan 5, 17 @ 4:04 pm
How would Illinois enforce the retirement income threshold?
Comment by Romeo Thursday, Jan 5, 17 @ 4:06 pm
=- JS Mill - Thursday, Jan 5, 17 @ 3:51 pm: =
I agree Ralph Martire’s financial plan for Illinois should be taken seriously.
Comment by Anonymous Thursday, Jan 5, 17 @ 4:06 pm
- Anonymous - Thursday, Jan 5, 17 @ 4:06 pm:
It is me.
Comment by MAMA Thursday, Jan 5, 17 @ 4:07 pm
So while Illinoisans may have this in reverse, the main driver of the states with population growth is people moving to “retirement havens” followed only then by specifically strong economies.
Comment by Precinct Captain Thursday, Jan 5, 17 @ 4:14 pm
Higher taxes will mean more people and business will move out of state! Watch as the exodus increases, as taxes go up! The ones paying most of the taxes are leaving, because they can!
Comment by Anonymous Thursday, Jan 5, 17 @ 4:20 pm
@Precinct Captain- I am not sure where or how you base your statement on “main driver of population growth”, but I have to say that there is some rationale for the concept. As America gets older, more and more of our population is at or above retirement age, so you make a fair point.
One thing that has not been discussed much is the change in the Illinois economy away from manufacturing and more toward sales and service. Something that Martire talks about a lot. If that is the case (and it is) we are taxing a shrinking tax base and we have to expand the tax base to match our changing economy. People might not like it but it does make sense.
I would add to my previous list:
7) freeze property tax (if state makes its required payments)
8) create method for property tax “relief” phased in beginning in year three. This would be subject to state meeting its’ statutory funding requirements.
Comment by JS Mill Thursday, Jan 5, 17 @ 4:24 pm
=Higher taxes will mean more people and business will move out of state! Watch as the exodus increases, as taxes go up! The ones paying most of the taxes are leaving, because they can!=
Except that taxation has no direct correlation to economic or population growth as demonstrated by national data, your argument makes total sense./s
Comment by JS Mill Thursday, Jan 5, 17 @ 4:25 pm
==Maybe someone should take Ralph Martire seriously.==
Beyond the unions that pay him? Perhaps. But I think any one of us can pick from that tax buffet and close the gap on paper. If life were a spreadsheet, it would’ve been done long ago.
That said, I do like the 2 year budget requirement.
Comment by City Zen Thursday, Jan 5, 17 @ 4:30 pm
Is the increase from 23% to 30% part of “The Ramp” ?? In the past Rich has stated Wall Street loved “The Ramp” so much it couldn’t be changed without serious consequences. Has Wall Street changed its tune?
Comment by Anyone Remember Thursday, Jan 5, 17 @ 4:33 pm
=Higher taxes will mean more people and business will move out of state! Watch as the exodus increases, as taxes go up! The ones paying most of the taxes are leaving, because they can!=
True, unless of course their business or occupation means that they need to be in Illinois.
Higher income retirees will be more likely to leave particularly if their pensions are taxed.
Those whose jobs or businesses require them to stay and those with lower incomes will stay. Others will continue to emigrate.
Comment by Federalist Thursday, Jan 5, 17 @ 4:43 pm
Moody’s sums it up. The suicide pact with pension debt will be the demise of the State unless the Pols can figure a way around the pension clause language. It’s probably more likely that the State continues towards insolvency before a constitutional amendment is made to the pension clause.
The advocates that think ordinary folks in Illinois already paying enough taxes (state income, sales, property, etc.) are strong motivation for people to just move.
Cubs won the World Series.
Comment by BK Bro Thursday, Jan 5, 17 @ 4:50 pm
The percentage of the revenue that goes to the pension payments changes inversely with the tax rate. Revenue was cut drastically when the income tax was reduced from 5% to 3.75%, so if the actual amount paid into the pensions was the same, the percentage would go up. Makes for a good misleading political ad.
Comment by DuPage Thursday, Jan 5, 17 @ 4:51 pm
–The ones paying most of the taxes are leaving, because they can!=
Price a condo in the Greater Loop, or a house on the North Shore, and get back to us.
Those who can make good money here are staying, obviously. It’s those who can make better money elsewhere that are leaving.
Just like in the other 30 states that are experiencing net migration.
Comment by wordslinger Thursday, Jan 5, 17 @ 4:57 pm
“Pension payments rising to 30 percent of the budget is just downright chilling.”
Is the reason the Pensions are 30% of the budget is because Rauner has not made any payments into the Pension funds since he became the governor?
Comment by Anonymous Thursday, Jan 5, 17 @ 5:06 pm
JS Mill, Leave Retired People Alone.. They Earned It… Unless General Assembly Retirees.. They Own This Illinois Mess.. Tax Retired Lawmakers.. Fixed That!!
Comment by Shake Thursday, Jan 5, 17 @ 5:13 pm
It would help if IDOT bought cat end loaders instead of Korean made kamatsu
Comment by foster brooks Thursday, Jan 5, 17 @ 5:44 pm
total state and fed budget is 69 billion. So pnesions would habe to equal 20 billions a year to be 30 percent. only way it goes that high is if we are paying it to 100% in like 5 years
Comment by Ghost Thursday, Jan 5, 17 @ 6:44 pm
== total state and fed budget is 69 billion. So pnesions would habe to equal 20 billions a year to be 30 percent. only way it goes that high is if we are paying it to 100% in like 5 years ==
People crunching the numbers don’t include the federal money, just the state money.
Comment by RNUG Thursday, Jan 5, 17 @ 6:53 pm
US Census Bureau:
Illinois pop., July 2016 = 12,801,539
Illinois pop., Apr. 2010 = 12,830,632
Net change in pop. = -0.2%
The net change in population in Illinois for this decade is statistically insignificant. Conclusion: The population is stagnant. It is not declining. Beware of selective statistics!
https://www.census.gov/quickfacts/table/PST045215/17
Comment by Anonymous Thursday, Jan 5, 17 @ 7:25 pm
So does anyone know what the per capita state debt for every resident in Illinois? If so can you back out the non tax payers ? Thats got to be a frightening / staggering number. How long will we have to pay our share ?
Comment by NorthsideNoMore Thursday, Jan 5, 17 @ 7:52 pm
How about we just beg the Republican triumvirate for bankruptcy protection.
Comment by blue dog dem Thursday, Jan 5, 17 @ 8:37 pm
blue dog dem - I’m guessing that’s the plan.
Comment by Robert the 1st Thursday, Jan 5, 17 @ 8:43 pm
It’s late, but with all the references to Martire, can someone provide a reference to read up on what he has to say? Thanks.
Comment by Flapdoodle Thursday, Jan 5, 17 @ 8:44 pm
- Flapdoodle -
Try Google?
Comment by Oswego Willy Thursday, Jan 5, 17 @ 8:46 pm
BoB1. I have three kids. All with families. Lincoln Park to Waterloo. They struggle every day to make ends meet in this state. They weren’t able to vote for or against the rotten politocos who got us here. I know there aren’t enough substantive cuts in the budget to be had, but darn it, let’s try. I hope, no, I pray that we can somehow constitutionally change promised benefits. I don’t mean going after the guy/gal bringing home $50k/yr in pension. But nobody,nobody should get a 3% AAI on $150k.
Comment by blue dog dem Thursday, Jan 5, 17 @ 8:55 pm
I know it’s a constitutional change but what would the numbers crunched be if you took the compounded COLA and made it simple COLA like IMRF? It may not be as generous but it’s still a COLA. Or attach it to CPI with a cap or Social Security?
Comment by DuPage Bard Thursday, Jan 5, 17 @ 9:35 pm
== what would the numbers crunched be if you took the compounded COLA and made it simple COLA like IMRF==
But IMRF has a “13th payment” that is on top of simple COLA. So IMRF’s COLA is actually more expensive for nearly 2 decades, them math takes over and compounded COLA blows it out of the water.
Comment by City Zen Thursday, Jan 5, 17 @ 9:43 pm
=JS Mill, Leave Retired People Alone.. =
We ALL own this mess. High income retirees definitely benefited from life in Illinois. I will be one of those one day. I will pay as well, no problem.
@DuPage Bard- AAI (it isn’t COLA) is the single greatest driver of the annual cost at one point according to Martire (that is year to year not debt payment) so you have a point, but it isn’t going to happen. It is protected and no way, no how anyone is going to give it up.
Comment by JS Mill Thursday, Jan 5, 17 @ 9:45 pm
===Maybe someone should take Ralph Martire seriously.==
Beyond the unions that pay him? Perhaps. But I think any one of us can pick from that tax buffet and close the gap on paper. If life were a spreadsheet, it would’ve been done long ago.=
LOL, that is sweet! You cannot argue with his numbers or facts so attack him and try to diminish his message because of what? theh fact that some of the funding for the CTBA comes from unions?
Is he a bad person too? Do people tell you that? Trump much?
Prove his math is wrong and you have something, until then you just sound like a fool with that garbage.
Comment by JS Mill Thursday, Jan 5, 17 @ 9:48 pm
The Illinois Policy Institute is treated with much more disdain here than CTBA… Guess it depends on where your checks come from even for the commentators.
Comment by Robert the 1st Thursday, Jan 5, 17 @ 10:44 pm
- Robert the 1st -
Respectfully, it’s the IPI that parades around trying to be all things; non-partisan think tank, news media outlet, shill for Rauner…
The only group that has an identity crisis IS the IPI.
Comment by Oswego Willy Thursday, Jan 5, 17 @ 10:49 pm
Hello Willy and happy New Year!
From the CTBA website….
The Center for Tax and Budget Accountability was formed in 2000 to be a bipartisan, nonprofit research, and advocacy think tank that works across ideological lines to promote social and economic justice for everyone, from traditionally disadvantaged populations to the middle-class
I suppose that means they don’t lie rich people to be fair…
Comment by Robert the 1st Thursday, Jan 5, 17 @ 11:02 pm
- Robert the 1st -
Happy New Yrar to you too.
I guess numbers have a funny way of figurin’.
The measurable sate what they are, but plugging those figures into those equations that may “miss” or “forget” others “factors”… I’d like to think here, Rich tries to let numbers be seen, and Rich let’s us all “check the work”.
Fair?
Comment by Oswego Willy Thursday, Jan 5, 17 @ 11:21 pm
*like*
I suppose they shouldn’t have said =everyone= if they only represent poor and government union folks come to think of it.
Comment by Robert the 1st Thursday, Jan 5, 17 @ 11:22 pm
Fair indeed. IPI is rightfully called out on their funding. As CTBA should be. That doesn’t discount and truthful information they provide.
Comment by Robert the 1st Thursday, Jan 5, 17 @ 11:25 pm
*any* Not =and=
Sorry for the typos.
My point being; both sources should be taken with a “grain-of-salt”
Comment by Robert the 1st Thursday, Jan 5, 17 @ 11:33 pm
- Robert the 1st -,
The IPI has exposed themselves to be who they are… that also includes thinking they can actually be a credential media in the House.
It’s all good. Numbers are numbers, it’s the formulas that give insight that lead to the “confusions”
Typos? Boy, I can tell you about typos…
Comment by Oswego Willy Thursday, Jan 5, 17 @ 11:37 pm
=The IPI has exposed themselves to be who they are=
Yep, they’re backed by special interests, no doubt.
That point is made almost daily here.
You haven’t, but many here treat Ralph Martire and CTBA as some sort of standard for non-bias reporting/analysis. Which is laughable.
I certainly agree about typos and numbers!
Comment by Robert the 1st Thursday, Jan 5, 17 @ 11:56 pm
JS Mill,from Moody’s in the post,
“Net migration has had a negative impact on populations in 31 states since the last census, while helping population growth primarily in states that serve as retirement havens… “
Comment by Precinct Captain Friday, Jan 6, 17 @ 2:12 am
The good thing about the U.S. system is that each person is free to leave the state. On an individual basis, it makes the solution simple.
Comment by Joe Friday, Jan 6, 17 @ 7:19 am
Many have warned of this problem and referred to it as the death spiral.
Comment by Pontiac Friday, Jan 6, 17 @ 8:19 am
- Robert the 1st -,
We’re on the same page, thanks for acknowledging my take on all too. I try to keep an open mind until things make that less possible.
OW
Comment by Oswego Willy Friday, Jan 6, 17 @ 8:35 am
=Fair indeed. IPI is rightfully called out on their funding. As CTBA should be. That doesn’t discount and truthful information they provide. =
When you want to find a “truth” in something you will. That is what partisanship actually is. That is the IPI in a nutshell.
The CTBA, and especially Ralph Martire have had a consistent message since at least 2003. That transcends political leadership in the governor’s office and Senate (at least the person). Martire has been critical of both Democratic and Republican decisions. He hasn’t let anyone off the hook and will deliver the same consistent message regardless of audience (the governor cannot say the same). He is actually bi-partisan.
Again, you can cite one of the CTBA’s sources (there are many) of funding, fair enough but if you want to use that to diminish the math good luck. I was skeptical at one time, but the math is the math.
The CTBA is not a “news” outlet, fake or otherwise. Comparing them to the IPI is like comparing apples and telephones.
Comment by JS Mill Friday, Jan 6, 17 @ 8:37 am
CTBA is not IPI…
So I’m clear.
Comment by Oswego Willy Friday, Jan 6, 17 @ 8:40 am
JS MIll
You can replace CTBA or Martire in your comment with AFSCME and it would hold true.
I suppose it’s very true to say AFSCME is nonpartisan and has been critical of both Democratic and Republican decisions. They’re still special interest.
Comment by Robert the 1st Friday, Jan 6, 17 @ 8:55 am
An easy start would be to re staff DCEO. Get some really good people in there who know what they are doing instead of just hanging out goodies. Focus on small and especially medium sized businesses. The “gazelles” as they are called. Re staff and fund the small business centers at the state colleges. As far as I know, all of those have closed because of funding. Hook up the IV to small and medium business STAT! Quite chasing rainbows with Intersect Illinois. They are feckless because they failed to achieve 501c3 status. They can’t solicit donations in a non profit manner. What business or foundation can give away money without deduction?
Comment by Honeybear Friday, Jan 6, 17 @ 9:01 am
No need to get into political orientation. CBTA numbers add up and they explain their methology. IPI numbers don’t.
That’s all you need to know about the two organizations.
Comment by RNUG Friday, Jan 6, 17 @ 9:38 am