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* S&P…
S&P Global Ratings considers the Illinois governor’s fiscal 2021 budget proposal a step toward improving structural balance, building liquidity, and addressing pension liabilities, although it is a very small step. The proposed $42 billion fiscal 2021 budget calls for recurring revenues to fund recurring expenditures, assuming voters pass a graduated income tax constitutional-amendment ballot initiative in November, and the budget includes measures to attain balance if the vote fails. The largest step taken is toward attaining current-year structural stability without budget gimmicks or the use of one-time revenues, while applying reasonable economic assumptions. However, we do not consider the budget balanced, because the pension funding is statutorily set and is not at a level supported by a third-party actuary. In addition, the annual pension funding proposed still does not meet our static funding calculation.
The $1.4 billion budgeted to be received from the graduated income tax will be held back, and will only be distributed to the budgeted line items beginning Jan. 1, 2021, should the measure be passed. Should the graduated income tax measure not pass in November, the state would alter the budget by withholding $1.4 billion in proposed budgetary reserves (see details below).
Proposing a budget with this level of revenue uncertainty raises credit risks, but the passage of the graduated income tax is the administration’s primary goal. The new tax structure, if approved, would net about $3.6 billion in additional annual general fund revenues, enabling the state to address its lingering structural imbalance to some extent. We would view the successful passage of the proposed constitutional amendment as a further step toward fiscal progress, absent large expenditure reductions, since the full $3.6 billion would be incorporated into the fiscal 2022 budget. However, even with this additional money, the state will only make partial progress toward reducing the approximately $7 billion outstanding bill backlog as of Dec. 31, 2019. The bill backlog peaked at $16.7 billion in fiscal 2018 and has been reduced by almost $1 billion over the past year. However, since the backlog totals over 16% of the proposed budget’s general fund, these obligations greatly limit Illinois’ budget options.
Even with this outstanding backlog, the administration expects to request a $50 million deposit into the rainy day fund in fiscal 2020 and then another $50 million in fiscal 2021; the second is contingent on the passage of the graduated income tax amendment. We have cited the lack of reserves as a limiting credit factor in the past, and so while still a very small potential offset to revenue declines, these actions are mildly positive. The last notable step toward fiscal stability is a $100 million deposit in fiscal 2021 to improve the state’s pension position. Although this is a move in the right direction, the amount is still not meaningfully above the statutory (not actuarially recommended) level being funded and keeps the target funded ratio at 90% by 2045, considerably slower than that of higher-rated peers.
Another positive is that the state’s fiscal 2020 year-to-date revenues and expenditures are projected to result in a current-year operating surplus at fiscal year-end (June 30). While we anticipate stability in the near term, we do not expect the current or proposed budgets will materially improve the state’s credit profile, as the overall liquidity position and funding of pension and other post-employment benefit obligations remain below those of higher-rated peers, and the bill backlog remains significant.
* Tribune…
“I’ve never said that we would solve all the problems in one year’s budget,” Pritzker said. “But I have said that it’s important that we are consistent and persistent at addressing the challenges that we have in the state.”
S&P also noted that there has been no word from a task force Pritzker created more than a year ago to recommend state assets that could be sold or transferred to infuse cash into the five statewide pension systems.
Pritzker said the group is still working on crafting legislation that would allow those transfers to take place.
“It isn’t the case today that you could just take an asset and move it into the five pension systems,” he said.
posted by Rich Miller
Friday, Mar 6, 20 @ 2:50 pm
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Make the actuarially defined pension contribution. Need it sooner rather than later more than ever. This year’s returns are not going to be good.
Comment by Chambanalyst Friday, Mar 6, 20 @ 3:06 pm
==reducing the approximately $7 billion outstanding bill backlog as of Dec. 31, 2019.==
S&P forgot the $8 billion bond issued to pay down the bill backlog. As they say, a liability by any other name…
Comment by City Zen Friday, Mar 6, 20 @ 3:26 pm
If all these new and proposed revenues are just a very small step, can we really dig ourselves out of the hole? Legalized weed, expanded gambling, progressive income tax and assorted other fees, and it’s just a very small step? I hope they aren’t implying that the 97% are going to have to contribute. That ruins the narrative.
Comment by SSL Friday, Mar 6, 20 @ 3:30 pm
==“It isn’t the case today that you could just take an asset and move it into the five pension systems,” he said.==
Sounds like the rating agencies need a little Schoolhouse Rock refresher.
Comment by Precinct Captain Friday, Mar 6, 20 @ 3:40 pm
It has been a year. Things take time and he has changed attitude which alone is helpful. He was voted governor not god
Comment by DuPage Saint Friday, Mar 6, 20 @ 3:50 pm
==It has been a year.==
We’ve been at 4.95% for two and a half years now.
Comment by City Zen Friday, Mar 6, 20 @ 3:55 pm
“S&P forgot the $8 billion bond issued to pay down the bill backlog. As they say, a liability by any other name…”
The bond bill does reduce the interest rates paid and that is of help but overall but the debt is still there and just kicks the can down the road a little bit more softly.
Comment by OpentoDiscusssion Friday, Mar 6, 20 @ 3:56 pm
JB is nothing more then a slick BS artist- all hat and no cattle as they say in Texas though he wouldn’t have been elected in the lone star state - they are too smart
Comment by Sue Friday, Mar 6, 20 @ 4:01 pm
IL GO bonds will stay expensive relative to other options. We continue to be the only state with GO rating below A-
current rating is BBB-
https://illinoiscomptroller.gov/financial-data/fiscal-information/bond-ratings/
Comment by Donnie Elgin Friday, Mar 6, 20 @ 4:02 pm
JB helped do something no one else could do, putting the graduated income tax on the ballot. It’s our best hope right now. Other solutions don’t provide revenue that we desperately need. Others who slam him want to save money by slashing spending and hurting our most vulnerable, students, state employees, etc.
Comment by Grandson of Man Friday, Mar 6, 20 @ 4:07 pm
=== though he wouldn’t have been elected in the lone star state - they are too smart===
This is a great Facebook comment. Congratulations.
To the post,
=== The new tax structure, if approved, would net about $3.6 billion in additional annual general fund revenues, enabling the state to address its lingering structural imbalance to some extent. We would view the successful passage of the proposed constitutional amendment as a further step toward fiscal progress, absent large expenditure reductions===
I’m surprised how many are ignoring this.
This seemly says that the passage of the fair tax is helpful.
“We would view the successful passage of the proposed constitutional amendment as a further step toward fiscal progress, absent large expenditure reductions…”
Huh.
Comment by Oswego Willy Friday, Mar 6, 20 @ 4:08 pm
=new tax structure, if approved would net about $3.6 billion ….
There is also this….
1) Propose in your annual submission to GOMB an actionable scenario that includes operational efficiencies reflecting a 6.5% reduction from an estimated maintenance
Comment by Donnie Elgin Friday, Mar 6, 20 @ 4:13 pm
Imagine the hole that the upcoming recession will cause. It is coming and the revenue side of this budget will be way, way off.
Comment by Taxyourwaytoprosperity Friday, Mar 6, 20 @ 4:34 pm
==Others who slam him want to save money by slashing spending and hurting our most vulnerable, students, state employees, etc.==
Most of those who slam him don’t ever offer ANY specifics of what they would cut. I’m including all GOP reps and senators.
Comment by don the legend Friday, Mar 6, 20 @ 4:38 pm