Illinois warns bond buyers that key pension payment may be delayed. The mandated payment in FY17 of more than $7.8 billion from state general funds to the five Illinois state-managed pension systems is required by statutory law. State law requires that whenever the State falls short of past commitments to these pension funds, it must make actuarially determined annual payments to these funds to “ramp up” or “catch up.” As these five funds now post, collectively, approximately $111 billion in unfunded pension liabilities, these ramp-up payments will be a feature of the State’s budget picture for more than a decade to come.
State general funds income, particularly income taxes collected from individuals and corporations, is falling at the same time as mandated pension payments are rising. At the same time, many other mandated recipients of state general funds have appealed to court orders, consent decrees, and automatic appropriations to ensure that they get positions at or close to the head of the line for the State’s remaining funds. The result of the convergence of all of these trends was that the State of Illinois was legally compelled to print a warning in its most recent State bond prospectus released on Tuesday, October 11, that some of the mandated $7.8 billion FY17 pension payment may have to be delayed.
Warnings of this type, in bond prospectuses, are part of the data used by credit rating agencies to rate the debts of institutional borrowers. Standard & Poor’s, Moody’s Investors Service, and Fitch Ratings have downgraded State of Illinois general obligation debt to only two notches above “junk bond” level. The three different firms use different terminology; in S&P phraseology, Illinois general-obligation debt is rated ‘BBB,’ or triple B. While bonds stamped with this rating can be sold as investment-grade securities, they are classified as a relatively low-ranking, risky investment. The State of Illinois, when it sells bonds in the marketplace, must offer to pay interest rates that are much high than the rates paid by other states. Illinois taxpayers must pay annual interest rates on 10-year notes that are approximately 200 basis points (2.00%) higher than the rates paid by the AAA-rated neighboring state of Indiana.
Study shows why Illinois residents are thinking about moving out of state. The study, performed by the Paul Simon Public Policy Institute, found that 47% of Illinois respondents said they were thinking about moving out of Illinois. When asked about their reasons for considering emigration from Illinois, the largest single subset of the respondent group (27% of total respondents) responded “taxes.” The weather, bad government, and the state’s job/education picture were also cited as reasons to think about leaving the Land of Lincoln. More than four-fifths (84%) of all of the respondents, including those who are not considering leaving Illinois, believe the state is “headed in the wrong direction.” The study questioned residents who were registered voters within Illinois. Results of the study were published on Monday, October 10.
Many former Illinoisans have already left the State. The State of Illinois experienced a net loss of more than 1.3 million people between 1995 and 2014. This number reflects the surplus of leavers over newcomers during this twenty-year period. Many of those who remain as of 2016, and who are now thinking about emigration, are tied to Illinois by possession of a house or job here; and they know it will not be easy for them to leave. When asked by the Simon Institute polling team, only 20% of respondents think it is likely they will in fact leave Illinois within the next 12 months. The Paul Simon Public Policy Institute is an affiliated institution within Southern Illinois University (SIU) in downstate Carbondale.
Few Illinois Obamacare marketplaces are truly competitive. The Illinois Department of Insurance (IDOI) reported this week that of the 102 counties of Illinois, three-quarters – more than 70 counties – now have only one or two insurance companies offering coverage through “Get Covered Illinois”, the IDOI Affordable Care Act marketplace.
The announcement implies that many Illinoisans mandated to purchase individual-household insurance by the federal Affordable Care Act will have only one or two entities willing to quote a price to them. While prices for health insurance differ from household to household based upon the age of the purchaser and other factors, a lack of competition is generally correlated with higher prices. The IDOI announcement coincides with reports that there are likely to be sharp price hikes for ACA-compliant health insurance in Illinois for purchasers in 2017.
The announcement of diminished or absent ACA competition in Illinois follows decisions by large providers of private-sector health insurance, headed by UnitedHealth, to withdraw from the Illinois market. This development also followed the financial collapse of a significant Illinois ACA-compliant health insurance cooperative, Land of Lincoln Health, which is now in liquidation and is not offering health insurance policies for 2017.
The Department of Insurance reports that in seven significantly-populated counties of Illinois – Grundy, Kendall, Lake, Madison, McHenry, Monroe, and St. Clair – there is now only one insurance firm willing to sell ACA-compliant policies, Blue Cross Blue Shield. The Obamacare mandate now impacts the consumer status of the 1.75 million Illinois residents of these counties.
Underwriters agree to help refinance some Illinois debt. The $600 million in variable-rate bonds that will be refinanced are stapled to a set of “crocodile” clauses. Hidden under the dark water of the 2003 bonds’ contractual covenant are a series of punishment terms in which the State of Illinois promised to pay an enormous penalty ($150 million) should its credit standing fall below letter-of-credit level. A consortium of four banks has agreed to refinance the debt under terms that will replace the letters of credit requirement that was stapled, by covenant, to the old debt.
The bonds that will be refinanced under this agreement were placed during the administration of former Gov. Rod Blagojevich. The agreement, which was announced on Wednesday, October 12, is not expected to lead to an upgrade of Illinois’ sub-par triple-B credit rating. In addition, it is expected that the State of Illinois will have to pay fees to the refinancing banks in return for their replacement of the letters of credit. The refinancing is expected to be completed on November 7.
On Wednesday, the Transform Illinois coalition held its 2nd Annual Awards Ceremony at the Metropolitan Planning Council in downtown Chicago.
Transformer Awards were given to lawmakers and citizens who have furthered the goals of the coalition by streamlining local government.
This year’s awards were presented to Sen. Tom Cullerton (D- Villa Park), Rep. Tom Demmer (R- Dixon), the Village of Algonquin, and former Board President of the Century Hill Street Lighting District Tom Cieslak.
The luncheon also featured a keynote presentation from Dr. Chris Berry of the University of Chicago’s Harris School of Public Policy. Dr. Berry’s keynote traced the path that Illinois took to become the state with the highest number of local governments in the nation.
Illinois lawmakers are treating the state’s Road Fund as a piggy bank. The solution? A constitutional amendment that would protect your tax dollars and prohibit politicians from tapping into our state’s vital Road Fund.
Every year, vehicle owners in Illinois are forced to pay $101 (+ “Processing Fees”) for their annual vehicle registration. Politicians promise that this money will go toward maintaining the state’s roads and bridges.
And every time vehicle owners in Illinois fill up their gas tank, they are hit with a motor fuel use tax. Politicians promise that this money will go toward maintaining the state’s roads and bridges.
But politicians are not telling the truth. Instead, they are breaking their promise and are raiding the fund that houses these user fees and sweeping these dollars for other non-transportation related programs in state government.
Shouldn’t infrastructure dollars go towards our state’s ailing infrastructure? This election, VOTE YES on the first question on the ballot and let’s hold politicians accountable to your tax dollars.
Please share the Businesses for Safe Roads website with your friends, family and colleagues and encourage them to VOTE YES ON THE FIRST QUESTION ON THE BALLOT. The more informed voters Illinois has, the more we are able to keep Springfield accountable with our money.