On the heels of credit rating upgrades, Illinois has sold $1.6 billion worth of bonds to fund a pension buyout program and construction projects. As the Chicago Tribune reported, Gov. J.B. Pritzker touted the upgrades lauding Democratic leaders for their work “to make sure that we’re back in good fiscal order, that the state is building its fiscal foundations for the road ahead.” But as Hetty Chang of Moody has stated, ratings are not “public policy report cards, although politicians may use them as such.” Credit ratings do not focus on the overall financial condition of the state; they focus on the likelihood of bonds being paid.
And if the state is in such “good fiscal order,” then why did it need to borrow money?
Did you know that many cities, such as Chicago and Los Angeles, do not include the financial information of their school districts and other underlying entities in their financial reports and budgets? The result is taxpayers are on the hook for far more debt than they know. To provide a more complete picture of the 10 most populous U.S. cities including their largest underlying government units, Truth in Accounting has released its annual City Combined Taxpayer Burden report.
Includes: Laurence Msall, president of the Civic Federation, said, "We are dramatically better than we were when the pandemic started. ...The governor’s use of the federal revenue support has been effective and fiscally reasonable, and it has helped improve the state’s financial condition, as has the growth in revenue. ... There’s a lot of positives in this budget."
Includes: "S&P Global has Illinois at BBB. Moody’s has the state at Baa2. That’s after upgrades from the agencies last year. Fitch has Illinois at BBB-. [Comptroller Susana Mendoza said,] 'We did not wait until the end of the fiscal year to pay it off and instead finished the repayment last month, nearly two years early, and saved taxpayers an estimated $82 million in interest,' she wrote."
Includes: "Sheila Weinberg, founder of Chicago-based Truth-in-Accounting, contends those the governor routinely vilifies include “basic mathematicians, the state’s pension-system actuaries, Securities and Exchange Commission officials and those who drafted the state’s latest bond offering."
Includes: "The state's total required contribution to its five pension funds in fiscal year 2023 is $10.67 billion, according to the funds' most recent actuarial valuations, published in December."
Includes: "To call this Illinois budget 'balanced' is a bit like a kid announcing to his parents that his savings account reflects that he has managed his spending this year much better than ever before, while conveniently omitting that his grandparents wrote him a big check. Likely on a one-time basis."
Includes: "For starters, Governor Pritzker projected that the state’s General Fund will end its current fiscal year (FY 2022) with an on-budget surplus of almost $1.8 billion. An on-budget surplus simply means that the revenue projected for a fiscal year will exceed the expenditures scheduled for that fiscal year. But any on-budget accounting of the General Fund does not provide a complete picture of its fiscal condition. "
Includes: "As Pritzker proposed the biggest budget in state history, he said the state is in good shape despite the pandemic recession. ... The state's financial situation is helped by federal money and increased state revenues. ... In response to the governor's address, House Republican Leader Jim Durkin issued a statement saying, "
Includes: "The Democratic governor’s good-news budget proposal promises $1 billion in tax relief and increased investments in education and law enforcement, all while contributing an extra $500 million to the state’s nearly insolvent pension funds and pumping $200 million into its long-dry 'rainy day' fund. ... "
The Reader's Guide begins with the following: "The Illinois Constitution requires the Governor to prepare and submit a state budget to the General Assembly for the upcoming fiscal year. " (Sheila's note: Then how is the state more than $236 billion in debt?)
Includes “The Illinois congressional delegation is thus far standing firm in its bid to repeal the $10,000 cap on state and local tax deductions—albeit strictly along party lines. … repealing the cap has threatened to open a divide between Democratic progressives and traditional liberals. …
By Yvette Shields (The Bond Buyer), includes “Illinois would extend two pension buyout programs by two years funded by $1 billion in additional borrowing authority under legislation being advanced during the current session. … ”
By Matt Sheehan, includes “Announcing a run for re-election, Treasurer Michael Frerichs is going for a third term. Touting state investments, a college savings program, and his retirement program called ‘Secure Choice,’ Treasurer Michael Frerichs said there is more work to be done. … Truth in Accounting said Illinois’ finances were the second worst in the nation. ”
By Hannah Max, includes “The Illinois General Assembly is without a watchdog. The former legislative inspector general quit after saying she was just a paper tiger. Now lawmakers cannot agree on her replacement. … ”
By Greg Bishop, subtitled “Partial federal records indicate $429 million in unemployment fraud,” includes “ … The state borrows money from the federal government to help pay for the required benefits, and $4.5 billion in debt is still owed, costing taxpayers tens of millions in interest. … State Rep. Tim Butler, R-Springfield, said taxpayers still don’t know how much fraud there’s been. …”
By Yvette Shields, includes “The Chicago suburb of Skokie joins the wave of Illinois local governments borrowing to manage rising public safety pension costs with a $176 million issue that will wipe out most of its unfunded liability.”
By Adam Schuster and Aneesh Bafna, from September 2021, includes “It is bad Illinois has the nation’s worst pension crisis, but state politicians have made it worse by using risky debt to delay the day of reckoning … the gamble rarely works out that way … Illinois has a long history with using the bonds as a strategy to address its underfunded pension systems. ”
By Jack Hellner, includes “The Illinois Constitution requires a balanced budget, yet Illinois has run up hundreds of billions in actual debt and unfunded pension and health liabilities. The reason federal, state, and local entities have so much debt and unfunded liabilities is that they essentially borrow to balance their budget. … ”
Editorial, includes “Costs are rising for all of us. Inflation has increased the price of everything from gas and groceries to new and used cars, and it seems inevitable that as those expenses hit municipal governments in the coming year, they will be looking for more revenue. For homeowners, that could mean higher property taxes. … Could Illinois afford to give an increased share of income tax revenue to municipalities and counties? …”