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Thread: Moody’s Downgrades Chicago Credit Rating To ‘Junk’ Bond Status

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    Re: Moody’s Downgrades Chicago Credit Rating To ‘Junk’ Bond Status

    Quote Originally Posted by MrVicchio View Post
    Moody's holds the City accountable, points to the irresponsible SSC decision and Rahm whines about it. Amusing as hell.
    Mornin Vic. How was the Illinois Supreme Court's Decision irresponsible? Moreover this hits all of Illinois and not just Chicago. Illinois is 2 downgrades from Junk Status.



    Yet the Illinois court blows right through this judicial standard. Based on its prior rulings, the court opines that “neither the legislature nor any executive or judicial officer may disregard the provisions of the constitution even in case of a great emergency” or “for economic reasons.”

    If pensions can be modified, the court opines, then “no rights or property would be safe from the State. Today it is nullification of the right to retirement benefits. Tomorrow it could be renunciation of the duty to repay State obligations. Eventually, investment capital could be seized.” This irony of this slippery-slope fallacy is that by shielding pensions the Illinois judges are making it more likely that the state will renege on debt or other obligations. The justices cavil that politicians “made no effort to distribute the burdens evenly among Illinoisans” and could “have sought additional tax revenue.” Yet Illinois raised taxes by a record amount in 2011. The judges even suggest that it is unconstitutional to require government workers, rather than taxpayers, to shoulder the pension burden.

    Republican Governor Bruce Rauner has floated an alternative: a state constitutional amendment allowing pension modifications, which would require a public referendum and two-thirds vote of the legislature. Barring that, Illinois taxpayers may want to start contemplating Indiana or Florida residency.....snip~


    Illinois Pension Blowup - WSJ

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    Re: Moody’s Downgrades Chicago Credit Rating To ‘Junk’ Bond Status

    Quote Originally Posted by donsutherland1 View Post
    Some additional details from Moody's:

    The Ba1 rating on Chicago's GO[General Obligation] debt incorporates expected growth in the city's highly elevated unfunded pension liabilities. Based on the Illinois Supreme Court's May 8 overturning of the statute that governs the State of Illinois' (A3 negative) pensions, we believe that the city's options for curbing growth in its own unfunded pension liabilities have narrowed considerably...

    Developments involving the Municipal and Laborer plans present longer term risks to the city's credit profile. In our opinion, the Illinois Supreme Court's May 8 ruling raises the risk that the statute governing Chicago's Municipal and Laborer pension plans will eventually be overturned. If so, the city's obligation to fund the Municipal and Laborer plans would likely revert to that which existed before the statute took effect in January 2015. Under the prior funding requirements, the city's pension contributions were well below the plan's actuarial requirements. Therefore, if the Municipal and Laborer statute is overturned, and no other adjustments are made to plan revenues and/or expenditures, we believe the plans will continue to extinguish assets to pay annuitants. As the plans move toward insolvency, the city's credit standing will continue to deteriorate, given our view that the state may eventually implement legislation forcing Chicago to pay annuitants directly.


    Those details from Moody's explanation highlight the relevance of the Illinois Supreme Court's decision to Chicago's credit situation. IMO, the ratings agencies, including Moody's, remain behind the proverbial curve with respect to Illinois (which should be a junk rating), not that Moody's was too harsh with respect to Chicago.

    That is because Moodys knows of the overlap with the City, and the County. As well as all the other pension Crisis' in Illinois. So no they weren't being harsh. Moreover the city of Chicago has more Cops on retired pensions than they do cops on the force.



    Illinois harbors hundreds of hidden pension crises.....

    Illinois’ severely underfunded pension liability for the five state-run pension funds has earned national media attention. But Illinois is home to many other pension crises that too often fly under the radar. There are 675 public pension funds in Illinois. In addition to the five state-run funds, there are 359 suburban and downstate police pension funds, 301 suburban and downstate fire pension funds, a pension fund for suburban and downstate municipal workers, six pension funds in Chicago and three pension funds in Cook County, which overlaps with the city of Chicago.

    These pension funds cover more than 1 million people, or 8 percent of the state’s total population, when active workers, retirees and other beneficiaries are accounted for.

    Collectively, pension funds in Illinois had an unfunded liability exceeding $144 billion and an aggregate funding ratio of less than 50 percent in 2012, according the biennial pension report published by the Department of Insurance, or DOI.....snip~

    https://www.illinoispolicy.org/illin...ension-crises/



    Which they say they will be out with a report later this year.....and it will only be worse.

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    Re: Moody’s Downgrades Chicago Credit Rating To ‘Junk’ Bond Status

    Quote Originally Posted by Blue_State View Post
    I love the idea of a neutral third party. How would you put it together?
    It would be a third party negotiating party at the table that represents the tax payers. this is to ensure that state officials are not pandering to unions and giving into their demands.
    these 3rd party auditors can object to any proposal that they feel is outside the taxpayer interest.

    there I no outside interference with this 3rd party company other than they get a copy of the proposal. they see what is in the proposal and any meeting with any party is recorded
    and taped for auditing purposes.

    any meeting has an internal auditor present to make sure no coercion is going on.
    the 3rd party can amend the proposal to reflect taxpayers interest in this meeting that they feel is out of line.

    IE the state agrees to increase pension contributions by 10%. they can object to this until a better deal is reached.
    or they can offer another suggestion such as more contributions to healthcare or pensions from workers.
    or not as much of a pay increase to offset the difference.

    the problem that I have with public unions is that there is little profit that states make. I don't see how unions can demand more and more when there is 0 profit being made.
    the fact that these politicians give into these union demands with little regard to future cost to taxpayers tells me there is collusion and bad faith contracting going on.

    they continue to promise things they can't hope to pay for and then put it on the backs of taxpayers to some how fund their illegal promises.

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    Re: Moody’s Downgrades Chicago Credit Rating To ‘Junk’ Bond Status

    Quote Originally Posted by ludin View Post
    It would be a third party negotiating party at the table that represents the tax payers.
    Isn't that what elected officials are supposed to do, in part?

    In terms of implementation, establishing an independent entity (perhaps led by appointees with staggered terms and some professional staff) of some kind would probably be the easy part. Specifying what constitutes taxpayer interests would be challenging. Focusing more narrowly on authority to block terms of agreements or policies that create significant new unfunded pension liabilities might be more feasible, but constitutional issues might also be involved e.g., such an office would fundamentally erode the role of representative government. Moreover, if the entity's funding were tied to the legislative process, its viability would be undermined. Finally, it's unlikely that the Governor, State legislature, etc., would be willing to cede such authority to an independent entity.

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    Re: Moody’s Downgrades Chicago Credit Rating To ‘Junk’ Bond Status

    Quote Originally Posted by MrVicchio View Post
    The real question to ask is Chicago on a death spiral?
    Chicago is still a major centre for a lot of industries so I doubt it very much.

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    Re: Moody’s Downgrades Chicago Credit Rating To ‘Junk’ Bond Status

    Quote Originally Posted by Carjosse View Post
    Chicago is still a major centre for a lot of industries so I doubt it very much.

    Morning Carjosse. A lot of Business is leaving Chicago and Illinois, so to are a lot of people. Many have gone due to the Corporate Taxes. They are so desperate that Emanuel is ready to jump on the bandwagon for a Chicago Casino. Its pathetic.....laying a hope on people showing up to lose their money gambling. But now they are looking at that Medical Marijuana revenue to see if that can help them out.




    Safely elected in January 2011, Democrats then raised the state’s 3% flat income tax rate to 5% and its corporate rate from 7.3% to 9.5%, the fourth highest in the country. All $7 billion a year in new revenues have gone to pension payments, which will leave a huge new hole in the budget when the supposedly temporary tax hikes are phased out in 2015.

    It’s a sign of their desperation that the state’s business lobbies are supporting the reform as the best they can hope for. Others want special tax breaks to offset the 2011 tax hike. Archer Daniels Midland ADM +1.49% (Decatur) and Office Max (Naperville) have threatened to move their corporate headquarters if the state doesn’t guarantee $75 million in tax breaks......snip~

    https://www.illinoispolicy.org/news/...e-pension-fix/

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    Re: Moody’s Downgrades Chicago Credit Rating To ‘Junk’ Bond Status

    This should be headline news on all the networks but because illinois is super-liberal and obozo's state, the story has been censored by the non-internet press.

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    Re: Moody’s Downgrades Chicago Credit Rating To ‘Junk’ Bond Status

    Just cancel the pensions. These are govt employees which means they are affirmative action hires and should have never had the job in the first place. The taxpayers owe them nothing.

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    Re: Moody’s Downgrades Chicago Credit Rating To ‘Junk’ Bond Status

    Quote Originally Posted by TextDriversKill View Post
    This should be headline news on all the networks but because illinois is super-liberal and obozo's state, the story has been censored by the non-internet press.
    You mean just about Chicago? As Illinois Pension Reform made National News. As it has National Implications.




    Illinois Supreme Court Kills Pension Reform Effort
    BY BLOOMBERG NEWS


    The Illinois Supreme Court rejected the state's solution for its worst-in-the-U.S. $111 billion pension shortfall, handing organized labor a victory while deepening a crisis with national implications.

    Across the nation, state and local governments grapple with pension deficits that exceed a combined $2 trillion, according to a Moody's Investors Service report last year. Closing that gap by reducing payments to retirees would abrogate union contracts in many states and even constitutional guarantees. In Illinois, Chicago is grappling with $20 billion in unfunded pension liabilities that threaten its solvency. "Crisis is not an excuse to abandon the rule of law," the seven-member Illinois court ruled. "It is a summons to defend it."

    Friday's ruling raised the prospect of further downgrades by credit-rating firms. Investors already have been punishing Illinois. Its 10-year bonds yield about 3.7 percent, the highest since November and the most among the 20 states tracked by Bloomberg.....snip~

    Illinois Supreme Court Kills Pension Reform Effort - Investors.com

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    Re: Moody’s Downgrades Chicago Credit Rating To ‘Junk’ Bond Status

    Quote Originally Posted by MrVicchio View Post
    Moody's holds the City accountable, points to the irresponsible SSC decision and Rahm whines about it. Amusing as hell.
    Surely, siting the Obama Presidential Library in Chicago will make all this talk go away
    "Liberals claim to want to give a hearing to other views, but then are shocked and offended to discover that there are other views." William F. Buckley Jr.

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