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Illinois’ credit rating downgraded; state drops to worst in the nation

Rocketman

Rocketman

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A warning came Saturday morning from state treasurer Dan Rutherford (R) IL State Treasurer. The Standard and Poor’s downgrade from A to A-minus puts Illinois last on the list– and means a higher cost to borrow money.

What state did Obama represent as a senator? We can almost predict our path from his past behavior.



Read more: Illinois’ credit rating downgraded; state drops to worst in the nation | WGN-TV
Read more at Illinois’ credit rating downgraded; state drops to worst in the nation | WGN-TV
 
Rocketman said:
A warning came Saturday morning from state treasurer Dan Rutherford (R) IL State Treasurer. The Standard and Poor’s downgrade from A to A-minus puts Illinois last on the list– and means a higher cost to borrow money.

What state did Obama represent as a senator? We can almost predict our path from his past behavior.
Click to expand...


Not surprising and, IMO, a well-deserved downgrade. Several points:

1. President Obama was not governor of Illinois.

2. Illinois has a balanced budget amendment. Illinois' finances are evidence that when it comes to fiscally profligate states, such amendments are essentially meaningless gimmicks.

3. IMO, Illinois should have been downgraded further. The State has made little meaningful progress on its major fiscal challenges despite the end of the recession. Given its weak fiscal position, Illinois should adopt a robust austerity program aimed at eliminating its unfunded pension and health liabilities over the long-term. Both tax hikes and aggressive operating budget savings will likely be needed. In the near-term, Illinois should commit to achieving a balanced budget within a fixed period of time (more than a year but less than five) as a starting point, define a balanced budget as being balanced in total (inclusive of operating, capital and health/pension pre-funding), peg its commitment to the timeframe it sets forth (not arbitrary requirements that have been routinely ignored), and provide monthly progress reports to the State's major creditors and to the general public. Once the budget is balanced, the State should push aggressively ahead with reducing its unfunded health and pension obligations.
 
Illinois spends a large amount of its tax dollars on housing former Illinois politicians in Illinois state prisons.
 
donsutherland1 said:
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Not surprising and, IMO, a well-deserved downgrade. Several points:

1. President Obama was not governor of Illinois.

2. Illinois has a balanced budget amendment. Illinois' finances are evidence that when it comes to fiscally profligate states, such amendments are essentially meaningless gimmicks.

3. IMO, Illinois should have been downgraded further. The State has made little meaningful progress on its major fiscal challenges despite the end of the recession. Given its weak fiscal position, Illinois should adopt a robust austerity program aimed at eliminating its unfunded pension and health liabilities over the long-term. Both tax hikes and aggressive operating budget savings will likely be needed. In the near-term, Illinois should commit to achieving a balanced budget within a fixed period of time (more than a year but less than five) as a starting point, define a balanced budget as being balanced in total (inclusive of operating, capital and health/pension pre-funding), peg its commitment to the timeframe it sets forth (not arbitrary requirements that have been routinely ignored), and provide monthly progress reports to the State's major creditors and to the general public. Once the budget is balanced, the State should push aggressively ahead with reducing its unfunded health and pension obligations.
Click to expand...

My mother and stepfather lived there in a typcial ranch house in an 80's neighborhood. Their taxes 5 years ago were 4 times what mine were with my house being brand new and appaised at 3 times the value of theirs. Illinois has no idea how to manage a budget.
 
Rocketman said:
A warning came Saturday morning from state treasurer Dan Rutherford (R) IL State Treasurer. The Standard and Poor’s downgrade from A to A-minus puts Illinois last on the list– and means a higher cost to borrow money.

What state did Obama represent as a senator? We can almost predict our path from his past behavior.

. bbbbbbbb



Read more: Illinois’ credit rating downgraded; state drops to worst in the nation | WGN-TV
Read more at Illinois’ credit rating downgraded; state drops to worst in the nation | WGN-TV
Click to expand...

Obama represented Illinois as a Senator. GWShiiteForBrains represented failed businesses on a Texas scale. His consistency and constituency is currently recognized on a National scale!
 
DaveFagan said:
Obama represented Illinois as a Senator. GWShiiteForBrains represented failed businesses on a Texas scale. His consistency and constituency is currently recognized on a National scale!
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I would take the Texas economy over the Illinois economy any day of the week.
 
Risky Thicket said:
Illinois spends a large amount of its tax dollars on housing former Illinois politicians in Illinois state prisons.
Click to expand...

"If your in a place with than one former Illinois politician, chances are you are in prison." - I forget probably Jon Stewart
 
donsutherland1 said:
[/SIZE][/B]

Not surprising and, IMO, a well-deserved downgrade. Several points:

1. President Obama was not governor of Illinois.

2. Illinois has a balanced budget amendment. Illinois' finances are evidence that when it comes to fiscally profligate states, such amendments are essentially meaningless gimmicks.

3. IMO, Illinois should have been downgraded further. The State has made little meaningful progress on its major fiscal challenges despite the end of the recession. Given its weak fiscal position, Illinois should adopt a robust austerity program aimed at eliminating its unfunded pension and health liabilities over the long-term. Both tax hikes and aggressive operating budget savings will likely be needed. In the near-term, Illinois should commit to achieving a balanced budget within a fixed period of time (more than a year but less than five) as a starting point, define a balanced budget as being balanced in total (inclusive of operating, capital and health/pension pre-funding), peg its commitment to the timeframe it sets forth (not arbitrary requirements that have been routinely ignored), and provide monthly progress reports to the State's major creditors and to the general public. Once the budget is balanced, the State should push aggressively ahead with reducing its unfunded health and pension obligations.
Click to expand...

Illinois amendment isn't the problem, bad assumptions are. You can "balance" a budget as long as you assume that tax increases will generate new revenue or the economy will be more robust than normal and in the end you will still run a deficit. So the problem is the way we budget. Rather than setting a dollar amount, Illinois should set a percentage of the revenue to go to each expenditure. That way you never deficit.
 
Well, at least they're safe in Chicago..........
 
ksu_aviator said:
Illinois amendment isn't the problem, bad assumptions are. You can "balance" a budget as long as you assume that tax increases will generate new revenue or the economy will be more robust than normal and in the end you will still run a deficit. So the problem is the way we budget. Rather than setting a dollar amount, Illinois should set a percentage of the revenue to go to each expenditure. That way you never deficit.
Click to expand...

The problem with the amendment is not that it precludes bad assumptions. Its problem is that it contains no enforcement mechanisms. Hence, even if it becomes highly likely that a deficit will occur, there is no mechanism to bring about the necessary adjustments to address that issue. As such, it lacks credibility.

A more credible approach would entail an open/transparent commitment to balance the budget as a whole within a fixed period of time, provide monthly progress reports to leading creditors and to the general public on the State's website, and the inclusion of an enforcement mechanism to assure that the outcome would be realized. Automatic sequesters, automatic triggers of spending reductions/tax changes, or special budget sessions to address issues should the budget outcomes appear to be going off target are some examples of enforcement machinery.
 
donsutherland1 said:
The problem with the amendment is not that it precludes bad assumptions. Its problem is that it contains no enforcement mechanisms. Hence, even if it becomes highly likely that a deficit will occur, there is no mechanism to bring about the necessary adjustments to address that issue. As such, it lacks credibility.

A more credible approach would entail an open/transparent commitment to balance the budget as a whole within a fixed period of time, provide monthly progress reports to leading creditors and to the general public on the State's website, and the inclusion of an enforcement mechanism to assure that the outcome would be realized. Automatic sequesters, automatic triggers of spending reductions/tax changes, or special budget sessions to address issues should the budget outcomes appear to be going off target are some examples of enforcement machinery.
Click to expand...

What would a monthly progress report do for you? The reality is, the people of Illinois would see they are behind the budget, opinion polls would show they aren't happy and business would continue on as usual. Maybe some of the representatives lose their jobs, but the new ones won't really change anything and the state will continue down the same path it is on now. While the voting public hates deficits, they hate losing freebies even more.
 
ksu_aviator said:
What would a monthly progress report do for you? The reality is, the people of Illinois would see they are behind the budget, opinion polls would show they aren't happy and business would continue on as usual. Maybe some of the representatives lose their jobs, but the new ones won't really change anything and the state will continue down the same path it is on now. While the voting public hates deficits, they hate losing freebies even more.
Click to expand...

Providing the reports would create a level of accountability that does not exist in Illinois' currently broken fiscal process. Major creditors and the State's residents would have near real-time information as to how the State was performing. Given its bad performance to date, a dose of transparency might be helpful.

On your other point, I suspect that public attitudes might begin to change once they have a continuing stream of information against which to evaluate their State's fiscal performance. More importantly, creditors could begin to restrict lending if the State remains on its fiscally unsustainable course.
 
donsutherland1 said:
Providing the reports would create a level of accountability that does not exist in Illinois' currently broken fiscal process. Major creditors and the State's residents would have near real-time information as to how the State was performing. Given its bad performance to date, a dose of transparency might be helpful.

On your other point, I suspect that public attitudes might begin to change once they have a continuing stream of information against which to evaluate their State's fiscal performance. More importantly, creditors could begin to restrict lending if the State remains on its fiscally unsustainable course.
Click to expand...

Ya...it is hard to get people who have very little that isn't given to them to give up the freebies and go back to work.
 
ksu_aviator said:
Ya...it is hard to get people who have very little that isn't given to them to give up the freebies and go back to work.
Click to expand...

Currently, full employment is not a realistic proposition.

The latest BLS data show that for every job opening, there are 3.3 unemployed persons. Not surprisingly, 39.1% of unemployed persons have been unemployed for 27 weeks or longer. Furthermore, there is a structural component to the unemployment. Since 2007, construction and manufacturing have seen their share of employment drop from 15.4% of U.S. jobs to 13.1%. In contrast, education services and health care have seen their share rise from 11.7% to 13.3% of jobs. One cannot seamlessly shift workers from the construction and manufacturing sector to education and health care. A cyclical rebound is not likely to restore either sector to its pre-recession employment levels anytime soon, if at all given factors ranging from the housing bubble that distorted demand for construction and competitiveness gaps that impact parts of the U.S. manufacturing sector. During the past year, for every job created in construction and manufacturing, just over 2 jobs were created in the education and health care sectors. Another area of growth is professional business services. Last year, 472,000 jobs were created in that sector. Barriers to a career shift from construction and manufacturing into professional business services are also formidable.
 
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