Moody's: Madigan's tax hike possibly not enough to avoid Illinois junk bond rating

Moody’s Investor Service warned on Wednesday that big income tax increase  engineered by House Speaker Mike Madigan might not be enough to prevent the rating service to send Illinois bond’s spiraling into junk status.

In a statement, Moody’s said:

The decision to place the state’s ratings under review for moodysdowngrade incorporates our expectation that the legislature will implement revenue increases, overriding the governor’s vetoes. The review will provide a limited amount of time for the Illinois General Assembly to finish voting on the measures, and for assessment of the plan’s credit implications. The review process will also address the likelihood of further deterioration in Illinois’ most pressing credit challenges: its severely underfunded pensions and a backlog of unpaid bills, which has doubled during the past year.

Moody’s referred to the incredibly stupid (my words) idea that the income-tax-fueled will provide the state with the ability to borrow even more money, sinking the state into an even deeper dark fiscal whole:

So far, the plan appears to lack concrete measures that will materially improve Illinois’ long-term capacity to address its unfunded pension liabilities. A June 30 order from a federal judge that the state accelerate payments owed to Medicaid managed care organizations and service providers cast doubt on the state’s immediate ability to keep up with its statutory pension contribution schedule while also meeting obligations for debt service, payroll and school funding. The state anticipates addressing its approximately $15 billion backlog of payments owed partly through a bond offering that probably will rank among the largest in the state’s history. This component of the state’s broader fiscal plan leaves Illinois not only dependent on market access to ease liquidity pressures, but also facing a significant increase in its tax-supported debt burden. Moreover, the effectiveness of the state’s strategy to contain and reduce its deferred bills, once the backlog-financing debt has been issued, remains to be seen. [My emphasis]

This should come as a surprise to no one except those blindly partisan commentators who refuse to acknowledge that it was Madigan’s refusal to negotiate that brought about the latest crisis. Or that it was Madigan’s long “leadership” that explains much of why the state over the years has descended into this swamp. Or that it was Madigan’s refusal to incorporate any structural reforms that would make Illinois make the slightest dent in the pension and other indebtedness.

If this keeps up, the only people left in Illinois to feed off each other will be the insiders, gonifs and cheats who created this catastrophe.

dennis@dennisbyrne.net

www.dennisbyrne.net

 

Comments

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  • But the Chicago Tribune is reporting that your leader, Bruce Rauner, "showed little public concern about the threats from ratings agencies, telling reporters Wednesday, 'Don't listen to Wall Street.'"

  • In reply to jnorto:

    This was only step one. Rauner is still waiting for his services tax to be enacted. Then he'll veto it. Then the veto will be overridden. The action on the 911 fee (which became law) shows how this works.

    The real monkey wrench is Moody's knew what happened to the Quinn lame duck income tax increase from 3% to 5%. That was also supposedly to bond out then then existing backlog (as indicated by that it sunset to 3.75%). However, the money was spent, mostly after pension reform was ruled unconstitutional.

  • With 15 billion in unpaid bills and a 251 billion pension shortfall, the income tax plus the service taxes will not be enough.

    Still, there are those who do not see that Illinois has a spending problem, and those few representatives who balked at rolling over for Madigan are labeled as crazy conservatives who don't like to keep kids educated and that taxes on businesses and individuals do not influence whether people leave the state.

    Junk politicians, junk bonds to follow, and a junk election where the majority of the junk will be put back in office; that's Illinois. Except the governor is likely to be some rich Democrat whose formula will be Madigan squared.

  • A "junk election where the majority of the junk will be put back in office."

    Democracy is so disgusting! Now, if you were named the beneficent dictator, . . . .

  • In reply to jnorto:

    The Illinois electorate keeps putting the same "junk" back into office. I rest my case. Your comment is juvenile at best.

    You know what is really cowardly? You and others who have no identity. When you get the balls to put your real identity out in public get back to me.

  • In reply to Chef Boy RD:

    And your name is . . . . ?

  • In reply to jnorto:

    We know what his name is...Samuel J. Hypocrite.
    We also know the answer to your other question: Trump.

    Now that I've succeeded in dismissing Mssr. Hypocrite....

  • fb_avatar

    Voters in ILLAnnoy don't choose "elected" officials, they chose us...and did any read this column? By Dennis Byrne, June 27, 2017 at 4:59 pm

    We keep hearing about how government employee pensions are killing the state of Illinois, but we're always in need of another reminder because House Speaker Michael Madigan--the handmaiden for Illinois public employee unions--and his Democratic toadies refuse to let the reality sink in.

    So, here's another one that in simple and stark terms shows how Illinois' pension funds are so deep in the hole that it will drag down the rest of the state--the aid for the poor and unhealthy, the infrastructure, social services and on and on. Compare Illinois, if you have the stomach for it, with the rest of the states.

    And this accounting by the Truth in Accounting seems to me to be conservative. Be sure to follow the link to the group's scary analysis of how Illinois' finances continue to crumble.

  • It may be very onerous to mention once exactly ought to be pressured to cash your test.
    unitedcheckcashing.com

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