Tag: Debt

Moody’s Downgrades Chicago’s Motor Fuel Debt

Moody’s Investors Service has downgraded to A3 from Aa3 the rating on the City of Chicago’s (IL) $181 million of outstanding rated motor fuel tax debt. The outlook has been revised to negative.

via Moody’s.

Surprises no one.  Barely qualifies as news actually.

The City’s broke.  Unemployment (real unemployment, the U6 number) is out of control and people simply don’t have the means to support driving when they don’t have to.  Tie that in with Springfield’s ability and desire to continue to kick-the-can down the road and Chicago may just get screwed on its portion of the fuel tax.

It’s generally dumb anyway that Chicago gets a kick-back on the state’s fuel tax anyway as the city has it’s own fuel tax.  It’s just robbing Peter to pay Paul.  Round and round the money goes.

 

 

 

Quinn Balks at Illinois’ Fresh Interest Rate

Gov. Pat Quinn’s administration delayed Wednesday’s planned sale of $500 million in construction bonds, saying a recent credit downgrade because of inaction on government worker pension reform left the market “unsettled.”

The decision was made after officials with the governor’s budget office spoke with potential bidders who indicated they would seek interest rates higher than what the state wanted to pay.”

In a bond market when there is uncertainly, you pay an extra premium, which we decided was imprudent to pay,” said John Sinsheimer, director of capital markets for the state. “So we pulled them, and will bring the back at a future date when everything has settled down.”

via Chicago Tribune.

Pathetic.

The first thing to do when you’re in a hole is stop digging.  Quinn has the right idea… now may not be the best time to issue more bonds.  But because the finances are so bad pretty soon he will not have a choice.  More debt — at higher interest rates — is our future.

More troubling however is note how the Gov’s office is not waiting until they actually fix anything.  He’s not going to defuse the pension time-bomb.  He and The Machine are not going to balance the budget or develop a long term spending plan to correct the state’s deficit.  The plan is to merely wait until “everything has settled down.”

We deserve so much better than that.

So alas… people don’t like to hear bad news and will continue to vote for Santa Claus.  We need not be real.  Just keep voting for the guy who tells you it’s somebody else’s problem.

We’re so screwed.

“Obama, Romney – Same Police State”

Johnson’s first point was that the US political system is in desperate need of transparency.  Whether Obama or Romney is elected next month, he told the audience, we will still have “a heightened police state in the US.”  And Obama and Romney are guaranteed to continue American military interventions abroad, he added.

via RT.

Indeed.  Obama and Romney are more alike than different when you consider the other ideas being bantered about.  Such as:

However, [Johnson] saw taxing marijuana as one alternative to outlawing it. “I have drank alcohol,” he said, “and I have smoked marijuana. … I can tell you that in no category is marijuana more dangerous than alcohol – yet we are arresting 1.8 million people a year on drug-related crimes.” He claimed that fully half of the US court and prison budget every year goes to drug-related offenses, and asked, rhetorically, “to what end?”

I would love a presidential candidate to come forward and tell the American people directly that the war on drugs has been an epic failure.

Johnson repeated throughout the debate that thanks to American wars abroad, the US has unnecessarily made millions of enemies around the world.  The use of the military, he said, is to defend the country, not invade other nations.

I would love a presidential candidate to come forward and tell the American people directly that our foreign policy of intervening in everyone else’s affairs has been an epic failure.

“The biggest threat to our national security is that we’re bankrupt,” he told the audience….

I would love a presidential candidate to come forward and tell the American people directly that our debt is a national security issue.

…

Kudos to Gary Johnson.  Such a shame that the GOP and Dem and MSM just ignore you.

Chicago’s Pension Time-Bomb

While Emanuel can coast for two more years, the city in 2015 is required by law to set aside an additional $700 million a year for two of its four pension funds, all of which are woefully underfunded: That year’s budget will include a total of $1.2 billion for the retirement accounts of teachers, police, fire and municipal workers. Such a steep ramp-up threatens to gobble city resources for everything from parks to schools to transportation.

via Chicago Tribune.

The total budget for this year is $8.35 billion.  In two years the city has to find nearly another 10% more money… out of thin air.

This is naturally in addition to the $86 billion (laughable that anyone still believes this number; it’s easily twice that) hole is the state pension funds.

Get ready… something’s going to go BOOM pretty soon.

IL Pension Hole Analysis

I wrote this a few weeks ago as a comment on a retired teacher’s blog.  The post there was about how we need to “tax the rich” in order to fund the teachers’ pensions.  I was asked to comment on the post by a retired teacher I know.  Analysis follows:

There is no one sided solution to this problem. Perhaps if Springfield moved on this a decade ago it could be solved with “funding” but at this time both sides are going to have to give.

According to Crain’s Illinois’ unfunded pension liabilities are $86 billion. See: http://jamesbosco.com/2012/06/19/illinois-pensions-are-the-worst/

According to the Il Dept. of Revenue there were 36,682 returns filed in the state with over $500,000 in AGI. These returns paid $1,633,991,633. See: http://www.revenue.state.il.us/AboutIdor/TaxStats/2010/IIT-NetIncome-2010-Preliminary.pdf

If we (a/k/a Illinois) doubled the tax on these folks with AGI over $500k we could bring in an extra $1.63B assuming no one flees the state (which would happen.) So doubling the tax on “the rich” would cover 1.9% of the current pension liabilities.

If we quadrupled the tax that would cover less than 7.6% of the current pension liabilities. So it would take over 13 years of quadruple taxation on those making over $500k per year just to get current pension liabilities square. This would not cover the additional debt.

Union members can sit around pointing fingers but it’s not going to solve the problem. Illinois is broke. Everyone’s going to have to give more than they want. Of course, the “rich” can always move to Indiana or Wisconsin. Then they contribute nothing; that doesn’t help retired teachers one bit. So I recommend that you be careful what you wish for.

– – –

We cannot solve our problem by eating the rich.  We must grow the size of the pie. … Well, growth and inflation.

Eat the Rich vs. Obama

I was reading this story:

President Barack Obama will officially launch the battle over the impending fiscal cliff this morning, announcing a plan to extend the Bush-era tax cuts for people earning under $250,000, while letting the rest of the tax cuts expire.

via Business Insider.

This got me thinking about how much money will really flow into the Treasury from “the rich”?  I remember this from awhile back.

If you have not seen… it’s just plain excellent.
[youtube http://www.youtube.com/watch?v=661pi6K-8WQ?rel=0]

Bankrupt Stockton Chicago

Yesterday’s news:

Officials in Stockton said Tuesday that mediation with creditors has failed, meaning the Central California city is set to become the largest American city ever to declare bankruptcy.  …

The river port city of 290,000 in Central California has seen its property taxes and other revenues decline, while expensive investments and generous retiree benefits drained city coffers.

via NY Daily News.

Tell me something I don’t know, right?

Stockton, with 300,000 residents and $700 million in debt, would be one of the largest cities ever to file for Chapter 9 protection, according to municipal finance experts and bankruptcy officials.

via WSJ.com.

Humm…. ok.  Let’s compare that to Chicago.

Calling local government debt “staggering,” Cook County Treasurer Maria Pappas announced Tuesday that the $108 billion debt tab across various governing bodies in the county translates to $63,525 per Chicago household and nearly $33,000 per suburban household.

via Chicago Sun-Times. (Sept 29, 2011 — we now know the number to be higher.)

Math (not new math, the old fashioned kinda math.)

Stockton:
$700M / 290,000 residents = $2,413.80 of debt for every man woman and child in Stockton.

Chicago:
$63,525 * 1,033,022 households = $65,622,722,550 in total debt;
$65,622,722,550 / 2,695,598 people in the city = $24,344.40 of debt for every man woman and child in Chicago.

In order for the situation to be comparable, the dazzling urbanites of Chicago would have to earn 10 x as much as the poor downtrodden folks of Stockton.

Back to the Census:

Chicago Per Capita Money Income in Past 12 Months — $27,148

Stockton Per Capita Money Income in Past 12 Months — $20,176

So the average joker in Stockton has to work for about a month and a half (2413 / 20176 *365 = 44 days) to pay off their portion of the debt.

The average joker in Chicago has to work for nearly a year (24344 / 27148 * 365 = 327 days) to pay off their portion of the debt.

And so I ask you which one of these municipalities should really be filing for bankruptcy?  Which is in worse financial shape?  Who’s employee’s should be more worried about their pensions?  Who’s politicians are doing the right thing by dealing with the issue square-on and not trying to pawn it off on future generations?

I’m just asking.

Hat Tip to Anthony Curran for the concept of this post.

Chicago Aldermen: White Collar Criminals

An analysis of pension fund documents for 21 aldermen who retired under the plan shows they are in line to receive nearly $58 million during their expected lifetimes, though contributions and assumed investment returns are predicted to cover just $19 million, or a third of that sum.

The pension deal was inked more than two decades ago, but the costs began to kick in recently. Most of the 21 aldermen in the Tribune/WGN-TV analysis have retired within the past five years, and there are 53 more in the pipeline.

Former Ald. Thomas Allen is a prime example. After retiring from the City Council in 2010 at age 58, Allen went on to become a Circuit Court judge while also collecting roughly $90,000 a year from his city pension. During his lifetime, he stands to receive more than $4.2 million in benefits, though contributions and assumed investment returns are expected to cover only $1 million.

via Chicago Tribune.

We’re doomed.  Chicago will not be able to sustain itself under this kind of dead weight.  The taxpayers are going to be asked to provide more and more payments for services they will not receive.

Glad the Tribune is on the story now… but where has it been for the last 20 years?  Where’s the Sun-Times (the “Bright One”) on this?

We’re going bankrupt and no one cares.

IL Legislators Should Give-up Pensions

Illinois lawmakers ought to give up their state pensions.

Legislators are part-time employees, but they make nearly $70,000 a year and in some cases can qualify for a pension after as little as four years in office at age 62. If they were elected before 2011, they can retire at 55 and collect a pension after eight years of service.

Those pensions (like all pensions in Illinois) are not subject to the state income tax, and lawmakers also get health insurance benefits after they retire.

With the state facing roughly $80 billion in unpaid pension liabilities and on the verge of financial collapse, the elected officials who created this crisis ought to be ashamed to accept such largesse from taxpayers.

via Southtown Star.

Agreed.

I can’t remember where exactly but I once wrote about this at length.  Elected folks should earn a salary based on their more recent private sector salary.  And when they’re done with their “service” they should not receive a nickel from the taxpayer.

This change alone would solve many many of our problems.

lllinois Moves Toward Insolvency

We’re now making national news:

After trying to tax Illinois to governmental solvency and economic dynamism, Pat Quinn, a Democrat who has been governor since 2009, now says “our rendezvous with reality has arrived.”  …

Illinois was more heavily taxed than the five contiguous states (Indiana, Kentucky, Missouri, Iowa, Wisconsin) even before January 2011, when Quinn got a lame duck Legislature (its successor has fewer Democrats) to raise corporate taxes 30 percent (from 7.3 percent to 9.5 percent), giving Illinois one of the highest state corporate taxes, and the fourth highest combination of national and local corporate taxation in the industrialized world. Since 2009, Quinn has spent more than $500 million in corporate welfare to bribe companies not to flee the tax environment he has created.

Quinn raised personal income taxes 67 percent (from 3 percent to 5 percent), adding about $1,040 to the tax burden of a family of four earning $60,000. Illinois’ unemployment rate increased faster than any other state’s in 2011. Its pension system is the nation’s most underfunded, and the state has floated bond issues to finance pension contributions. Quinn’s recent flirtation with realism — a plan to raise the retirement age to 67 and cap pension cost-of-living adjustments — is less significant than the continuing unrealistic expectation that some Illinois’ pension investments will grow 8.5 percent annually. Although the state Constitution mandates balancing the budget, this is almost meaningless while the state sells bonds to pay for operating expenses (in just 10 years the state’s bonded debt has increased from $9.4 billion to $30 billion), underfunds pensions and other liabilities, and makes vendors wait (they are owed $5.6 billion).

…

Peterson, a professor of government at Harvard, and Nadler, a doctoral candidate also at Harvard, say collective bargaining rights for government employees pose “a dramatically new challenge to the viability” of American federalism. They cite studies demonstrating that investors’ perceptions of risk of default are correlated with the rate of unionization among government employees. Higher percentages of government employees who are unionized, and larger Democratic shares of state legislative seats, correlate with increases in state borrowing costs.At least 12 percent of Americans change their residences each year, often moving to more hospitable economic environments. In a system of competitive federalism, Peterson and Nadler write, “If states and localities attempt in a serious way to tax the rich and give to the poor, the rich will depart while the poor will be attracted.” And government revenues and expenditures vary inversely.

via Boston Herald.

Illinois may fail before California.  Businesses are fleeing.  Residents are fleeing.  Illinois is shrinking, dying.

For all of the Democrats efforts to “help” the poor, how will the poor be helped when Illinois becomes nothing more than one big Detroit?  The rich will all leave — they have the means to do so.  Those left I guess will feed on each other.

I need to make sure history get written correctly.  The suffering of the poor that is coming is blood on the hands of Richie Daley, Michael Madigan, Lisa Madigan, Rod Blagojevich, George Ryan, Pat Quinn, Rahm Emanual, Jesse White, Danny Davis, Jesse Jackson, Todd Stroger, John Daley, and the rest of the Illinois combine… the Machine.