Reverend Jeremiah Wright of Chicago, among other things, liked to talk about the "chickens coming home to roost."
Could he have been forewarning Illinois citizens of the fact that its creditworthiness was rapidly becoming a thing of the past? Undoubtedly not but sombody should have been. An already seriously bad situation is getting worse by the day.
And since the Democratically dominated state won't come to grips with its public sector pension problems and its other financial recklessness, relative to other states the interest rates on its borrowings will be going up considerably, putting even more pressure on its deficits each year. It's a vicious circle.
And what's going on in Illinois may be predictive of our nation's future creditworthiness as well, assuming we don't get our combined political and We the People act together and begin to make common sense decisions about spending, taxing, economic growth and the irresponsible behaviors of our big and ever growing government knows best gang of aristocrats.
Illinois Yanks Bond Amid Pension Woes reports the latest on the continuing political debacle in the "progressively" financed Land of Lincoln:
"Illinois took the rare step Wednesday of postponing a bond auction just hours
before it was expected to launch, as concerns grew among investors over the
state's deep pension hole.
While Illinois still has ready access to capital markets, state officials
feared a jump in interest costs to attract buyers if they went forward with
plans to sell $500 million in bonds for school and transportation projects. Bond
investors have become increasingly leery of the state because of a deadlock in
the Illinois Legislature over how to fill a $96.8 billion pension shortfall,
considered by researchers as the worst among U.S. states.
"It's the first real market indication that, because of our fiscal condition,
we couldn't sell bonds," said Brian Battle, director of trading at Performance
Trust Capital Partners in Chicago, referring to his home state. His firm had no
role in the Illinois bond sale.
The potential jump in borrowing costs is the latest sign of growing fiscal
challenges in Illinois. The state already is paying the highest interest
rates—at about 3.2% on its 10-year bonds, according to Thomson Reuters Municipal
Market Data—among U.S. states, and the Illinois government is behind on its
bills to hospitals, doctors and pharmacies by an estimated $8.4 billion,
according to the state comptroller's office.
Standard & Poor's Ratings Services on Friday downgraded the state's debt,
aligning Illinois and California as the lowest-rated states. But while
California's rate outlook is positive, the credit-rating firm warned of further
downgrades of Illinois if the pension issue isn't addressed....
The decision by Gov. Pat Quinn, a Democrat, to delay Wednesday's bond sale
sparked renewed calls for immediate action among lawmakers who have been
debating potential fixes for more than two years. "The governor's delayed bond
sale should direct our attention to the indisputable truth about pensions," said
Illinois Senate President John Cullerton, a Democrat.
Still, no timeline exists for when pension legislation will be voted on, with
the next likely deadline coming at the end of May when the legislature is
scheduled to adjourn. Any plans to address the shortfall are expected to require
cutting benefits for state workers and retirees, raising new revenue or a
combination of the two. A plan that would have put on hold a cost-of-living
increase for retirees and increase pension contributions by current employees
didn't even get voted on earlier this month in the so-called lame-duck session,
which took place before new legislators were sworn in.
The pension issue is further complicated by a state constitutional protection
of promised pension benefits for current and former government workers, with
labor unions planning a court challenge if lawmakers approve cuts. In its
downgrade of Illinois, Standard & Poor's cited the likelihood of years of
litigation and its potential drag on state finances.
State budget officials said they are still planning to go through with the
bond sale, but haven't set a new date. States tend to postpone bond offerings
only when circumstances change, roiling interest rates. For now, the projects
the bonds were being sold to fund aren't expected to be delayed."
Ignoring problems won't make them go away.
And when unions insist on not finding solutions, the problems get worse.
And when the problems get worse, new loans are harder to get and the interest rates on those loans will be high.
And that will make the financial problems more acute.
The state constitutional protection, behind which the unions are trying to hide, won't provide money to pay the bills.
Only taxpayers can do that. Soon it will get down to tough decisions about how much of the limited taxpayers funds to spend on such things as public safety and security, infrastructure needs, and public services relative to the number of and salaries paid to current public sector employees compared to the cost of benefits for retired public sector employees who are no longer working.
The problem in Ilinois is analogous to trying to put ten pounds of s_ _t in a five pound bag. It can't be done.
In simple language, the same dollar can't be spent twice, and when borrowing those dollars becomes more expensive than it already is, the chickens will definitely be hurrying home to hear the fat lady sing.
That's my take.