Thursday, February 25, 2010

Crain's Chicago Business: "Illinois is headed toward a governmental collapse" -- but I rate Hopeychangeyland's finances 'a good, solid B+'

Crain's Chicago Business describes the scene in the state that brought us hope and change.

...Despite a budget shortfall estimated to be as high as $5.7 billion, state officials haven't shown the political will to either raise taxes or cut spending sufficiently to close the gap.

As a result, fiscal paralysis is spreading through state government. Unpaid bills to suppliers are piling up. State employees, even legislators, are forced to pay their medical bills upfront because some doctors are tired of waiting to be paid by the state. The University of Illinois, owed $400 million, recently instituted furloughs, and there are fears it may not make payroll in March if the shortfall continues.

Without quick corrective action or a sharp economic upturn, Illinois is headed toward a governmental collapse. At some point, unpaid vendors will stop bidding on state contracts, investors will refuse to buy Illinois bonds and state employees will get paid in scrip, as California did last year.

"The crisis will come when you see state institutions shutting down because they can't pay their employees," says David Merriman, head of the economics department at the University of Illinois at Chicago.

A record $5.1 billion in state bills was past due at yearend, almost doubling to 92 days from 48 days a year earlier the average amount of time it takes the state to pay vendors such as doctors, hospitals, non-profit service providers and other contractors.

"I don't see any light at the end of the tunnel," says Dan Strick, CEO of SouthStar Services, a Chicago Heights non-profit that helps people with developmental disabilities. "It seems to be getting worse and worse, and the delays longer and longer." SouthStar hasn't been paid since July, forcing him to borrow to keep afloat.

State tax receipts from July through December last year were running more than $1 billion behind 2008, including a $460-million plunge in sales taxes and a $349-million drop in personal income taxes.

It's another Obama miracle!

Despite receiving 22% more federal money -- that's your taxpayer "stimulus" cash in action -- total state receipts were down 2.1% from the prior year. But actual spending for the state was up 2.2%!

The resulting $5.1-billion backlog of unpaid bills doesn't include $1.4 billion in Medicaid and group health bills that haven't been processed, plus $2.25 billion in short-term borrowing that must be repaid soon.

Illinois is living hand to mouth, paying bills as revenues come in each day, building up cash when special payments are coming due. Cash on hand varies from day to day, sometimes dipping below $1 million, says a spokeswoman for Illinois Comptroller Dan Hynes.

The state's credit rating has been steadily worsening since 1997, with three downgrades in the past 13 months. "The absence of recurring solutions in the next year to deal with the current budget challenges and begin to stabilize liquidity will likely result in a further downgrade of Illinois," Standard & Poor's said last month.

...As credit ratings dropped, the state has to pay more to borrow. The state also has to pay interest on bills unpaid after 90 days, adding further to its costs...

And did I forget to mention that Illinois' public-sector union pension costs are exploding?

The state's unfunded liabilities and pension debt will hit $95 billion by mid-year because the state continually failed to adhere to its own payment schedule.

The sharp rise in pension payments is the biggest factor pushing Illinois toward what a legislative task force last November called "a 'tipping point' beyond which it will be impossible to reverse the fiscal slide into bankruptcy." The little-noticed report on the state's pension problems warned that "the radical cost-cutting and huge tax increases necessary to pay all the deferred costs from the past would become so large that many businesses and individuals would be driven out of Illinois, thereby magnifying the vicious cycle of contracting state services, increasing taxes, and loss of the state's tax base."

Gee, isn't a giant, unaccountable, centralized, authoritarian government grand?

But I'm certain that the same group of Democrat hacks who destroyed Illinois will be able to orchestrate a command-and-control health care system for the whole country. At least as well as they managed Grove Parc.


Anonymous said...

Illannoy, isn't that where Little Barry served 2 terms as a Senator?

Anonymous said...

How does one acquire a one-quarter million dollar pension (or higher)? No one I know who retired from an honest government job receives a pension in excess of their final salary.