Illinois Treasurer Susana Mendoza recently wrote to the credit rating agencies asking for an upgrade, as reported this week. Primarily, she cited progress in reducing the state’s bill backlog, which is now down to about $4 billion, a number that probably can be considered pretty close to normal.
It doesn’t hurt to ask. Maybe the credit raters will agree; they have their own standards and I can’t speculate on their response.
But for ordinary Illinoisans, here’s the real question: Has the state really done anything to fix its structural deficit problems?
Well, the state did pass a big tax increase in July 2017, raising personal and corporate income tax rates by 32%. But the state has also sold bonds to pay down the bill backlog, which really just swapped one debt for another. And it authorized the state treasurer to use money he holds to pay down bills, which doesn’t have much effect on the state’s net position. You have to remember that the bill backlog is just one account among hundreds that the state has. Some can be improved at the expense of others. The bill backlog is not a good index of anything.
Most recently, the state, like most of the nation, has been deluged with cash from the federal government under the label of pandemic relief. It’s not just cash coming directly to the state. Money flowing to people and businesses has spiked tax collections during the pandemic far beyond expectations. Revised estimates were just released by two different state offices. That federal largesse won’t last long.
The full answer will probably have to wait until we see the 2022 budget finalized later this month. They will also have to deal with the awful mess created by the federal government on the restrictions Congress imposed over how federal money may be used. We will try to sort that out as answers come in.
For now, however, we sure haven’t seen anything from Springfield that has addressed the state’s fundamental fiscal crisis as it existed before the pandemic.
-Mark Glennon
Expect no retraction or apology. This what they do.
The state’s existing buyout program for its own pensions is the precedent for Chicago, which should be a warning: Look out for similar exaggerated claims and shoddy analysis.
The state has put more money into the pension systems than it ever has, yet the liability keeps increasing. If you were a credit agency and your client was putting more money into debt payments but the debt grew larger, would you improve their credit score?