Tick-Tock 100 Billion on the Clock

Tick Tock 100 Billion on the Clock

Posted on April 5, 2013 at 8:55 am

By the time you finish reading this article, Illinois could pass 100 Billion dollars in unfunded pension debt. That's right folks...100 BILLION dollars of unfunded pension debt. Best case scenario is we don't hit that number for another..(are you ready?)...2-3 weeks. The fact is, even the most liberal realistic accounting has Illinois hitting that 100 Billion Dollars mark and there is nothing to stop it from happening. That comes out to nearly $8000.00 (eight thousand) per person in Illinois to pay off just the portion we are short.

So why is that number 100 BILLION so important? Well, that debt is growing each day at the tune of 17 MILLION dollars and the revenues from investments can't keep up with the debt growth. Simply put, Illinois taxpayers' money is tied up in a manner that loses money overall. And that is bad...really bad and here's why.

Ilinois's credit rating has been downgaded by Moody's 4 times in the past 42 months. This is important to know because Illinois is going to ask for another 800 MILLION  dollars from the bond market this April...as in now. When that 100 BILLION figure is hit, the credit rating will most likely be downgraded again. If..and this is a big "if"...the rating is downgraded again then those bonds will be off limits to most institutional customers. That will, in turn, bring down the ratings of virtually every entity that relies on bonds. Schools, Forets Preserves, Municiplaities that depend on an uninterrupted flow of funds from the state. Lenders will then push UP the costs of loans to any entity that needs to borrow to offset the loss of revenues from Springfield. That means even less capital to work with and more costs to shoulder...and that means we, the taxpayers, have to eat this avoidable mess. In other words, Dad spent our allowance and college funds on a new Mercedes and Enron stock. Now we have no prom, no car, and need to take massive loans for community college tuition.

100 BILLION DOLLARS folks, remember that number. We've been staring at that figure for over 4 years now, and just about every qualified finance model (those that factored in even mild dips in the economy) done in the last 10 years has indicated this calamity would happen. 10 years warning and yet we are still in this situation. This is what bad leadership brings...an insurmountable problem that doesn't get solved due to inaction, incompetence, and an atmosphere of denial prevalent in Springfield. All because we elected people that would take no action that might put at risk their votes and budgets.  

So again...why is that 100 Billion figure so important? I mean, if we did nothing at  90 Billion or even 50 Billion, or 500 million, why should 100 BILLION motivate Springfield to take any action? That amount of 100 Billion isn't what is significant in itself, I mean it could be 200 Billion or even 200 Million for that matter. What IS important is that the 100 Billion of pension debt is weighed against Illinois' annual budget and domestic product (how much we Illini produce) and that ratio is so bad that it makes us a standout among our peers...in category we do NOT want to be a standout in. It paints us in a very very VERY bad way.

Here's how bad it really is: That 100 Billion Pension debt is almost TWICE what Illinois' annual expenditures (to include capital spending) and nearly ONE FIFTH of our combined annual economic output. Simply put, we owe so much compared to our investment and revenue sources that we can't even get a consolodation loan to reduce our monthly payments...and the only car the family owns just blew an engine and we don't have any savings to pay for the repairs and can't get a loan to fix it because our collateral is worthless...or if we do get a loan the costs and payments will be so high that we should have been able to get a Mercedes...which we won't get because most of the payment s going to expensive interest and administraton costs and not for working capital... which means instead of a reliable Mercedes or Chevy we wind up driving a beat up old Ford Pinto on it's last legs....which is pretty much what we have now. Any doubts now about how bad it is in Illinois Finance?

So how do we get out of this mess? Your guess is as good as mine. One thing I do know is that the problem won't be fixed by a career politician. They had their chances for over a decade and they blew it. We had a decent chance of getting our finanes at least addressed last election with the McKenna/Murphy ticket, a succesful businessman and businessman/politician team for Governor/Lt Governor. But we blew that one in a spectacular display of bi-partisan lunacy. We had Brady versus Blogo...neither one of which was capable of understanding the magnitude of the problem.  And now we have Quinn, so far pretty much inneffective in putting a dent in the problem.

This next election doesn't indicate any improvement regarding the candidates with one exception, and he's a wild card player from the finance industry. That guy is Bruce Rauner, a genius at finance. But he'd need a STRONG Lt Governor that knows the ins and outs of Springfield and I honesty have no idea who that candidate would be. Maybe Rutherford, maybe Murphy, maybe even Judy Barr...but certainly not any of the previous Governor candidates I've seen. 

So, we're in a pickle folks, and nobody wants to take responsibility. But...we can't allow this situation to continue. "Surely we must all hang together or we shall hang seperately" said Ben Franklin. Well folks, I suggest we take his advice, let's use our votes and send a message to Springfield that we have had enough...We need to elect leaders, not just managers. We need to elect people that put the long term future first and are not just working at keeping their elected positions. We need a person that cannot be intimidated or bought, bribed, or cajoled, yet knows how to get a compromise in order to benefit the public.

Unfortunately, Teddy Roosevelt and John Wayne are both busy pushing up daisies so we better start looking for a new type of leadership... or we'll be seeing billboards that read "Will the last person leaving Illinois please turn out the lights.."