Illinois Is On 'Verge Of Financial Disaster,' State Treasurer Says

Illinois is "on the verge of a financial disaster" as payments on the state's debt have skyrocketed, Treasurer Dan Rutherford said on Monday.

Illinois faces an estimated $45 billion in principal and interest payments on its outstanding debt over the next 25 years, up nearly four-fold from the $12 billion owed in 2002, according to a position paper from the Republican treasurer, who took office in January.

Adding to the state's debt burden is $140 billion in unfunded pension and retiree health-care liabilities and $8 billion of currently unpaid bills, the paper said.

"Every household in Illinois is responsible for the repayment of $10,000 to reimburse our bondholders in the coming years," Rutherford said in a statement, adding that unpaid bills and pension and health-care liabilities would boost that total to $42,000 per household.

Illinois' widening structural deficit, huge unfunded pension liability, inability to pay the state's bills on time, cascading bond ratings and its propensity to borrow its way out of financial problems have made the state a major worry in the $2.9 trillion U.S. municipal bond market.

"We need to cut our spending and break our unsustainable borrowing cycle before we realize a further financial disaster," Rutherford said.

Even with a big income tax rate hike passed in January, Illinois is still spending about $5 billion more a year than it receives in revenue, according to the position paper, which also said the state's low bond ratings have resulted in higher borrowing costs compared with other states.

Governor Pat Quinn has been pushing the legislature for anywhere from $2 billion to $8.75 billion of bond authority to pay off bills and other obligations incurred this fiscal year.

His office said in a statement on Monday that this plan is not new borrowing, but a restructuring of debt the state owes to vendors and service providers who have been waiting months for payments.

"Governor Quinn is 100 percent committed to making good on all bills due and feels restructuring debt the state already owes at attractive rates is the least costly option for taxpayers in order to address this bill backlog," the statement said.

Copyright 2011 Thomson Reuters. Click for Restrictions.

Comments

[marshallwyattearp]

09:43 AM on 06/03/2011

As I read the comments below... I don't see the One Issue people making comments... Like the ones commenting on the financial crisis the hospitals are in, in the state of Illinois.

On this same website, they are blaming the republicans for the issues in Illinois. None seem to have the intelligence to do any research and find that Illinois has been run by the Democrats... The Dem's have a large enough lead in the State's House and Senate, that they have mad the policies for decades.

The largest Union in Illinois Is the Education Union... Guess what folks, they are a Government Entity.... and they are Killing the state Financially... All the Benefits are causing the State to drop School Activities....

The State has also Taxed and Regulated Manufacturing Businesses to the Brink of Exstinction.

Hello, this is what Obama and his cronies are doing to the US.

[WhereSheStops]

04:01 PM on 06/02/2011

President Obama learned his financial lessons from Illinois.

[RPIL]

05:34 PM on 06/03/2011

He bailed out the auto industry and saved jobs there. Do you dispute that?
He pushed the second TARP which kept the banks/wall st. solvent in hopes they could begin lending but they haven't. Do you dispute that? If not, what would you do to get banks lending to business again? Nationalize them?
While against it, he signed an extension off all tax cuts. Where are those benefits?
After all those questions, I have a statement.
It sure is easy to sit around and complain. I could do that cause it seems so easy. Maybe a recommendation show a little more courage. Do you want to reduce SS and Medicare to continue lower taxes and further still to reduce the deficit? What do you want to do? It is time for the ones simply sitting and complaining to show some backbone. What do you want to do?

[Michael Dayne]

11:46 AM on 06/02/2011

No worry, more casinos, more borrowing, and don't let those pesky public pension issues take up all your time guys.

[GreekOracle]

06:41 PM on 06/01/2011

Going deeper into debt to pay your debt obligations is financial suicide!

[alhorvath]

03:40 PM on 06/01/2011

What a surprise. When you constantly spend more than you take in, eventually you go bakrupt.

[Trustfunded1]

01:34 PM on 06/01/2011

They should increase taxes and welfare handouts...LOL

[Highly Opinionated]

12:21 PM on 06/01/2011

Amazing how the very district that was so superbly community organized and had such a magnificient state senator is in so much do-do

[BCinVA]

12:11 PM on 06/01/2011

Welcome to a post crash global economy. Everyone is competing with global cheap labor. Employment down, wages down, tax revenues down, spending up, cities, States and Fed is broke. The money will have to come from where the money is, and the money isn't where it was before.

[boston33]

11:17 AM on 06/01/2011

Yeah lets stop spending money on improving the quality of life and let the money keep funneling upward (http://www.cbpp.org/cms/index.cfm?fa=view

[FOXYROSE]

11:04 AM on 06/01/2011

You, sir, are not alone - the whole Country is collapsing, thanks to generations of corruption on the Hill.

[spoonbill1963]

11:03 AM on 06/01/2011

Too funny.
Socialist policies and non stop welfare spending just doesn't work.
Obama has to take some of the blame.

[Donald Holzum]

05:04 PM on 06/01/2011

Tell me again the name of that "socialist" advisor Obama hired from Goldman Sachs to run the economy! Seriously, if you haven't got a clue, well, just don't speak!

[YMBM]

06:07 AM on 06/01/2011

You have a serious problem! Yet, certain groups over the years have continuously not experienced the rapid economic growth in that state! Wow!

[dutchman]

03:45 AM on 06/01/2011

A big part of Illinois' problem (like most states) is reliance on capital gains taxes, which are notoriously volatile. In good times, they encourage states to spend or cut taxes, while in bad times they force the wholesale slashing of services we see happening now. Far better to scrap the capital gains tax altogether, and replace it with a flat wealth tax of say, 1.5% for any net assets above $500,000. This will accomplish three things: 1) It will smooth out the revenue states receive, so that this feast or famine problem goes away; 2) It's a much easier tax to calculate than capital gains, saving taxpayers money in terms of tax return preparation; and importantly, 3) it will remove many of the peverse incentives capital gains taxes introduce, like tax loss harvesting and loss carryforwards, which are incredibly poor uses of limited capital. It's more or less the system we have here in The Netherlands. And it's worth pointing out that our unemployment rate is just 5%

[spoonbill1963]

11:03 AM on 06/01/2011

Spoken like someone who hasn't a dime to his name.

[GustavoRejivik]

02:50 AM on 06/01/2011

Illinois increased Taxes .. again .. another reason to move to Texas ..

Texas is doing just fine by the way .. low taxes...

[kidcat24]

07:35 AM on 06/01/2011

lol you obviously haven't read how in debt Texas is.

[MrBwood]

09:50 AM on 06/01/2011

Exactly, I love these "move to Texas" types. They are cruizin for a bruizin. But, you asked this guy to read something, that aint happening

[spoonbill1963]

11:04 AM on 06/01/2011

No individual income taxes.
That's sweet.

[orcinous]

02:34 AM on 06/01/2011

Wow, maybe they need a balanced budget ammendment like California, we have problems but not like this.

[spoonbill1963]

11:04 AM on 06/01/2011

California will have problems every bit as big....and bigger. Just wait.