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Governer of Illinois Bruce Rauner delivering his 2017 Budget Address | Youtube, Reboot Illinois

The Facts

  • Legislators in Illinois voted to override Republican Governor Bruce Rauner’s veto and pass a budget for the first time in two years on Thursday.
    • The Illinois House of Representatives overrode the governor’s veto by a vote of 71-42 on Thursday, which included 15 Republicans.
    • The Senate overrode the veto on Tuesday with the minimum 36 votes required in favor, including one Republican, according to the Chicago Tribune.
  • The governor vetoed the spending plan on Tuesday, with the following included in his statement regarding the decision.
    • The budget will cut $3 billion in total state spending from the previous year, according to state Sen. Toi Hutchinson (D).
    • Despite the decreases in spending, the budget remains unbalanced, according to Rauner.
    • Rauner said in his veto statement:

“Even with the [Speaker Michael] Madigan permanent 32% income tax increase, this budget remains $2 billion out of balance for fiscal year 2018.”

The Context

  • According to ABC News, 10 others states did not have budgets approved as of 1 July.
    • Those states include Connecticut, Delaware, Maine, Massachusetts, New Jersey (which has since passed its budget), Oregon, Rhode Island, and Wisconsin.
      • Pennsylvania and Michigan have budgets awaiting gubernatorial approval.
    • Generally, if a budget is not approved, some government services deemed to be non-essential might temporarily shut down (like in New Jersey, as its state beaches were closed over the weekend after a failure to pass the budget before the 4th of July holiday), while essential services generally continue under previous years’ spending levels in the short term.
  • Illinois has not been able to pass a budget since 2015 and has accumulated nearly $15 billion in unpaid financial obligations to date, according to NPR.
  • Moody’s Investors Service, which rates the creditworthiness of commercial and government entities, announced in March that political gridlock threatened to lower Illinois’ rating, which is currently the lowest of any US state.
    • A low credit rating means it is harder to attract investors, or those who would hold the state’s debt obligations. With a low rating, the state has to pay more interest to bond holders for taking on added risks that the state may default, or fail to make, debt payments.
    • The announcement said:

“Illinois’ rating is seven notches lower than the median Aa1 state rating. Illinois’ credit weakness incorporates very large unfunded pension liabilities, the two-year political standoff, and its long-running reliance on payment deferral to manage operating budget imbalances.”

    • Pulling from a new Moody’s Investors Service report, titled “Illinois (State of): Record Bill Backlog Signals Critical Juncture for State’s Leaders,” the announcement said:

“The State of Illinois’ (Baa2 negative) credit rating is vulnerable to further downgrades as ‘grand bargain’ talks to break an almost two-year budget impasses have broken down, and intensifying liquidity pressures have tripled the state’s chronic backlog of unpaid bills to a record $13 billion.”

    • Ted Hampton, Moody’s senior credit officer, said:

“Illinois is at a critical juncture and its leaders must choose between further credit deterioration and drift without compromise, or the potential for stabilization. With a budget consensus, Illinois could quickly secure its financial position.”

  • Moody’s announcement in March warned that failure to reach a budget agreement before legislators adjourned on 31 May could lead to “creditor-adverse actions,” such as “borrowing from debt service funds, depleting available non-operating cash, or prioritizing core operating needs over debt service.”
    • Even though an agreement has been reached, Illinois’ credit rating may still be in jeopardy according to Hampton, as quoted by Bloomberg in an article published on 1 June:

“Legislative gridlock has sidetracked efforts not only to address pension needs but also to achieve fiscal balance. During the past year of fruitless negotiations and partisan wrangling, fundamental credit challenges have intensified enough to warrant a downgrade, regardless of whether a fiscal compromise is reached.”

  • Several Illinois institutions of higher education have had their creditworthiness downgraded over the month of June by Moody’s.
  • On Friday, Moody’s announced it has placed the credit rating for parts of the Chicago Park District under review.
    • The rating action stated:

“Moody’s Investors Service has placed the Chicago Park District, IL’s Ba1 general obligation unlimited tax and general obligation limited tax (together, GO) ratings under review for possible downgrade. The action applies to $430 million of outstanding GO bonds.

This action reflects the close political and governance relationship the park district shares with the City of Chicago. Moody’s placed the city’s Ba1 GO rating under review for possible downgrade earlier today due to continued uncertainty surrounding the financial situation at the Chicago Board of Education (B3 rating under review) and the relationship between the city and the school district.

Given the close ties between the city and park district, increased credit pressures on the city could weaken the park district’s credit quality. Although it is a legally distinct entity, the park district functions as a city department in many respects. Chicago’s mayor appoints the Board of Commissioners, subject to City Council approval. City officials hold sway over various budget, debt, policy and taxing decisions of the district. The pronounced revenue needs of the city and CPS could limit future levy increases by the park district in order to lessen the overall burden on the Chicago taxpayer.”

  • Standard & Poor (S&P) financial analyst Gabriel Petek was quoted by Bloomberg, saying:

“The rating actions largely reflect the severe deterioration of Illinois’ fiscal condition, a byproduct of its stalemated budget negotiations. The unrelenting political brinkmanship now poses a threat to the timely payment of the state’s core priority payments.”

Supporters

  • House Speaker Madigan (D) wrote in a statement provided to CBS’s KMOV regarding the veto override:

“While none could say this was in an easy decision, it was the right decision; it’s clear that a budget package that cuts billions of dollars in state spending and also provides new revenue is the only path forward.”

  • State Sen. Kwame Raoul (D) tweeted Tuesday after the Senate overrode the veto:

  • Raoul joined Sen. Hutchinson to discuss the passed budget on Chicago Tonight on Thursday.
    • In response to a question on how he would justify tax increases on his constituents, Raoul said:

“It’s high time for us to bring stability that the business community was calling for as well as the low income community…

We’ve operated without a budget and we’ve built a $15 billion debt during [Rauner’s] tenure that has hurt people.”

    • Hutchinson voted for the budget and the veto override. She said:

“They said they wanted less taxes and less spending. We were spending $39 billion without a budget. We’re spending $36 billion with a budget…

We have to decide where we are at this moment in time, and if the tradeoff is whether or not we keep fighting on ideological divides for things that we’re gonna continue to fight on, or we’re gonna let the state crash, that was the choice that was at stake on the day that we passed that bill.”

Critics

  • Gov. Rauner released the following statement on his Facebook page on Thursday:

  • State Sen. Tom Rooney (R) did not vote in favor of the budget or the veto. He released the following statement Tuesday:

“Countless hours of hard work and negotiations fell by the wayside today with lawmakers choosing false promises over real progress. A permanent tax increase without critical structural reforms is woefully short-sighted. Illinoisans have shouldered the majorities’ tax-and-spend policies for too long and the longer we allow for more of the same, the heavier that burden becomes.”

  • Ronney said on Chicago Tonight that he felt progress was being made in the spring toward bipartisan compromise in the areas of pensions reform, workers’ compensation, and school funding before pressure became too great and the Senate chose to “ram through” an inadequate version of a spending plan.
  • State Sen. Dan McConchie (R) joined his colleagues on Chicago Tonight, where he said there was “plenty of blame to go around” as far as both parties were concerned, and that the budget impasse did not rest solely on the governor’s shoulders. He said:

“The last two years were unnecessary. We have been told for the last two plus years that the governor’s signature on a bill, on a budget, was necessary in order to get our state on the right path. And then in the end the legislature actually did it on their own without the governor’s support. And so this whole mess that we’ve been in, the legislature has a great deal of blame in this as well…

The biggest issue that I have with this budget is that we bypassed any substantial reforms that are absolutely necessary to get our state on the right track. Moody’s statement which has indicated that this does nothing to address our long-term pension liabilities, does almost nothing to get under control our unpaid bills that are stacking up on the comptroller’s desk, is a sign that this solution is not a solution that’s gonna work.”

Stephanie Haney contributed to this report.

The Whim News Team
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The Whim News Desk

We'd rather be second and accurate than be first and wrong. The Whim News Desk is a dedicated team of researchers and investigators committed to presenting the news without bias. Follow us @TheWhimOnline for daily news coverage without the spin!

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