Obviously Illinois is within days of either making a budget or going down to junk status, leading to hung construction plans, companies more urged to leave and god knows what else. Illinois can’t declare bankruptcy, so now what? How far as we to a default?
Could you repeat the question? Because the only one I could make out was answered in your first sentence.
Yeah, it appeared to be slightly incoherent, let me try again.
Illinois has a budget crisis, it hasn’t had once since Pat Quinn left office, and now the state is going into junk status. No other state has this issue besides us, and it looks grim that we’ll solve this at all.
So what’s likely for Illinois now that it’ll enter junk bond status (including what I just answered, what else)? And what’s next for the future of this state if they don’t pass a budget?
Ahhh, yes, that’s much clearer. Unfortunately, I don’t have an answer to your very good questions. I’d recommend getting out.
I’d love to, but it’s too costly to move for me and my family, and you can’t claim refugee status from a US state so…yeah.
(Personally, I’d be down to move to Kenosha, Wisconsin, due to its connection to Metra).
Illinois, Puerto Rico, Venezuela are all running out of others people’s money. They are going down, down, down. Fun to watch in a way, but I feel sorry for the people in these failed states.
I have been reading of the Kansas experiment in the news, but unaware of Oklahoma issues. There are some low tax states that are doing just fine.
However back to Illinois, Puerto Rico and Venezuela. They seem to be in a league of their own for fiscal irresponsibility.
The interesting thing, to me, to watch is how the ones that got them into this mess cling to power and absolutely refuse to take steps to resolve. Venezuela is the most interesting. The leaders there would rather see millions starve than give up power. Seems that the Illinois Democrats are of the same mindset.
The Governor of Illinois is Republican Bruce Rauner. What have the Illinois Republicans done to solve the budget issue? This is not a one party problem, and Rauner ran on fixing this very issue and he’s done absolutely nothing so far to that end. It’s amazing how blind partisanship can make people to reality.
Rauner is running lots of campaign ads on TV, even if there’s no election. So we’ve got that going for us.
Kansas and Oklahoma can raise taxes tomorrow and their budget problems are solved. Illinois’s revenues are maxed out. Their people cannot be taxed anymore without causing either voter rebellion or brain drain.
So anyway, what wil happen isn’t all that complicated. Illinois will default, they will be unable to borrow money, and non-mandatory spending will simply stop. Retired bus drivers and teachers will get their pensions but the buses won’t run and the schools will close.
What happens after that is that the federal government gives Illinois the right to renege on its mandatory spending commitments, a form of bankruptcy. Retired government workers take a painful haircut and the trains and schools run again.
So it’s actually pretty simple: Illinois state pensioners are going to get screwed. But I don’t feel all that badly for them because few couold have been ignorant of the situation and they voted to keep the gravy train going. I feel the same way about SS beneficiaries. We’ve known about the shortfall forever, and people just assume that the money will somehow be taken from working families when the time comes. That’s not going to happen, just like it won’t happen in Illinois.
Who are these people that are assuming this? Who are the “working families” it is assumed will pay? Where are you getting all this from?
Oklahoma did fix their budget issues, effective July 1.
Looks like the biggest chunk of money will come from taxes on the oil industry.
Natural resources do make a huge difference in offsetting lower taxes. davida03801 mentioned low-tax states that are doing well; the current most tax-friendly statesare Wyoming and Alaska, both of which make up the difference from minerals and oil money. Once you get further down the list, it’s usually sales and/or property taxes that pick up the slack from low income tax.
So all Illinois needs to do is to strike oil. Problem solved.
As someone who lives very close to the Chicago/Illinois border I’m not finding it fun or amusing to watch - we’ve had a couple decades of people living the big city to come to our counties to get away from the Illinois/Chicago mess and it’s only going to get worse. Not to mention the crime and desperation seeping over the border.
I get it - I moved from Chicago to Indiana myself 20 years ago - but the worse the problem over there the more fallout we have to deal with here.
I don’t have an answer either, I voted with my feet long ago. I’d say Illinois needs to get rid of the Madigans to have any hope of reforming the system.
Meanwhile, I am seriously considering moving back to Detroit. In fact, I’m sitting here in Ferndale, MI just 1.5 miles from the border of Detroit and … it’s actually a pretty nice place these days.
It is pretty much a one party problem, since the Democrats have a supermajority in both chambers of the General Assembly. The governor can’t do much on his own.
The issue isn’t a budget gap in a state, which happens across the spectrum of state taxation levels time to time. It’s a budget gap in states where taxes are already high enough to be eroding the tax base, in a federal union where people can freely move to other states with the same language and similar culture.
Or that’s the debate. Some people seem to really believe there’s no incentive effect from taxation, but saying people won’t move away from high state taxes is a pretty extreme version of non-belief in incentive effects from high taxes.
I live in one of the states not far back in line from IL, NJ. But after the end of the term of deservedly unpopular (IMO) Christie, all the Democratic primary candidates…and one the Republicans (though who lost the primary) wanted higher taxes, not in KS or OK but already super-taxed NJ. Including bringing back the estate tax which the Democratic legislature voted to phase out last year in a deal to raise the gas tax (and cut the sales tax, likely winner wants to undo that tax cut too, but not undo the gas tax increase, of course).
Political moralizing about ‘fair share’ aside, state estate taxes are the most extreme example of incentive effect: you just move out of state after you retire and avoid them*. It’s one thing to think through that people who live in NJ and work on Wall Street can’t easily move to low tax states while they are working**. But once you retire, and most people now retire before dying, you move.
And the Christie era has proved you can’t really get a handle on excessive promises to public employees in NJ. Eventually NJ is going to default IMO***, as IL eventually is. There’s no particular reason to think low tax states with budget gaps are going to default rather than just raise taxes to levels still below state like IL or NJ, or cut spending to what can be paid for by still pretty low taxes, which the politics of the high tax states just won’t allow, or until things get a lot worse in those states at least.
*taking with you the income and sales tax revenue you’d pay by staying, so NJ was projected to actually lose money net from its estate tax in the long run, which even the Dems seem to agree at one point, but now ‘some revenue now, forget about later’.
**though some can, NJ actually made a note in its financial statements about a revenue shortfall due to one tax payer moving out of state, who wasn’t named but it referred to the hedge fund mogul David Tepper moving from NJ to FL. The narrower a tax base you aim at, the bigger a problem that becomes.
***note, default and bankruptcy are not the same thing. Bankruptcy is a legal process to sort out the claims of creditors when a debtor admits it can’t pay all of them fully. States are not eligible for bankruptcy. Default is when you just can’t pay. ‘States can’t go bankrupt’ doesn’t mean they can magically always pay.
What has he even tried to do? The buck stops elsewhere in Illinois I guess then? Usually the head guy in charge, who promises to fix an issue, then does absolutely nothing in his entire term to address it would have some responsibility as things get worse and worse under his leadership.
Party of personal responsibility? What happened to that? Only counts for Democrats?
Your obvious partisanship is obvious.
Oh I agree. Illinois is a mess of its own making (and not all of one party, although the Democrats bear the brunt of it as the primary party in power over the decades).
I was specifically taking issue with the strange lumping together of Illinois, Puerto Rico and Venezuela for partisan purposes while deliberately excluding other failing states for the same partisan purposes. Venezuela is a particularly odd choice; they may have the left-wing Chavez and successors to blame for their current mess but it wasn’t down to high taxes (or “other people’s money”, as it was claimed). If anything, it was due to the sort of practices Alaska uses, relying on oil revenue as a substitute for taxation of the masses, but with a lot more government corruption thrown in.
And Puerto Rico is a mess for a whole other host of reasons including massive overborrowing, major corporate predation, Congressional jiggery-pokery and its weird state-not-a-state status.
Well, they don’t have a supermajority, so there’s that. And even when they did, it wasn’t a reliable one.
But that overlooks the fact that Rauner knew what the General Assembly looked like when he took the job and campaigned on a pledge to work with them. Instead, he has stonewalled the budget for pet non-budget causes like union busting and term limits. He has failed to advance anything meaningful and “Waahh, but Madigan!” isn’t an excuse for that. As Super Chicken used to say, “You knew the job was dangerous when you took it, Fred.” Maybe Rauner should have never taken the job if he was going to be this unwilling or unable to get results.