Illinois credit rating

Chicago, The Writing Is On The Wall

The city of Chicago is in for some tough times down the road.

“The Machine” keeps putting a positive spin on the city’s deteriorating financial condition, but the numbers don’t lie. I’ve rattled them off time and time again, the most recent being Tuesday. The Chicago press (sans Fran Spielman over at the Chicago Sun-Times and a few others) has even caught on, publishing articles with more frequency these days that reveal just how ugly the city’s finances truly are. Case in point, a Chicago Tribune editorial entitled “Chicago is on the road to Detroit” that appeared on their website yesterday. From the piece:

By the most recent numbers, Mayor Rahm Emanuel’s government owes $13.9 billion in general obligation bond debt, plus $19.5 billion in unfunded pension obligations. Add in Chicago Public Schools and City Hall’s other “sister agencies” and you’re talking billions more in debts that Chicago taxpayers owe. Yet here we are on a Wednesday when the mayor probably will get approval from a derelict City Council to issue another up-to-$900 million in bonds backed by property taxes — and to double, to $1 billion, the amount of short-term bank money his administration can borrow to raise cash…

(Editor’s note: Italics added for emphasis)

By the way, Mayor Emanuel got that approval. Fran Spielman reported on the Chicago Sun-Times website Wednesday morning:

Without a word of debate, the City Council on Wednesday blindly added $1.9 billion to Chicago’s mountain of debt even though aldermen have no idea how the money will be spent.

The vote was 43-to-4. “No” votes were cast by Aldermen Bob Fioretti (2nd), Scott Waguespack (32nd), Brendan Reilly (42nd) and John Arena (45th)…

Now, I’ve heard/read some Chicagoans say something along the lines of don’t worry about the city’s finances, Governor Quinn and the State of Illinois or President Barack Obama and the federal government will ride to the rescue of their fellow Democrats in control of the “Windy City.”

To which I say, I’m not so sure. Is there anyone in America who doesn’t know how much of an economic basket case the “Land of Lincoln” is? A $100.5 billion public pension debt and the worst credit rating of all 50 U.S. states routinely make headlines across the country. As for the federal government, I keep encountering the words “insolvent” and “bankrupt” more and more these days to describe the nation’s finances. And don’t think for a second other economically-challenged cities across the country won’t cry foul to the Oval Office and their elected representatives if Chicago is bailed out. I find it hard to believe the State of Illinois or the Feds could come to Chicago’s rescue without there being serious financial and political repercussions.

Chicago, the writing is on the wall. By the looks of things, that great city where I was born and from which I recently just left is now past the proverbial point of no return, no longer looking capable of effectively navigating the growing financial crisis.

While I don’t foresee the city’s death, I do envision a continuation of its already gradual decline until a point of fiscal implosion is reached. Will it be Detroit-esque in its bottoming out? I don’t know. But it sure as hell won’t be pretty.

Faced with such a scenario, will Chicagoans choose to stay and contend with the almost certain prospect of much higher taxes and fees in conjunction with curtailed city services (public safety comes to mind here), or will they depart the “Second City” like I did?

One might think the latter (going), but I’m sure there will be plenty of the former (staying).

In the interests of surviving and prospering, which is the better choice?

I don’t think the answer is as clear-cut as many readers might think. And it’s something I’ll be exploring and blogging about more in the coming days.

By Christopher E. Hill
Survival And Prosperity (


“Chicago is on the road to Detroit.” Chicago Tribune. 5 Feb. 2014. (,0,3757189.story). 6 Feb. 2014.

Spielman, Fran. “City Council OKs going $1.9 billion deeper into debt.” Chicago Sun-Times. 5 Feb. 2014. ( 6 Feb. 2014.


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Illinois Reports $43.8 Billion Total Deficit, Worst In Nation

As this business week comes to a close, there’s more bad for the “Land of Lincoln” as it concerns finances. The State of Illinois Office of the Auditor General issued a “Summary Report Digest” yesterday for a statewide financial statement audit for the year ending June 30, 2011, and pointed out the following:


The June 30, 2011 financial statements of the State of Illinois are fairly presented in all material respects.

The financial statements reflect a continuing financial deficit. At June 30, 2011:

• The net assets of governmental activities continued to deteriorate and the deficit increased by $6.3 billion from FY10 to FY11. Overall, net assets of governmental activities are reported as a deficit of $43.8 billion. (Exhibit 1)

• The General Revenue Fund deficit decreased by $738 million from FY10 to FY11. The June 30, 2011 deficit was $8.1 billion. (Exhibit 2)

(Editor’s note: Italics added for emphasis)

Regarding the net assets of governmental activities:


The net assets of the State’s governmental activities declined $6.283 billion.

When a state-to-state comparison of net assets for fiscal year 2011 is done, Illinois had the lowest level of net assets in the country.

Concerning the General Revenue Fund deficit:


Many programs are accounted for in the General Fund. The GAAP basis financial position of the General Revenue Fund deficit decreased at June 30, 2011 from June 30, 2010. The fund balance deficit in the State’s General Revenue Fund decreased by $738 million on a GAAP basis (from a deficit of $8.818 billion, as restated, to a deficit of $8.080 billion).

A little bit of improvement there, but still over $8 billion.



The State of Illinois did not have sufficient controls over its finances to ensure obligations are paid timely. This condition increases the risk that liabilities will not be properly recorded. We noted the following during our financial audit of the State’s financial statements and our financial audits at various Departments.

The State had transactions, totaling $4.740 billion, on hand at June 30, 2011 that had been approved for payment by the State, but remained unpaid at year end due to the State’s cash flow difficulties. Of this amount, approximately $3 billion was owed to external parties, the remaining balance was related to intra-governmental transactions.

Billions of unpaid bills. Not good.

But that was a year ago. Consider this. On May 28, 2012, the Chicago Tribune’s Monique Garcia wrote:

Even if Medicaid cuts and pension reforms are put in place, the state’s unpaid bills are expected to total $8.5 billion come June 30. The new state budget isn’t expected to shave much off that tab. The pile of bills was an estimated $8 billion when the income tax hike was approved.

(Editor’s note: Italics added for emphasis)

In January 2011, Illinois Governor Pat Quinn signed off on a 67 percent personal income tax hike on Illinois residents.

Reuters reported on the findings from William Holland, Auditor General, and added the following yesterday afternoon:

The state reported an unfunded pension liability of nearly $83 billion at the end of fiscal 2011 and a funded ratio of 43.4 percent, way below the 80 percent considered healthy. Based on fiscal 2010 data, Illinois had the lowest funded ratio of any state, according to a report this week by the Pew Center on the States.

The state liability for other-post-employment obligations, mostly retiree health-care costs that the state funds on a pay-as-you-go basis, was $33.3 billion in fiscal 2011…

On a budgetary basis, fiscal 2011 marked the 10th-straight year of general fund deficits for the state, which has been pushing unpaid bills from one fiscal year to the next.

Illinois’ structural deficit along with its huge unfunded pension liability have led to credit downgrades, with Illinois rated A2 by Moody’s Investors Service, the lowest level among states it rates. Standard & Poor’s Ratings Services has warned it could drop Illinois’ A-plus rating by multiple notches if progress on solving its financial problem is not made this year.

(Editor’s note: Italics added for emphasis)

I am worried about where this state is headed. Truly worried.

You can read the entire “Summary Report Digest” on the Auditor General’s website here (.pdf document).


Garcia, Monique. “Record tax hike isn’t fixing Illinois’ problems.” Chicago Tribune. 28 May 2012. ( 22 June 2012.

“Illinois in poorest fiscal condition of all states.” Reuters. 21 June 2012. (,0,1446672.story). 22 June 2012.


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Friday, June 22nd, 2012 Deficits, Government, Taxes 1 Comment

Best And Worst Run U.S. States

That last post about Illinois being the second least favorite state in a recent nationwide poll wouldn’t bug me so much if I weren’t also aware of a study showing the “Land of Lincoln” being seriously mismanaged. Sure, the local media outlets seem to have an unending supply of negative stories associated with state government. However, the New York City-based financial news and opinion organization 24/7 Wall St. reviewed data on the financial health, standard of living, and government services of the 50 states to determine how well each is managed. They then proceeded to rank the 50 states from the best to the worst run. The results were posted in a November 28, 2011, article entitled “Best and Worst Run States in America- An Analysis Of All 50.” The best run states were found to be:

1. Wyoming
2. Nebraska
3. North Dakota
4. Minnesota
5. Iowa

The worst run?

1. California
2. Illinois
3. Michigan
4. Arizona
5. Nevada

Here’s what 24/7 Wall St. had to say about Illinois:

> State debt per capita: $4,424 (13th highest)
> Pct. without health insurance: 13.8% (23rd lowest)
> Pct. below poverty line: 13.1% (25th lowest)
> Unemployment: 10% (10th highest)

Illinois has fallen from 43rd last year to the overall second-worst run state in the country. The state performs poorly in most categories, but is worst when it comes to its credit rating. Illinois has a credit rating of A+, the second worst given to any state, behind only California. The state has been on credit watch since 2008 because of budget shortfalls and legal challenges against then-governor Rod Blagojevich.

Since that piece came out, while the official unemployment rate has improved somewhat to 9.8 percent, the credit worthiness of the state has deteriorated, with Moody’s Investors Service announcing on January 6 they were lowering the State of Illinois’ general obligation bond rating to A2 from A1, the lowest credit rating of any state in the country.

Getting back to that most/least favorite state poll, being a keen observer of management over the years I realize decision-making done for the good of the organization isn’t always popular. However, as Illinois is concerned, I wonder if being named America’s second least favorite state isn’t somehow related to it being the second worst run state in the country.

Time to get our act together, Illinois.


“Best and Worst Run States in America — An Analysis Of All 50.” 24/7 Wall St. 28 Nov. 2011. ( 24 Feb. 2012.


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Christopher E. Hill, Editor

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