State of Illinois Debt Worrying Credit Markets
CHICAGO--(ENEWSPF)--October 11, 2011. With reports that the State of Illinois faces debt concerns greater than any other state, U.S. Senator Mark Kirk (R-Ill.) today published the Report on Illinois Debt, advising citizens on how much their state owes and the danger of its mounting debt. The report was prepared in consultation with Senator Kirk's Sovereign Debt Advisory Board, chaired by financial expert Henry Feinberg.
"If Illinois enters an unrecoverable debt spiral, there will be no federal bailout. Therefore, the people of Illinois need to know the dire financial position of our state and what we need to do to fix it ourselves," said Senator Kirk.
This report shows Illinois directly owes over $30 billion, on top of unpaid bills that increased ten times in ten years. The state's accumulated health and pension obligations total over $140 billion -- with less than 60% of these promises covered, representing the lowest percentage in the nation. Illinois has the worst credit rating of any state in America and ranks 48th out of 50 states in healthy business climate. By adding the debts owed to Illinois, Cook County and the City of Chicago, each Chicago household owes $78,000.
"Illinois is in a self-perpetuating, destructive cycle of debt resulting from increasingly mismatched revenue and obligations," said Henry Feinberg, Chairman of Senator Kirk's Sovereign Debt Advisory Board.
Illinois pays almost $3 billion annually for interest on the money it already borrowed. Spending on interest already totals four times the amount needed to erase the $700 million budget deficit of the Chicago Public School System. The debt picture is not improving because Illinois unemployment is rising. The state employed 190,000 more people in January, 2001, than it does today. For debts and unfunded liabilities, each person in Illinois owes twice as much to the state as people in Indiana, Iowa and Missouri and three times more than people in Wisconsin and Michigan.
Because Illinois has such a poor credit rating, local governments must pay higher interest rates than similar communities in better-run states. For example, Cook County School District 163 had to pay more in interest expenses than similar Midwestern creditors because it was in Illinois: $592,706 more than Brownsburg Redevelopment Authority, Indiana, $893,109 more than Waterloo, Iowa and $1,096,437 more than a school district in Randolph County, Missouri.
Prospects for repayment are difficult. Illinois lost over 190,000 jobs since January 2001. The City of Chicago lost over 200,000 people during the same period.
Lost population means the debts and unfunded liabilities must be repaid by taxpayers who remain in the state. If Illinois had the same population growth rate as Indiana, per household debt would be approximately $400 lower than it is today.
Illinois citizens face higher taxes and larger debts because so many of their fellow citizens have moved to other, more fiscally responsible states. The State lost over 85,000 net taxpayers between 1995 and 2007 to neighboring states. Taxpayer flight between 1995 and 2007 cost Illinois an estimated $2.4 billion in tax revenue.
While Illinois is an American state with substantially stronger institutions than Europe, its debt load per person is higher than for citizens in Spain, Portugal, Ireland or Greece.
While there are many solutions to this problem, knowledgeable Republican and Democratic state legislators joined the Civic Committee to focus on key pension reforms needed to improving the state's dismal record with borrowed money. Senator Kirk concluded, "The deteriorating credit rating of Illinois harms our state's ability to attract new jobs and higher incomes. To maintain the federal credit rating, Congress cannot bailout a few spendthrift states. Therefore, our state's leaders must focus on pension reform and other anti-spending measures to replicate the growing success of Indiana and other Midwestern states."