STUMP » Articles » Illinois Round-Up: Bonds Issued at High Rates, the Harvey Harbinger, and More Doom » 25 April 2018, 22:07

Where Stu & MP spout off about everything.

Illinois Round-Up: Bonds Issued at High Rates, the Harvey Harbinger, and More Doom  

by

25 April 2018, 22:07

So much doom, so little time to blog.

BONDS ISSUED WITH UNSURPRISING HIGH PRICE


6% coupon is fairly high for munis, iirc.

More on the bond offering (before they were sold):


Oh, what’s this:


Marshall Crenshaw, you say? Have some, won’t you?

ANOTHER INTERLUDE



Those “required” amounts will become magically unrequired at some point, as Chicago will not be paying them.

Unless there’s superduperhyperinflation and those amounts are piddly. Too bad the pension benefits scale with inflation.

THE HARVEY HARBINGER: MORE PAIN TO COME

The short story of what happened in Harvey, Illinois:
- pension contributions have been wayyyyy too low for many years
- there are other sketchy public finance things going on there, too
- there is a (relatively recent) law that allows the state to cut off funds to municipalities, and send the money directly into pension funds
- that got activated for Harvey, Illinois… the first town to have this happen to it

So the reaction has been: well, other Illinois towns don’t have that dodgy stuff going on.

via GIPHY

Are you sure?

Harvey, IL pension crisis ‘canary in the coal mine’

Harvey, Illinois is in the midst of a financial crisis that represents the tip of the iceberg for literally hundreds of small towns in Illinois.
…..
Since state law prohibits municipal bankruptcy, Harvey has been forced into a situation Illinois has never seen. In February, the state began to garnish Harvey’s revenue to fund its pension liabilities. The city was forced to lay off 40 police and firemen – 25% of police employees and 40% of firefighters. This, in a city already known for high levels of crime.

The irony is that the state of Illinois’s own pension crisis is even worse. But fear is growing that unless a massive infusion of pension money is forthcoming from the state, dozens of towns will suffer a similar fate as Harvey.

Hmmm, what’s this about municipal bankruptcy being blocked?

Ives on Harvey: ‘Bankruptcy is The Only Way Out’ – NBC Chicago

A state representative said Monday the embattled city of Harvey isn’t alone in its inability to meet the state’s pension demand—and it should strongly consider bankruptcy.

Since the state withheld tax money to Harvey—a consequence for not paying into the pension system—firefighters and police officers have been laid off. Other cities—from Burbank to Niles to Maywood are in very similar financial straits. With boarded up businesses on the main street there’s no denying the financial troubles facing the town of Harvey. Might city leaders turn to bankruptcy? Republican state Rep. Jeanne Ives says it’s more than likely.

“Bankruptcy is the only way out,” she said.

People need to understand what bankruptcy means in this context: it’s a legal framework whereby the municipality can figure out what it can actually afford going forward, no matter what its promises were in the past.

I understand why many politicians want to bar this option, but it’s not like financial catastrophe is barred for not allowing the legal process.

So for some of these towns, here are the possible choices put in front of them:
- raise taxes
- cut services, including cutting off all the employees covered by these benefits

That’s it.

So what happens if no combination of those two will fill the big obligation hole?

The money runs out. And that’s it.

Governments fail all the time, but because of a momentary demographic bubble (aka the Boomers) this has been staved off for a while. People don’t realize how weird the Baby Boom was, in historical terms. That’s because we finally got childhood mortality down to very low levels. And so the demographic bubble has been able to inflate all sorts of government expectations.

Which weren’t sustainable, absent the Baby Boom weirdness.

Harvey got there first in Illinois… if you don’t count Chicago’s dysfunction, and I’m not even going to address Chicago in today’s post.

So the “happy” news for Harvey is that some judge has temporarily opened the money spigot again. But that’s not going to protect the fire/police employees & retirees of Harvey.

Or those in any other Illinois town.

Related links:

Of course, what burns my biscuits is that at least one actuary was involved in this crap. Harvey deliberately underfunded its pension, in terms of its official actuarial reports, but other town have found themselves in a position of worsening funding positions though they paid the “actuariallhy required contributions”.

To be sure, pension trustees were also complicit if they were being deliberately “ignorant” in the lowballing of pension liabilities.

But if an actuary recommended certain valuation assumptions that made the financial situation erode… well, I hope that actuary is 90 years old.

MORE BAD FINANCIAL IDEAS: SPEND MORE

Illinois Senate OKs bill to nearly double home care workers’ pay

SPRINGFIELD — Illinois senators narrowly approved a bill Tuesday to nearly double wages paid to home care workers in the state’s Community Care Program.

Under Senate Bill 3511, home care worker wages would jump from about $10.98 an hour to $19.89 an hour on July 1. Wages would continue to climb by $1 an hour per year until they reached $24.69 in 2021.

State Sen. Mattie Hunter, D-Chicago, said the workers supply home care to 100,000 seniors, allowing them to remain out of nursing homes and in their own homes.

The Service Employees International Union, which represents the workers, said low wages for home care workers leads to high turnover among home care workers.

Well, that’s probably true, but generally they’re not going on productivity, now are they?

Are they planning to reduce the number of home healthcare workers?

State Sen. Jim Oberweis, R-Sugar Grove, said the bill will cost the state $800 million a year that it doesn’t have.

“We’d all like to help these people,” he said. “It might be a good idea to sit down and figure out a budget before we spend another $800 million we don’t have. We have to figure out which programs we’re going to cut.”

Senate Republican Leader Bill Brady of Bloomington voted against the bill. State Sen. Andy Manar, D-Bunker Hill, voted for it. Sen. Sam McCann, R-Plainview, did not vote.

The bill now goes to the House.

Sounds like they’re not planning on reducing the number of workers. Or, I guess it just happens naturally, when Illinois is not able to pay the bills and the people don’t get paid.

I assume people will quit in that situation.

Oh, and here’s another union sweetener for Illinois:

BILL WOULD ALLOW GOVERNMENT BONUSES FOR UNION MEMBERS, BUT BAN THEM FOR OTHER STATE WORKERS

The Illinois House of Representatives is considering a bill to boost government union ranks in anticipation of the U.S. Supreme Court’s upcoming decision in Janus v. AFSCME.

On its face, House Bill 5309 prohibits bonuses to employees of state agencies. It’s a sweeping prohibition that would interfere with any government compensation program intended to encourage efficiency by rewarding workers based on merit.

But there’s much more to it than that.

The bill defines the term “employee” to explicitly exclude anyone covered by a collective bargaining agreement. That means any government worker represented by a union could receive bonus compensation, but other employees could not.

Well, given there won’t be money to pay bonuses as the years roll by, why not? Go for it.

UNPAID BILLS

This is just gonna be a link dump about Illinois’s unpaid bill situation.

Before I dump, though: THIS IS NOT NEW. I watched this crap going on when I was blogging at somebody else’s site, AT LEAST 8 YEARS AGO.

So excuse me if I’m annoyed.

I don’t mind Comptroller Mendoza’s grandstanding, because it’s less destructive (so far) than what the New York or California folks do.

ODDS N SODS

Here are the links I have left over.

via GIPHY

I still say Illinois is going under before New Jersey.

But we shall see.

via GIPHY


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