I'd almost missed this news in the rush of activity at Libertycon, but if you're owed money by Illinois, whether a debt that must be paid, or your salary, or your pension . . . you'd better have enough cash reserves to survive without it, if this goes on.
A federal judge on Friday ordered Illinois to start paying $293 million in state money toward Medicaid bills every month and an additional $1 billion over the course of the next year, worsening a cash-flow problem caused by two years of budget-free spending by state government.
. . .
Comptroller Susana Mendoza ... said Friday's ruling would cause her to likely have to cut payments to the state's pension funds, state payroll or payments to local governments. Payments to bond holders won't be interrupted, she said.
"As if the governor and legislators needed any more reason to compromise and settle on a comprehensive budget plan immediately, Friday's ruling by the U.S. District Court takes the state's finances from horrific to catastrophic," Mendoza said in a statement. "A comprehensive budget plan must be passed immediately."
There's more at the link.
Please note the critical sentence in Comptroller Mendoza's statement:
"Friday's ruling by the U.S. District Court takes the state's finances from horrific to catastrophic"
The person speaking is the one currently juggling Illinois' ever-fewer free dollars, deciding each month which bills to pay and which to delay. The state's backlog - payments it owes, and is supposed to have made already, but has not - amounted as of June 30th to $14,711,352,943.90. Yes, that's $14 billion plus. It has to make those backlogged payments over and above the routine, everyday payments it has to make for all normal transactions. No wonder Ms. Mendoza calls the state's finances 'catastrophic'. It's a pretty accurate description.
Folks, if you depend financially on the state of Illinois, you need to be implementing your financial-emergency contingency plans. Now. If you haven't made those plans yet, it's probably too late to start.
Peter
14 comments:
Illinois state bonds will be rated as "junk", which will send their yields up. They are already at 4.8%, which is huge in this ZIRP investment environment.
Circling the drain at an ever increasing rate.....
Everyone is focused on Illinois at the moment, and also for the moment, it's good entertainment, but.....they're merely the current leader in the Drain Parade.
There are these things called "cascading events" and there's no way to tell - yet - whether Illinois' impending demise will be A Memorable Event or a cascade trigger.
No matter where you live, you should have been stocking up on all the usual stuff. Peter's right, if you live in Illinois it's too late, but for those living elsewhere, just for S&G look up the definition of "metastasis." If the feds get involved in Illinois everyone will get sick, fast.
"Eventually you run out of other people's money." I'm sure that the the democrats in Congress will push for a bail out deal.
The thing that got me was that 100% of revenues are taken up by mandatory expenses - mostly pensions and court-ordered payments. They literally can't turn on the lights in state buildings, meet payroll, or anything. They're in an impossible position.
It was a ponzi scheme from the get go.
Okay, things are bad in Illinois, but what happens if they don't pass a budget? I mean, they haven't passed one for two years, why should this year be any different?
Things are different this year because their credit rating has dropped so far that interest rates for money they borrow are high, and they've got $1.3B in recently added expenses courtesy of the courts.
LL nailed it. Illinois has been in big financial trouble for years - this isn't something they just discovered one dismal morning. Probably not the elected officials (they're too busy getting re-elected and covering up other things), but the people who quietly work in the State government would have seen this coming and prepared themselves for it. The rest of the State? Who are you trying to kid, me or you?
There is no preparedness, no exit strategy. The Federal Government will have to come to the rescue. Now, when they (Feds) do bail Illinois out, which State will be next? And who, pray tell, will bail out the Federal Government when it's discovered that there really and truly isn't enough wealth in the U.S. to cover the debts?
@Mad Jack - I suspect Kalifornia isn't too far behind Illinois. I give it 5 years, tops.
My will be getting her pension from CalPERS, which she claims is a "private" organization, but which is actually a part of state government.
Supposedly CalPERS is financially sound, but I have some 'nagging doubts' considering it's part of the state government, and I wouldn't be surprised if the state tried to raid the assets.
Do keep in mind that a bond's rating is the primary indicator of whether or not that bond will be cashable at maturity.
Sure Illinois bonds are a fantastic deal right now at almost 5%, but should they put the state into full bankruptcy creditors come first and bond holders stand at the end of the line.
Expecting the Feds to bail them out is a foolish assumption. Expecting them to do so while allowing the state to continue the very practices that put them in this situation is pure crazy.
It would seem to be wise for Illinoisians to immediately relocate to other states before you are picked clean down to the bones.
I know of smaller rural and suburban hospitals in Illinois which are owed millions in Medicaid reimbursements. Like into the 9 figures over the hospital network. They know they're never going to get paid. Physicians and hospitals who have the option aren't even taking Medicaid patients. Heaven help you if you're the one who has to tell a Medicaid patient they either have to pay out of pocket or go somewhere else. The vast majority of Medicaid patients upwards of 80% (I can only speak to the facilities I'm familiar with mind you) have a VERY entitled attitude. Most are multi-generational leeches of the welfare state. Their big milestones in life are getting WIC when they get pregnant in their early teens and upon turning 18 going down to the welfare office with mom and grandma and your aunties to sign up for EBT, section 8 etc and going to celebrate at red lobster. In rural areas it's not quite like that. Medicaid is usually the truly destitute, disabled and elderly in nursing homes etc with a smattering of multi-generational leeches but the numbers aren't nearly as high and the entitlement attitude isn't prevalent. You get into the urban and suburban areas and it's quite a culture shock for someone who isn't accustomed to behavior and attitudes like that. My point of all this being that if the free stuff from the state suddenly stops the people with those entitled attitudes are going to lose their freaking minds. If you have to call the cops to a doctor's office because they can't get a free ultrasound or there's a 4 dollar co-pay for their std meds (both actual and non isolated events btw) can you imagine what they'll do if the spigot of free stuff gets drastically reduced or even dries up?
Yep, it'll be riots and blood in the streets, anon!
From Uncle Lar
Expecting the Feds to bail them out is a foolish assumption. Expecting them to do so while allowing the state to continue the very practices that put them in this situation is pure crazy.
The pure crazy you speak of is how the State got into this situation. Since there isn't anything or anyone to stop it, what makes you think it won't continue?
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