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from MuniLand:

Illinois’ expensive retiree health care ruling

Illinois

Illinois suffered a blow when the State Supreme Court ruled that public employee retiree health benefits are enshrined in the state constitution and may not be adjusted via legislation. Illinois has lost an important tool for reducing $56 billion of unfunded retiree health care liabilities and $100 billion in unfunded pension liabilities. These unfunded retiree costs outstrip the state’s $33 billion of net tax supported debt.

The Chicago Tribune wrote:

The Illinois Supreme Court ruled today that subsidized health care premiums for retired state employees are protected under the Illinois Constitution, signaling potential trouble for an overhaul of pension benefits that’s also being challenged in court.

Today’s ruling also could affect the city of Chicago’s ongoing phase-out of retiree health insurance subsidies, a program Mayor Rahm Emanuel was counting on to save millions of dollars a year, as well as legislation recently approved to modify the pension plans of city workers and laborers.

The 6-1 decision centers around a 2012 law that allowed the state to charge retired workers for health care insurance premiums, which many did not have to pay depending on how long they worked for the state.

from The Great Debate:

Is Michelle running for the Senate?

michelle walking in

First Lady Michelle Obama is everywhere. She’s traveling to China. She’s raising money for Democrats. She’s issuing plaintive tweets seeking the rescue of the kidnapped Nigerian girls.

She’s wading uncharacteristically deep into the Washington political mud pit to defend her school lunch program against Republicans, assailing them last Tuesday for opting to “play politics with our kids’ health.” She struck a similar tone in a New York Times op-ed two days later, accusing Republicans of trying to “override science” and suggesting they join parents and “put our children’s interests first.”

from MuniLand:

Is Illinois getting weaker?

Illinois has queued up contestants for the governor’s race this fall. The New York Times reports:

Bruce Rauner, a multimillionaire businessman making his first run for political office, won the Republican nomination for governor of Illinois on Tuesday, setting up what is expected to be one of the nation’s most contested races for governor this fall.

from MuniLand:

How effective was Illinois’ pension reform?

The state of Illinois had two milestone events recently. The legislature passed a long-awaited pension reform and the state treasurer issued $350 million of taxable general obligation (GO) bonds. The Bond Buyer reported on the GO offering:

The yields ranged from 0.75 percent on the short end to 5.65 percent on the long end. The two-year maturities priced at a yield of 1.28 percent, 95 basis points above a Treasury rate of .33 percent. The spread on the state's final 2038 maturity was about 175 basis points more than the 30-year Treasury rate of 3.90 percent Thursday.

from MuniLand:

The high cost of borrowing for Illinois

Illinois, the state with the lowest credit in the United States, had to pay up this week to bring a $1.3 billion general obligation bond offering to market. Reuters reported that the general obligation bonds due in 25 years were priced at 5.65 percent on Wednesday. This was approximately 180 basis points (1.80 percent) over Thomson Reuters MMD AAA, compared to a spread of 138 basis points on Tuesday. In other words, Illinois got spanked hard.

from MuniLand:

Illinois: Driving into a ditch

The state of Illinois, which joined the union in 1818, has a state motto: “State Sovereignty, National Union.” The website Netstate says this about the motto:

Two months after Illinois entered the Union, the new Illinois General Assembly decreed, on February 19, 1819, that a permanent state seal should be obtained for use on the official documents of the state. A seal, modeled after the Great Seal of the United States, was created with some differences appropriate to Illinois as a state. Importantly, the ribbon held in the eagle's beak was changed from E Pluribus Unum to State Sovereignty - National Union.

from Full Focus:

Two moms, two kids, one family

Ava and Jaidon have two moms. Theresa Volpe is “mommy” and her partner Mercedes Santos is “mama”. Santos and Volpe are a same-sex couple raising two of their biological children as they struggle to get same-sex marriages passed into law in Illinois. Photographer Jim Young spent time documenting the family. Read Jim's personal account.

from MuniLand:

Two massive pension reform struggles

After similar challenges fought in 42 other states, Muniland’s two weakest credits - Illinois and Puerto Rico - are fighting difficult battles over pension reform. The pension struggles will have enormous effects on their creditworthiness.

Puerto Rico’s pension fund, which is dangerously close to insolvency, figured prominently in credit rater Moody’s analysis when it downgraded the commonwealth last December to Baa3, its lowest investment grade rating:

from MuniLand:

Illinois, the sovereign entity, gets a slap on the wrist

Numerous public pension plans across America are in horrendous shape. The employee plan of the Commonwealth of Puerto Rico, funded at an alleged 7 percent of assets, is functionally broke. Other public plans, like that of Charleston, West Virginia, have 24 percent of the assets needed to meet future promises to retirees.

There is little to no regulatory oversight of public pensions. And what little there is comes in a roundabout way. For example, the sanction that the Securities and Exchange Commission administered to the state of Illinois for not adequately disclosing to bond investors that it was not properly funding its system.

from MuniLand:

Illinois on the downward slope

The state of Illinois was placed in the lower investment grade class last week when Standard & Poor’s downgraded the state to A- with a negative outlook.

Fitch

Moody’s

Standard & Poors

A  [negative watch]

A2  [Negative outlook]

A -  [Negative outlook]

On a market-based scale, the Fitch (A) and Moody’s (A2) ratings for Illinois are considered equivalent, while Standard & Poor’s is considered one notch lower. But more importantly, all the raters have a “negative watch or outlook” on the state. This means that it could be downgraded again. The ship is taking on water.

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