Is the Ricketts family of Chicago bipolar? The patriarch, billionaire and Chicago Cubs owner Joe Ricketts, blasted onto the national stage yesterday, when the New York Times reported that his super PAC considered running an ad campaign entitled “The Defeat of Barack Hussein Obama: The Ricketts Plan to End His Spending for Good.” His super PAC, the Ending Spending Action Fund, also lobbies against excessive federal spending and special-interest earmarks.
In a series of decisions that may affect healthcare nationally, Illinois is tightening the noose on hospitals that claim tax-exempt, non-profit status. What began as the denial of a property tax exemption by the Champaign County Board of Review for one hospital system in 2002 has become a state-wide analysis of how much actual “charity care” hospitals are providing.
In the municipal bond market, one of the most insightful ways to examine a state is to look at how actively its bonds trade. Broker-dealers make money by trading, so naturally they go where the action is and commit market-making resources to those states. It’s generally true that the most populous states are the ones with the most traded bonds, but if we map the wealth of a state’s citizens to how often that state’s bonds trade, we get some interesting results. For example, New Jersey, which has only 2.8 percent of the national population but a high proportion of its wealthy citizens, might have the highest number of municipal bond owners as a percentage of state population.
Illinois, the state in the weakest fiscal position, is planning two big bond deals in the first quarter of 2012. Next week they plan to raise $800 million in general obligation bonds to finance various transportation projects, followed by another $750 million later this winter in long-term bonds to fund construction projects.
Illinois has massive problems: the state has more liabilities than assets, and the credit-default swap market says they are the number one state at risk for default (see chart above). The Bond Buyer ran an excellent story on how the liabilities of Illinois are rapidly increasing:
Insurers have “manageable” muniland risk
Meredith Whitney has made many assertions about muniland, but the only one that I had not heard from others before she stepped onto the national stage was her contention that insurance companies would be forced to sell their municipal bonds into a declining price spiral. She alleged this would collapse muniland, so it’s very interesting to see Moody’s assess the risk for insurance industry. From Property Casualty 360:
Many cities took a big step forward for clean air when they adopted buses fueled by natural gas. But there are other important projects that will make getting around easier, quieter and less polluting. New York City is getting ready to take a big step. From American City:
According to the credit rating agencies and the bond markets, these are the 8 states with the weakest credit profiles. These states may be weak because their debts are too big, because their economy is flagging or because they haven’t adequately funded the retirement of their employees. If this were a school, these would be the students sitting in the back of the class. Maybe it’s time for these states to do a little more homework.
The state of Illinois has been riding the easy governance boat on a river of debt. It has run up its borrowing to fund infrastructure, pension liabilities and unpaid bills. According to state treasurer Dan Rutherford, Illinois’s debt load currently amounts to $198 billion — that is a mountain of debt. The amount is also about 31% of the 2009 gross state product of $630 billion.You get the feeling that Illinois state government is addicted to overspending and debt and just can’t let go of that overdraft account down at the bank.
Happy Friday all!
Illinois passes landmark education reform
The Chicago Sun-Times reports that the Illinois state legislature has passed a substantial education reform bill. The legislation severely restrains the power of the teachers’ unions: