Friday, June 16, 2017

CBS News: Could Illinois be the first state to file for bankruptcy?

Not too bad of an article about Illinois and the "B" word, although the one man who is responsible more than any other person, state House Speaker Michael Madigan (D-Chicago) isn't mentioned.

Madigan of course as you know--unless you are a CBS reporter--has held that job for 32 of the last 34 years. He's also the chairman of the Illinois Democratic Party. His chamber didn't even bother to vote on a budget this spring.

From CBS News:
Illinois residents may feel some solidarity with the likes of Puerto Rico and Detroit.

A financial crunch is spiraling into a serious problem for Illinois lawmakers, prompting some observers to wonder if the state might make history by becoming the first to go bankrupt. At the moment, it's impossible for a state to file for bankruptcy protection, which is only afforded to counties and municipalities like Detroit.

Chapter 9 bankruptcy protection could be extended to states if Congress took up the issue, although Stanford Law School professor Michael McConnell noted in an article last year that he believed the precedents are iffy for extending the option to states. Nevertheless, Illinois is in a serious financial pickle, which is why radical options such as bankruptcy are being floated as potential solutions.

Ratings agency Moody's Investor Service earlier this month downgraded Illinois' general obligation bonds to its lowest investment grade rating, citing the state's growing pile of unpaid bills and its mounting pension deficit. Illinois, by the way, has the lowest credit rating of any state. Lower ratings mean higher borrowing costs, since lenders view such borrowers as riskier bets.

No comments: