Brett Rowland | Investors get more truth than Illinois taxpayers

Brett Rowland | Investors get more truth than Illinois taxpayers

By BRETT ROWLAND

Nearly every Illinois lawmaker who voted for the state's $38.5 billion budget in May said it was balanced. They came up far short of the truth.

In the Senate on May 30 and again the next day in the House, lawmakers talked about bipartisanship and compromise and how things can get done when everyone works together. Amid the back patting and effusive praise, there was some talk about the budget not being perfect. The handful of lawmakers who opposed the budget and raised concerns were largely ignored. Everyone, it seemed, was telling taxpayers, almost in unison, that the budget was balanced.

The state told potential investors something different in its latest bond offering: "The Fiscal Year 2019 General Funds budget has an estimated underlying structural deficit of $1.2 billion."

The bond offering goes on to explain some other things that most lawmakers weren't talking about at the end of May.

"To avoid future structural deficits, the governor and the General Assembly would, among other potential solutions, need to reduce expenditures, adjust revenue collections or approve a combination of revenue adjustments and reductions in expenditures," the offering states.

"Revenue adjustments" is code for tax increases.

But then comes my favorite part: "The state provides no assurances as to how, when or in what form this structural deficit might be addressed."

Here are a few other things in the bond documents that few politicians had the courage to address amid the back-patting session after the budget was approved.

— "The State's retirement systems are severely underfunded. Over the past 10 years, the funding levels for the state's retirement systems have deteriorated dramatically and are among the lowest in the nation with respect to state pension plans."

— "No assurances can be given that the state will make the appropriations necessary to meet any deficiencies incurred by the retirement systems."

— And this on the subject of future pension reform efforts: "Such pension reform proposals were not included in the Fiscal Year 2019 enacted budget. The state can give no assurance as to whether any of the remaining proposals, or any proposals to be introduced in the future, will be enacted into law and, if so enacted, the effect such proposals may have on the retirement systems or the state's future contributions to the retirement systems."

Most of the state's lawmakers were willing to vote for the budget. And most of them were willing to tell the taxpayers they represent that it was balanced even though it wasn't. Why not lie? There was really no downside.

But state officials weren't willing to allow any of that swill to be presented to investors.

After all, there are consequences for misleading investors. Illinois leaders found this out in 2013 with help from a Securities and Exchange Commission fraud investigation.

"Municipal investors are no less entitled to truthful risk disclosures than other investors," said George Canellos, who was acting director of the SEC's Division of Enforcement in 2013 when the state settled the matter. "Time after time, Illinois failed to inform its bond investors about the risk to its financial condition posed by the structural underfunding of its pension system."

Illinois residents, who are as surely invested in this state as bond buyers, would do well to read the less-varnished truth in the bond offering.

Brett Rowland is news editor of Illinois News Network and the digital hub ILNews.org. He welcomes your comments. Contact Brett at browland@ilnews.org.

Sections (2):Columns, Opinion
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