|
 But the Republican is offering few details on how he will proceed
and how he plans to fix a political culture in the state capitol
that he described as broken during the campaign.
The transition team for Rauner, a private equity investor and
first-time office-holder, in a report on Friday deferred specific
fiscal recommendations until a later date. "An effective plan will
include spending cuts, efficiencies, comprehensive tax reform, and
many changes that, over time, will require difficult choices and
shared sacrifice," the report said.
The Land of Lincoln is buckling under a chronic structural budget
deficit and the lowest credit ratings and worst-funded pension
system among the 50 states.
Pension payments are projected to jump to nearly $7.6 billion in
fiscal 2016 from $6.8 billion this fiscal year. And outgoing
Democrat Governor Pat Quinn's budget office recently estimated
Illinois' pile of unpaid bills will climb to $9.8 billion at the end
of fiscal 2016, from $4 billion this year.
"In the modern era ... the state has never been in this poor of
financial condition," said Laurence Msall, president of the Civic
Federation, a Chicago-based government finance watchdog group.
To make progress, Rauner will need to find a way to work with a
legislature dominated by longtime Democrat power broker Mike
Madigan, speaker of the Illinois House. David Merriman, an Illinois
budget expert at the University of Illinois, said Rauner needs to
focus on what is politically achievable. "You have a Democratic
legislature and a Republican governor so they're going to have to
figure out some way to work together," he said.
Robert Amodeo, a portfolio manager at asset manager Western Asset,
put Illinois in a same class with the most troubled municipal bond
issuers in the nation. "We will continue to monitor developments in
Puerto Rico, New Jersey and especially Illinois, all of which face
challenging fiscal conditions," Amodeo said.
To sell its debt, Illinois has had to offer hefty yields. Illinois
bonds due in 10 years yield about 140 basis points more than stellar
AAA-rated debt, according to Municipal Market Data. California,
which is bouncing back from its fiscal morass, has a so-called
credit spread of only 24 basis points.
Illinois' credit ratings at A-minus and A3 are the lowest among the
50 states and rating agencies have warned of further downgrades. An
immediate concern is the Jan. 1 partial expiration of 2011 temporary
tax hikes that moved the personal income tax rate down to 3.75
percent from 5 percent, and dropped the corporate rate to 5.25
percent from 7 percent.
[to top of second column] |
Quinn's budget office projected that income tax revenue will drop by
$5.16 billion to $14.64 billion in fiscal 2016, which begins July 1.
The state's projected general fund deficit is expected to balloon to
nearly $5.8 billion, from just $180 million this fiscal year.
An effort to reform Illinois' troubled state pension system, which
faces a $105 billion unfunded liability, has foundered, at least for
now. The state's Supreme Court later this year will rule on a lower
court's rejection of a 2013 law making sweeping cost-saving changes
to state retirement benefits.
Labor unions, which are fighting the 2013 law, have vowed a
constitutional challenge to Rauner if he executes a campaign plan to
move workers to 401k-type plans.
Msall at the Civic Federation said Rauner has to release his fiscal
2016 budget in February before the Supreme Court rules.
"In the short term, the answer has to be that you have a
comprehensive plan that stops making the situation worse," Msall
said.
On Saturday, Rauner unveiled key administrative appointments that
included Tim Nuding, chief of staff to Illinois Senate Republican
Leader Christine Radogno, as director of the Governor’s Office of
Management and Budget.Rauner also tapped members of Illinois
Republican U.S. Senator Mark Kirk's staff and members of former
Indiana Governor Mitch Daniel's staff.Other freshman governors face
fiscal challenges, too. Pennsylvania's governor-elect, Tom Wolf, a
Democrat, will wrestle with an unfunded pension liability on track
to hit $65 billion in three years, and Rhode Island's new governor,
Democrat Gina Raimondo, will be fighting a court challenge to tough
pension changes she spearheaded as the state's treasurer.
(Reporting By Karen Pierog; Editing by David Greising and Eric
Walsh)
[© 2014 Thomson Reuters. All rights
reserved.]
Copyright 2014 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed. |
