Unable to Pay Bills, Illinois Sends “Dear Contractor” Letter Telling Firms to Halt Road Work on July 1

Mish Talk

The state of Illinois has not passed a budget for close to three years.

Arguably it’s just as well because Illinois budgets for decades have been nothing but a moth-eaten collection of lies, one time deficits repeated endlessly, and financial wizardry statements designed to disguise Illinois’ real problems: failure to rein in spending coupled with a very business unfriendly environment.  

As Illinois’ bond rating careens towards junk, Illinois Unpaid Bills Jumped to $14.3 Billion. Today, the state told contractors to halt roadwork other that required for safety.

Dear Contractor

I do not have a link, but here is the letter in image form.

This does not raise much alarm in Illinois as these kinds of letters went out last year as well. It’s simply business as usual in Illinois.

My IDOT contact, who wishes to be left unnamed, reports …

Hello Mish

Last year when they did this the extra work bill to the state cost millions of taxpayer dollars. At the last minute, the shutdown was averted but not until the shutdown measures were employed and thus extra cost was due to contractors and consultants.

Look out for the Road Builders Association to come out with an estimate of what it will cost this time around after the letter today.

Last year, the supplier for paper and toilet paper had not been paid and thus various offices were reportedly cut off of supply. IDOT employees were going to have to work from home due to the potential unsanitary conditions.

Five Illinois Universities Rated Junk

Yesterday, the Illinois Policy Institute reported MOODY’S DOWNGRADES 7 ILLINOIS UNIVERSITIES, 5 ARE JUNK.

Everybody wants to blame the downgrades on the state’s current budget impasse. The stalemate of nearly two years has led to cuts in state appropriations to Illinois universities. But the universities’ financial difficulties started before the state’s budget gridlock and are largely of their own making. Illinois colleges and universities have long overspent on bloated bureaucracies and expensive compensation and benefits, prioritizing administrators over students.

For years, university and college officials across the state have hiked tuition to pay for administrative hiring sprees, generous executive compensation and out-of-control pensions. Their spending priorities distorted university finances long before the budget impasse began.

The number of administrators in Illinois’ universities grew by nearly a third (31.1 percent) between 2004 and 2010. At the same time, faculty only increased 1.8 percent, and the number of students only grew 2.3 percent.

Illinois Tuition Fees

Retirement Costs Soars

Blame Who?

It is easy to blame Governor Rauner, but he is last on my list. Illinois has been in trouble for decades. The state’s only solution has been to tax, and tax, and tax.

That is precisely the same position as Chicago Mayor Rahn Emanuel.

The result is easy to predict.

Illinois’ Economic Growth is Worse than During the Great Depression

Illinois’ total state economic activity has increased by only 4 percent since 2007, which is lower than the U.S.’ 10 percent GDP growth during the worst decade of the Great Depression according to the Illinois Policy Institute.

Illinois Employment

Feed Me

Illinois Debt Backlog

It took $31.6 billion of new tax revenue to reduce the backlog of bills by $1.3 billion. But the complete picture is much worse as Illinois’ pension debt rose more than $25B from 2010 through 2015.

Failed State

  1. On June 4, 2017, Politico reported How Illinois became America’s failed state.
  2. The Heratige Foundation beat Politico to the idea by a mile with its September 28, 2015 analysis Illinois: The Anatomy of a Failed Liberal State.
  3. The Chicago Tribune is behind the times with its January 3, 2017 analysis, Illinois in danger of becoming a failed state.

Illinois is not in danger of becoming a failed state, it is a failed state. I have been talking about this for years.

Five Desperately Needed Reforms

  1. Municipal bankruptcy legislation
  2. Pension reform
  3. Right-to-Work legislation
  4. End of prevailing wage laws
  5. Workers’ compensation reform

Number one on my list of Illinois reforms is bankruptcy legislation. It is the only hope for numerous Illinois cities whose hands are also tied by union-sponsored prevailing wage laws.

Despite massive gains in the stock market since 2009, Illinois pension plans have gotten deeper and deeper into the hole.

Even a modest pullback in the stock market will sink numerous Illinois pension plans. I expect much worse than a modest pullback.

Tax hikes are not the answer. Reform is the answer, and bankruptcy reform is at the top of the list.

Required Pension Contributions to Double or Triple

Inquiring minds will also wish to consider Required Pension Contributions of California Cities Will Double in Five Years says Policy Institute: Quadruple is More Likely.

The same fate or worse faces Illinois.

Madigan Sponsored Problem 

The problem is on Speaker Madigan’s side. He insists on tax hikes first and reforms second.

Governor Rauner has held out and I support that policy. Once the governor agrees to tax hikes, no reforms will ever take place.

Illinois is Bankrupt

Illinois is essentially bankrupt. Unfortunately, there is no provision for states to declare bankruptcy.

States can default, however, and default is an easy prediction for Illinois’ public union pensions.

Mike “Mish” Shedlock

Mish Talk

2 thoughts on “Unable to Pay Bills, Illinois Sends “Dear Contractor” Letter Telling Firms to Halt Road Work on July 1

  1. “It is easy to blame Governor Rauner, but he is last on my list.”

    There’s no shortage of OTHER problems he’s to blame for, however.

    “The state’s only solution has been to tax, and tax, and tax.”

    They keep running out of cocaine, champagne and hookers.

  2. Bankrupt like the “fed. govt.” The “fed govt.” has a supply of “money,” this is the difference.

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