Turned Around

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A report by the ReFund America project on how the swaps that were supposed to save Illinois millions turned toxic.

Illinois is in the throes of a major budget crisis. Even though residents have had to bear draconian cuts as critical services have been defunded, Wall Street has gotten a free pass in the state’s budget stalemate. More than halfway through the current iscal year (as of January 2016), the Illinois General Assembly has still been unable to pass a budget because Governor Bruce Rauner has refused to make a budget deal until he gets his anti-union “Turnaround Agenda”. As a result, Illinois has delayed, reduced, or ceased funding for critical services, like low-income child care programs, domestic violence services, immigrant family services, need-based college grants, youth programs, and homeless services, to name a few. At the same time that the state has been unwilling to meet its obligations to social service providers, Illinois has nevertheless been paying banks for a whole host of inancial services, like interest rate swaps.

Illinois People’s Agenda

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In 2015 Grassroots Collaborative launched the Illinois People’s Agenda: a vision of reinvestment in the people of Illinois. The People’s Agenda provides a new path forward that creates jobs, grows the
Illinois economy meets the challenges facing our state in a way that is fair and equitable to all residents and helps Illinois families prosper.

In order to bring Illinois in line with other Midwest states, the People’s Agenda calls for generating new state revenue from those ablest to afford it. The People’s Agenda revenue package includes closing corporate loopholes, passing a graduated income tax, millionaire tax, and a financial transaction tax. Together, these revenue proposals would generate billions of dollars for the state of Illinois.

Illinois faces further credit dings and interest rate swap crisis

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Adding yet another blow to the moribund finances of Illinois, two major credit rating bureaus, Moody’s and Standard and Poor’s, last week gave the midwestern state another financial downturn; this time to just two levels above junk status, in view of the continued lack of a budget and the growing gulf between Republican Gov. Bruce Rauner and the Democratic majority legislature, said bureau officials.

Citing political gridlock as the reason the change, from from level to Baa2, this action also affects the bond issuance of $2.75 billion in revenue bonds and helps to increase a bill backlog of over $10 billion, according to the Chicago Sun TImes.” It also noted that prior to the Rauner administration, Illinois had the worst credit rating of any state, a fact that may have become lost in the recent donnybrook between the governor and the state legislature.

The change from Moody’s was from a “lowered Illinois’ rating on $26 billion in debt by one level to Baa2. That downgrade affects $2.75 billion in revenue bonds,” and for S&P it “downgraded the state’s general obligation bonds to BBB+ from A-.”

On Monday, the Illinois House Revenue and Finance Committee held a second hearing to address the expenses on interest rate swap deals that have already cost the state of Illinois $684 million, and are tied to financial deals that could cost taxpayers an additional $870 million in November, if the state does not sue or renegotiate these deals as others across the country have done.

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Monday Marks Second Hearing On Illinois’ Controversial Interest Rate Swaps

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An Illinois House committee will hold a second subject matter hearing Monday morning in Chicago on the issue of interest rate swaps.

City of Chicago Treasurer Kurt Summers is among those expected to testify before the House Revenue and Finance Committee.

Last month, Summers urged three Chicago employee pension funds to consider joining class action lawsuits against banks in an effort to recoup losses from swap deals.

“We are asking the question of whether this financial market was ever fair. If we are successful, then all Illinois residents and taxpayers will benefit. We will send a message that this sort of bad behavior will no longer be tolerated by the people of Illinois. We will only accept a fair and level playing field for the investment of public money,” Summers said in a news release distributed by the Grassroots Collaborative. “I call on Governor Rauner to fulfill his fiduciary obligation to protect our finances at their most vulnerable moment by joining the antitrust lawsuit.”

Monday marks the second subject matter hearing the House Revenue and Finance Committee has held on the interest rate swap deals Illinois has struck with big banks. Progress Illinois previously covered the first hearing on the issue, which was held in late April.

According to the Grassroots Collaborative, which has been working to shed light on interest rate swaps, the controversial financial deals “have already cost the state of Illinois $684 million” and “could cost taxpayers an additional $870 million in November if the state does not sue or renegotiate these deals as others across the country have done.”

Read Progress Illinois’ past reporting on how interest rate swaps work and their financial impact on the state, city of Chicago and Chicago Public Schools system.

 

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Experts Sound Alarm: Wall Street Banks Set to Shakedown Illinois for $870 Million Unless Springfield Acts Fast

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Mayor Emanuel Paid Out Hundreds of Millions to Wall Street Banks on Swap Deals that Torpedoed Chicago and CPS budgets, Governor Rauner Urged to Not Repeat Mistake with State Swaps

CHICAGO, IL – On Monday, the Illinois House Revenue and Finance Committee held a second subject matter hearing on interest rate swap deals that have cost the state of Illinois over $684 million thus far. During the hearing experts testified how these deals could trigger further financial crisis for the state if letters of credit are not renewed in November. Without these letters of credit, renegotiation, or legal action by the State of Illinois, taxpayers would be on the hook for $870 million in entirely avoidable payments to Wall Street banks.

Kurt Summers, Chicago City Treasurer, stated,  “On May 27th, I sent Governor Rauner a letter encouraging him to join the ongoing class action lawsuits as a chance for the State to recoup tens of millions of dollars in potential damages. This is real money that will benefit the State in a time of unprecedented fiscal challenges but there is more to it than that. This is a statement to financial institutions that the citizens of Illinois, Chicago and any municipality in the union demand to be treated fairly and openly.”

Experts speaking during the hearing made clear that Illinois has alternatives to paying out to the banks including litigation and regulatory action. When faced with a similar situation involving toxic swaps, San Francisco successfully leveraged a public campaign to save money and win substantially better terms from JPMorgan Chase.

Jono Shaffer, a leader with the Service Employees International Union who helped run the campaign in San Francisco explained, “We worked with the Mayor and Controller’s offices in San Francisco to force Chase to the table and avert the crisis. As a result the bank agreed to terminate the swap without charging us $18.5 million in penalties, return $13 million of collateral, refinance us into an affordable fixed-rate loan and to reduce to the outstanding principal on the loan by $21 million.”

The social service infrastructure in Illinois is already in crisis as a result of the ongoing budget impasse. Testimony during the hearing warned of the human toll on Illinois residents if the state paid out in full on the swap deals.

“The $870 million payoff to the banks we are talking about today is sufficient to pay off, in full, all human services providers who are under contract with the state and have not been paid for services rendered over the past 11 and ½ months, since the start of fiscal year 2016 on July 1, 2015. This includes service providers in the areas of infant mortality, homeless youth, mental health, addiction prevention and treatment, respite care, supportive housing, and centers for independent living,”, stated Dan Lesser, Director for Economic Justice at the Sargent Shriver National Center on Poverty Law, to the committee.

Erica Rangel, Lead Community Organizer with Enlace Chicago which runs one of the few Ceasefire programs still operating in the state commented, “These banks have contracts with the state – just like our programs have contracts with the state.  The only difference is, the contracts with the banks are being honored.  Ours are not.  When our government prioritizes big banks who have cheated our state through bad deals over life saving programs – then we have lost our way.”

“Although Springfield has been unable to pass a budget it is our hope that our elected officials can work together to prevent money that should be going to educate our young people and protect our most vulnerable residents from being eaten up by Wall Street bankers,” stated Amisha Patel, Executive Director of Grassroots Collaborative, following the hearing. “Otherwise, the Governor and legislative leaders can take any remaining claim they have to fiscal responsibility and throw it right out the window.”

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Failure of Emanuel Administration to Push Through Swap Payments a Victory for Working Families

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The House failed to bring the Fair Tax Amendment (HJRCA 59) to a vote, missing the deadline for placing it on the ballot for the upcoming November elections. The Fair Tax amendment, that would have allowed voters to vote on a constitutional amendment to implement a progressive income tax enjoyed massive public support in both Democratic and Republican districts. By not taking up the amendment, Governor Rauner and House Republicans allowed Illinois to continue to head in the wrong direction.

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The Peoples Agenda, a path to prosperity for all IL families

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The House failed to bring the Fair Tax Amendment (HJRCA 59) to a vote, missing the deadline for placing it on the ballot for the upcoming November elections. The Fair Tax amendment, that would have allowed voters to vote on a constitutional amendment to implement a progressive income tax enjoyed massive public support in both Democratic and Republican districts. By not taking up the amendment, Governor Rauner and House Republicans allowed Illinois to continue to head in the wrong direction.

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Failure to Pass Fair Tax Amendment Will Take High Human Toll in Illinois

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The House failed to bring the Fair Tax Amendment (HJRCA 59) to a vote, missing the deadline for placing it on the ballot for the upcoming November elections. The Fair Tax amendment, that would have allowed voters to vote on a constitutional amendment to implement a progressive income tax enjoyed massive public support in both Democratic and Republican districts. By not taking up the amendment, Governor Rauner and House Republicans allowed Illinois to continue to head in the wrong direction.

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Failure to Pass Fair Tax Amendment Will Take High Human Toll in Illinois

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Springfield, IL – Today the House failed to bring the Fair Tax Amendment (HJRCA 59) to a vote, missing the deadline for placing it on the ballot for the upcoming November elections.  The Fair Tax amendment, that would have allowed voters to vote on a constitutional amendment to implement a progressive income tax, enjoyed massive public support in both Democratic and Republican districts. By not taking up the amendment, Governor Rauner and House Republicans allowed Illinois to continue to head in the wrong direction.

“Increasing state revenue has become a matter of life and death in our community,” stated Erica Rangel with Enlace Chicago. “Our Ceasefire program has saved lives and prevented numerous acts of violence before they happen. The reality is that by not passing common sense revenue Springfield is choosing to let people die instead of making the needed investment in the future of our young people.”

Amisha Patel, Executive Director of Grassroots Collaborative stated, “Springfield should have learned by now that not voting on the tough issues does not make them go away. Our state needs long term structural solutions. Illinois ranks 47th in spending on core public services despite being the 5th largest economy in the US. We have a real revenue problem, we need our leaders to not run away and address this structural issue. We cannot have a stable budget until we modernize our tax structure and make the rich pay their fair share.

Governor Rauner has used his bully pulpit, PAC funds, and his role as head of the Illinois GOP to recklessly push his own personal agenda at the expense of Illinois’s people and economy. The Turnaround Agenda is dead. Instead of pressuring his party to obstruct passage of popular, equitable, and rational solutions Governor Rauner should be working with the legislature to fully fund the programs and services our state needs.”

Even without Fair Tax being on the ballot in November, there are many other revenue solutions that legislators can pursue including closing corporate loopholes, enacting a financial transaction tax, and ending bad bank deals. A full list of revenue solutions can be found the in Grassroots Collaborative’s People’s Agenda: http://thegrassrootscollaborative.org/sites/default/files/ThePeoplesAgenda.pdf

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Decatur Residents Demand Illinois Budget with New Revenue

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As Budget Impasse Continues, Residents Speak Out on Damage Being Done to Local Community

Decatur, IL – On Monday, Decatur residents and elected officials called on officials in Springfield to pass a fair budget that raises new revenue from those who can most afford it, and funds the programs and services that Decatur residents need.

Speaker after speaker detailed the devastating impacts that the 10 month old budget impasse has had on Decatur residents.  Speakers called on Gov. Rauner and other officials in Springfield to stop holding the budget hostage, and pass a fair budget with new revenue before the end of May.

“I’ve been hurt by the budget impasse and so have my children,” stated Amber Ginger during the press conference. “My son can no longer go to the doctor to get the services that he needs because of the lack of a state budget. Our lights are off because of the budget impact on the LIHEAP program. I’m speaking out because I know I am not the only one being impacted, there are many other people in Decatur with their lights off too.”

Participants made it clear that they believe there is a way forward.  They asked legislators in Springfield to take immediate action to create new revenue for the state, by asking the wealthy of our state to pay their fair share.

“The people of Decatur are a smart investment. We need a state budget that recognizes that fully funding programs and services help our residents succeed and contribute back to the state economy,” said Lisa Stanley, City of Decatur Supervisor.

“We need to have real revenue solutions,” stated Cheryl Flowers, Grassroots Collaborative organizer and Decatur resident. “Illinois is the 5th largest economy in the US but ranks 47th in spending on public services. We have to stop trying to cut our way out of this mess and instead invest back into the people of our state as our Midwestern neighbors have. If we had their tax rates we would be talking about surpluses instead of deficits. Decatur residents deserve to be invested in.”

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