The federal government continues to pile up debt at a staggering rate. In August alone, the US government added $450 billion to the national debt. But Uncle Sam isn’t the only one who doesn’t have enough money to pay his bills. Forty state governments are also drowning in red ink.
Total state government debt now stands at $1.49 trillion with 40 states lacking sufficient funds to pay their bills according to Truth in Accounting’s (TIA) Financial State of the States report.
There is a mass exodus from Illinois.
According to the US Census Bureau, the Prairie State lost a net 33,700 residents in fiscal year 2017. More people bailed out of Illinois than any other state in the US. And based on calculations the folks over at ZeroHedge worked out, the exodus was even worse than the Census Bureau numbers indicate.
Of course, the net population loss masks the true gross outflow of Illinois residents as it doesn’t account for natural births/deaths. Assuming that Illinois has the same natural population growth as the US as a whole (0.7%) implies that the state lost a staggering ~125,000 residents in aggregate, or roughly 1 man/woman/child every 4.3 minutes.”
So, why the big rush to bail out of the great state of Illinois?
What happens when government officials spend with virtually no restraint and they don’t have a printing press that can crank out more money?
Last week, both S&P Global Ratings and Moody’s Investors Service downgraded Hartford’s credit rating deeper into junk status. According to a Reuters report, the downgrade puts Hartford near the bottom of the credit scale. This means the agencies view the city as essentially in default with little prospect for a full bondholder recovery.
Lawmakers in Illinois appear on the verge of passing the state’s first budget in two years. The measure includes a $5 billion tax increase on the good people of of the state. But the Illinois’ finances are in such a mess, even that may not be enough. It looks likely that even if the politicians get things done and finally pass a budget, the state still may find its credit rating downgraded to junk.
This shows just how bad things are in the Land of Lincoln. Let this sink in for a moment – the state is so far in debt that not even a $5 billion income tax increase can’t put its fiscal house in order.
Illinois’ credit rating is on its way to “junk” status.
According to an AP report, S&P Global Ratings recently warned it will likely lower Illinois’ creditworthiness to below investment grade if feuding lawmakers fail to agree on a state budget for a third straight year.