For the record, Moody’s Investor’s Service said Tuesday that it was reclassifying the status of bonds from Baa2 to Ba1 with a negative outlook. That’s one grade below investment level and means that anyone buying a Chicago-issued bond is doing so on speculation.
IN THE WORLD of high finance, the slang term is “junk bonds.” As in our finances are supposedly so uncertain that we can’t be trusted to repay the debts incurred.
The only people who technically would buy such bonds are those looking for a bargain, figuring they can get them so cheap that, what the heck have they really got to lose.
But while many municipalities like to boast about how high their ratings are with the bond rating services, we in Chicago can no longer do that.
What brought this act on was the ruling last week by the Supreme Court of Illinois – the one that struck down the General Assembly’s attempt to fix the way the state funds its pension programs for retired state workers, educators and legislators.
THERE WERE A lot of people gloating at that act because they wanted to perceive it as evidence that Democrats had managed to bungle the attempt to resolve the state’s financial problems.
Now, we still have those problems, and the longer they last the greater they will linger. It’s a complete mess. But now we have to consider the reality that their politically partisan “victory” results in a business failure that will impact the whole state.
Personally, I always have been skeptical of reading too much into the actions of business-oriented agencies, because their concerns don’t always match up with those of the public at large.
Let’s not forget that when then-Gov. Pat Quinn signed into law the pension reform measure, the bond rating agencies reacted favorably because we fixed our problem.
SO BY THEIR logic, it was good for us to do something that was later found to be unconstitutional. While taking up the issue again is a bad action; one that reduces us to the level of “junk.”
Does this mean that when our political people manage to come up with another solution to this problem, we will get our bond rating upgraded again?
Will our financial status cease to be trashy and decrepit?
Or could this be financial technicalities that we all are reading way too much into? It’s hard for me to get too worked up over this – even though I realize it means our government is going to get whacked with even more interest payments when it has to take on the cost of borrowing money.
HAVE WE REALLY come down to the level of being the equivalent of the kind of person whose only financial option is to use payday loan stores whenever they have debts that just can’t be postponed any longer?
Or is this something more akin to the status of the Chicago River, which back when I was younger much was made of the fact that the water quality was considered to be toxic. Mere contact with its water was a health hazard.
Our river is still something you don’t want to drink directly or take a swim in. But it has been cleaned up in recent years to the level where it is now merely classified as “polluted.”
How long will it take our political people to bolster the city’s finances to the point where they’re no longer toxic, but merely polluted?