Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
Support MFO
Donate through PayPal
Illinois Lottery Can't Or Won't Payoff Big Lottery Winners
Illinois is issuing IOUs until it passes a budget to lottery winners who will be getting windfalls.
It's a big leap from that to implying that Illinois is financially unable to pay the winners. Both articles cited in this thread say only that it is illegal for Illinois to pay the winners now.
California had money to pay its debts but because it failed to pass a budget it was legally forced to issue IOUs. Those IOUs happened to be (for awhile) "money" you could take to the bank, literally. Bank of the West, Citibank to keep accepting California IOUs
Just two quick points. Receiving IOUs is not the same as getting stiffed (although it feels like it), and government shutdowns tend to be largely political . Planned Parenthood, really?
As to what happens after a fiscal year begins without a budget, we can check history. When did those Calif. IOUs get paid? When did federal workers furloughed in 2013 get backpay? Did anyone have to wait until the next fiscal year?
I'll guess that by experts you mean the NRSROs. They say Illinois is A rated, and they define A rated as having a STRONG capacity to meet its financial commitments.
If one believes what they're saying, then Illinois has the capacity to pay off the winnings, and its failure to do so is thus strictly a legal matter. It is illegal to pay off large winnings without a budget in place. Not conjecture, but fact.
That's the point. If you want to discuss Illinois' ability to service debt (this is an investing forum), I'm happy to do so. See below. But the idea that a legal statute prohibiting paying lottery winners has anything to do with a fiscal ability to pay is fatuous. The only connection is that what triggers the statute is a budget impass, which may have nothing or everything to do with money.
Ask me what I think about the Illinois budget, and I'll say that the state has some hard decisions to make. And they do seem to have a dysfunctional budgeting process. Still, the state government did not actively decide to withhold lottery payments. Heck, from the looks of it, they can't decide to do anything except fund education. The legislature passed and the governor signed legislation to keep the school system going. That's all they've been able to agree on.
Regarding Illinois bonds:
What S&P wrote in July (FY 2015 ended June 30th): "From a credit standpoint, the absence of a budget does not have an immediate impact on the state’s ability to pay debt. General obligation (GO) debt service in Illinois benefits from a continuing appropriation and the state has made provisions to ensure payment of its moral obligation debt coming due through August."
The ability to pay debt (bonds - principal and interest) is what the credit agencies rate. Though as we know, S&P seems to like commenting on political processes, and its assessment of Illinois' process is decidedly negative ("a failure in the fiscal policymaking process" - same link). Can't argue with that.
Haven't you ever wondered why the state can pay off lottery winners under $25K? Shouldn't you be complaining about discrimination against the "rich"?
The answer is that the state, by law must segregate money for these smaller winings. Money for larger winnings must come from the general "public moneys of the state". Hence by law the larger winnings cannot be paid absent a spending statute or court order.
I'm hardly convinced that one can make this a federal case, literally, as you're suggesting (except for federally mandated programs). But you do have the right idea - courts (IMHO state courts) can intervene. And they have done so in the case of paying public workers. It looks like a state appellate court ruled on state constitutional grounds, and the state supreme court declined to accept an appeal.
In addition, as I wrote above, the legislature and the governor did agree on a law to fund K-12. The answer to the rest of your education question, higher education, is that
Funding for state universities and scholarships for low-income college students are on hold. Health insurance payments for state workers and retirees aren't being made. Agencies that serve the developmentally disabled and elderly aren't getting paid on time. They're turning away clients, and some may close their doors.
Regarding Enron - I agree with you, I would not be quoting these experts. But I also wouldn't write about how they said Illinois was a shaky state from a credit perspective. If they're not credible, then they're not credible.
You just need to register (free). I must have done this a long time ago; I had to use a different browser to (re)discover that the site needed a login.
Regarding Medicaid, I'm guessing that this article could be the one you read. While it does say that some hospitals "in the past" have been waiting for payments up to a year, it doesn't say that any long backlog was recent.
Rather, it seems to suggest the opposite: It says that in Cook County, a federal court ordered the state to continue Medicaid payments - so it appears the state had been making payments up to the end of FY2015 (June 30).
Comments
California had money to pay its debts but because it failed to pass a budget it was legally forced to issue IOUs. Those IOUs happened to be (for awhile) "money" you could take to the bank, literally.
Bank of the West, Citibank to keep accepting California IOUs
Just two quick points. Receiving IOUs is not the same as getting stiffed (although it feels like it), and government shutdowns tend to be largely political . Planned Parenthood, really?
As to what happens after a fiscal year begins without a budget, we can check history. When did those Calif. IOUs get paid? When did federal workers furloughed in 2013 get backpay? Did anyone have to wait until the next fiscal year?
If one believes what they're saying, then Illinois has the capacity to pay off the winnings, and its failure to do so is thus strictly a legal matter. It is illegal to pay off large winnings without a budget in place. Not conjecture, but fact.
That's the point. If you want to discuss Illinois' ability to service debt (this is an investing forum), I'm happy to do so. See below. But the idea that a legal statute prohibiting paying lottery winners has anything to do with a fiscal ability to pay is fatuous. The only connection is that what triggers the statute is a budget impass, which may have nothing or everything to do with money.
Ask me what I think about the Illinois budget, and I'll say that the state has some hard decisions to make. And they do seem to have a dysfunctional budgeting process. Still, the state government did not actively decide to withhold lottery payments. Heck, from the looks of it, they can't decide to do anything except fund education. The legislature passed and the governor signed legislation to keep the school system going. That's all they've been able to agree on.
Regarding Illinois bonds:
What S&P wrote in July (FY 2015 ended June 30th): "From a credit standpoint, the absence of a budget does not have an immediate impact on the state’s ability to pay debt. General obligation (GO) debt service in Illinois benefits from a continuing appropriation and the state has made provisions to ensure payment of its moral obligation debt coming due through August."
The ability to pay debt (bonds - principal and interest) is what the credit agencies rate. Though as we know, S&P seems to like commenting on political processes, and its assessment of Illinois' process is decidedly negative ("a failure in the fiscal policymaking process" - same link). Can't argue with that.
The answer is that the state, by law must segregate money for these smaller winings. Money for larger winnings must come from the general "public moneys of the state". Hence by law the larger winnings cannot be paid absent a spending statute or court order.
I'm hardly convinced that one can make this a federal case, literally, as you're suggesting (except for federally mandated programs). But you do have the right idea - courts (IMHO state courts) can intervene. And they have done so in the case of paying public workers. It looks like a state appellate court ruled on state constitutional grounds, and the state supreme court declined to accept an appeal.
In addition, as I wrote above, the legislature and the governor did agree on a law to fund K-12. The answer to the rest of your education question, higher education, is that Apparently the state courts haven't found any laws requiring these payments in the absence of an explicit budget statute. But it seems there is a law that the winnings get paid before the people running the lottery. So we might get to see it shut down after all.
http://www.chicagotribune.com/news/opinion/editorials/ct-lottery-ious-lawsuit-illinois-edit-0912-20150911-story.html
Regarding Enron - I agree with you, I would not be quoting these experts. But I also wouldn't write about how they said Illinois was a shaky state from a credit perspective. If they're not credible, then they're not credible.
Regarding Medicaid, I'm guessing that this article could be the one you read. While it does say that some hospitals "in the past" have been waiting for payments up to a year, it doesn't say that any long backlog was recent.
Rather, it seems to suggest the opposite: It says that in Cook County, a federal court ordered the state to continue Medicaid payments - so it appears the state had been making payments up to the end of FY2015 (June 30).
To put it another way, or as the judge in that case said: "The money is there. The money is available."
http://www.wbez.org/judge-orders-state-pay-cook-county-medicaid-providers-during-budget-impasse-112465