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    Entries in Illinois (10)

    Wednesday
    Oct122016

    The Week in Public Finance: Wells Fargo's Punishment, a Surprising Study and Kansas' Forecasting Blues

    BY  OCTOBER 7, 2016

    Governments Punish Wells Fargo

    Some governments are temporarily cutting ties with Wells Fargo thanks to a scandal involving thousands of unauthorized accounts.

    This week, Illinois and the city of Chicago announced they're joining California and suspending their relationship with the bank for at least one year. Meanwhile, Massachusetts, Oregon and the city of New York are reviewing their business ties with the firm.

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    Friday
    Aug122016

    The Week in Public Finance: Why Some Pensions Are Falling Behind, Stress Testing States and More

    A roundup of money (and other) news governments can use.
    BY  AUGUST 12, 2016

    Pollyannaish About Pension Returns

    Houston is fighting a losing battle with its pension system: The unfunded liability between Houston’s three plans totals at least $3.9 billion, up from $212 million in 1992. Meanwhile, pension costs as a percentage of the city’s revenue have doubled since 2000 and were one of the reasons behind a recent credit rating downgrade.

    new report from Rice University’s Kinder Institute identifies two main culprits for the funding crisis: Even though the city is now paying its full pension bill, it’s still not enough to chip away at the unfunded liability, and the three plans have assumed investment returns of between 8 and 8.5 percent -- that's higher than the national average and even higher than their own recent experience.

    The report's authors looked at examples of pension changes in other major cities and highlighted potential solutions, including raising the cap on the city’s revenues so it can generate more money for pensions; increasing employee contributions; and reducing cost-of-living payments to retirees. “All of these options would generate different amounts of funding in different time frames,” the report said. "[But] none would likely solve the problem alone.”

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    Friday
    Jul222016

    The Week in Public Finance: Hot Munis, Cooling Off Creditors and Warming Up to Facebook

    A roundup of money (and other) news governments can use.
    BY  JULY 22, 2016

    It’s July and Muni Bonds Are Hot

    The municipal bond market could be off to its best start since 2010, when federal policies helped fuel new issuance. During the first six months of this year, a total of $221 billion in bonds have been brought to market by state and local governments, according to data from the Securities Industry and Financial Markets Association (SIFMA). The total includes new bonds and refinanced ones.

    Most of that activity has come from the second quarter of the year, specifically in May and June when the volume of new bonds in each month was the highest since 2008, according to an analysis by RBC Capital Markets’ Chris Mauro. Even Puerto Rico’s recent default on a $2 billion debt payment has not appeared to phase investors or hurt interest rates.

    The market is currently on pace to finish the year with over $430 billion in issuance. But with more than five months to go before the end of the year, anything could happen -- particularly with a volatile presidential contest underway. Last year, the pace cooled in the second half of the year, with the value of total bonds issued finishing just shy of $400 billion. Still, Mauro said he is increasing his original prediction of new bond volume to somewhere between $400 billion and $425 billion.

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    Thursday
    Jun302016

    Who Should Police Municipal Markets?

    A questionable bond sale in Illinois has left some wondering why there's no one to stop financially troubled governments from borrowing.
    BY  JUNE 30, 2016

    Borrowers have long assumed that banks and other traditional lenders will only loan them as much money as they can responsibly afford. Almost a decade ago, the subprime mortgage crisis shattered that belief. But it might still persist in the municipal market.

    Take Illinois, whose fiscal woes are no secret. It has the lowest credit rating (BBB+) -- by far -- of all 50 states, its pensions are among the worst-funded in the country and it's entering its second fiscal year without a budget. Yet earlier this month, Illinois borrowed more than a half-billion dollars from municipal market investors with relative ease.

    The state paid a higher interest rate for its troubles. But thanks to the high demand for municipal bonds these days, the rate was actually lower than the one Illinois paid on its last bond issuance in January.

    "That's the biggest weakness of the municipal market," said Matt Fabian, managing director for Municipal Market Analytics. "We will help issuers borrow as much as they say they want, whether or not they can afford it."

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    Friday
    Jun102016

    The Week in Public Finance: Punishment for Illinois, Budget Battles and New Jersey's Win

    A roundup of money (and other) news governments can use.
    BY  JUNE 10, 2016

    A Battle Over Illinois’ Downgrade

    Illinois was downgraded this week to two steps above junk status by Moody’s Investors Service. The downgrade is largely due to the state’s inability to pass a budget for the past year and a half. A political stalemate has crippled lawmaking in the state and Illinois -- already the lowest-rated state -- is being docked now with a Baa2 rating. The state’s current budget gap has only worsened over the past year. The structural budget deficit, including what Illinois is supposed be spending on pensions but isn’t, amounts to 15 percent of total general fund expenditures, Moody’s said. A day after the Moody's downgrade, Standard & Poor's also downgraded Illinois.

    Apparently unperturbed by the fact that its overwhelming debt is what got it into this pickle, Illinois plans to borrow a half-billion in bonds later this month. The downgrade will likely increase the interest rate Illinois will have to pay on those bonds and impact the state’s outstanding $26 billion in debt.

    Not long after the downgrade, the world’s largest money manager said investors should boycott Illinois’ upcoming sale.

    “We as municipal market pa

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