Bloomberg reports that Illinois lawmakers have merely days to cover their current $13 billion deficit:
Illinois lawmakers will try this week to accomplish in a few days what they have been unable to do in the past two years — resolve the state’s worst financial crisis.
The legislative session that began today as the House convened will take aim at a budget deficit of at least $13 billion, including a backlog of more than $6 billion in unpaid bills and almost $4 billion in missed payments to underfunded state pensions.
Credit default spreads in Illinois are even higher than my beloved People’s Republic of California!
Insuring $10 million of Illinois debt against default cost $350,000 a year on Dec. 29, more than California’s $298,000, according to data compiled by Bloomberg. Illinois and Arizona were the weakest states in a Dec. 30 financial-strength index report from the Chicago office of BMO Capital Markets, a financial services company.
And bond king Bill Gross agrees that Illinois is in the worst shape out of any state.
But will Illinois actually default? An astute reader based here in California recently wrote to me, reminding me of all the options available to avoid outright default here. This stuff always seems to take longer than it should to play out. And this probably will be no different…though I wouldn’t want to be a holder of muni bonds right now!
Muni bonds under siege! (Source: StockCharts.com)