Credit outlook, Tornado, coal plant shutdowns & more
Slight upgrade to Illinois’ credit outlook. The three major New York-based bond-rating agencies agree that the State of Illinois has the lowest credit rating among the 50 states. Using the terminology published by two of the three rating agencies (Standard & Poor’s and Fitch Ratings), Illinois has had a BBB- credit rating – the lowest level above “junk bond” territory – with a “negative outlook” for further changes. Any reduction in Illinois’ credit rating from BBB- would push the State’s general obligation (GO) debt, the bonds Illinois sells to finance a wide variety of day-to-day capital expenses, into the realm of non-investment-grade securities.
Fitch Ratings this week revised Illinois’ debt outlook from “negative” to “positive.” The move reaffirmed Illinois’ sub-optimal GO bond rating, but also offered hope that a move to fiscal prudence by Illinois lawmakers and the State could pull it up from the brink of
junk bond territory. The rating agency praised Illinois’ “operating performance and structural balance” during the post-pandemic reopening of the American economy, while noting that Illinois’ economy and budget outlook had not yet returned to pre-pandemic levels.
Illinois and its taxpayers will continue to be required to pay much higher interest rates that the taxpayers of other debt-issuing states. The interest rates that lenders charge BBB- borrowers is significantly higher than the near-zero interest rates currently charged to AAA states, such as Illinois’ neighboring state of Indiana.
With vaccination rates slowing down, Illinois creates lottery incentive. The $10 million prize package for vaccinated Illinoisans includes $7 million in cash payouts and $3 million in Bright Start 529 college savings plans. Under the rules of the “All In for the Win” vaccine incentive, all of the residents who have received COVID-19 vaccinations are eligible to have their name selected. The prizes will be distributed in the form of cash payouts of $1 million to $100,000, and the college savings plan prize program will distribute twenty savings plans in amounts of $150,000 each.
The COVID-19 vaccine lottery idea was first implemented in Ohio. Other states, including Illinois, have taken up the idea. The Illinois vaccine lottery will be funded through the federal American Rescue Plan Act (ARPA). The Illinois Lottery will draw names each week starting on Thursday, July 8.
Tornado hits Naperville and neighboring suburbs. A severe EF-3 tornado hit the Chicago-area communities of Naperville, Woodridge, and Darien this week, injuring Illinois residents and causing property damage, including damage to at least 230 homes. The tornado left a 16-mile-long track in its path from Naperville to Willow Springs. Approximately 22,000 customers of Commonwealth Edison lost power because of the tornado and severe storms.
There are many things Illinoisans can do to prepare for severe summer weather. The Illinois Emergency management Agency has published a Severe Weather Preparedness Guide with tips for emergency lighting, household activities in times of extended power outage, safe avoidance of downed power lines, and more.
More Illinois coal plant shutdowns announced. The announcement came from NRG Energy, operator of coal-fired power plants located in Romeoville and Waukegan, Illinois. The two plants employ a total of 111 workers. The plants burn coal and generate almost 1,200 megawatts of electricity. A series of decisions powered by state and law, and the policies of electric grid operators, have affected one coal plant after another. In the 2021 pricing and regulatory system of Illinois electric power, the price offered by the grid to the plant creates less cash flow than what the plant needs to operate. Responding to a May 2021 electric grid pricing announcement, Houston-based NRG Energy stated that the Romeoville and Waukegan units would close down in June 2022.
Coal-fired electric power, once the industrial backbone of Illinois life, has become increasingly marginalized in recent years. The two shutdown announcements represent the last two coal-burning power plants in northeastern Illinois, with the 689-megawatt Waukegan plant having begun operations in 1958 and the 510-megawatt Romeoville plant going into service in 1963. These Chicago-area plants were built during the post-World War II suburban housing development push. The NRG announcement was made on Thursday, June 17.
More than 600 bills sent to Governor’s desk following spring 2021 session. Far away from the headlines, members of both parties in the Illinois House and Senate worked on many pieces of legislation in the first half of 2021. Many of these bills were technical measures designed to implement needed changes in legislative language, or to move a legal process forward after agreements by a variety of stakeholders. Clerks have counted more than 660 bills passed by majorities in both houses.
Although some of the bills enacted by the General Assembly have already been signed into law – in particular, three highly partisan measures to enact a State budget, redraw the maps of the Illinois General Assembly, and redraw the maps of the Illinois Supreme Court and its judicial districts – these partisan bills have already run into trouble. The budget has already had to be re-enacted after the first version was passed with numerous drafting errors, the General Assembly map faces litigation, and the Supreme Court has already placed a stay on the judicial map. At the same time, most of the day-to-day work of legislators in the first half of this year was not at all partisan and is slowly working its way through the process.
After a bill is passed by both houses, a final copy (called the “enrolled” bill) is reviewed. The enrolled bill must be sent to the Governor within 30 calendar days after its passage. The Governor must sign or veto each bill within 60 days after presentation to him or her. These deadlines are contained within Section 9 of Article IV of the Constitution of Illinois.
University of Illinois, other campuses to require proof of COVID-19 vaccination. As part of their planning for the fall semester in 2021, the University of Illinois System is preparing to mandate that all on-campus students show proof of vaccination for COVID-19. The U of I System includes three undergraduate campuses in Chicago, Springfield, and Urbana-Champaign. The System also includes medical campuses, institutes, and affiliated operations of scholarship and higher education located throughout the state. Other Illinois colleges and universities are putting similar rules in place. The U of I announcement followed the creation of near-universal vaccine availability for persons above age 12.
Unemployment rates down, jobs up in every metro area. The number of nonfarm jobs increased over-the-year in all fourteen Illinois metropolitan areas in May according to preliminary data released Thursday by the U.S. Bureau of Labor Statistics (BLS) and the Illinois Department of Employment Security (IDES). The unemployment rate decreased over-the-year in all metro areas.
The number of nonfarm jobs increased in all fourteen Illinois metropolitan areas. The metro areas which had the largest over-the-year percentage increases in total nonfarm jobs were the Springfield MSA (+9.0%, +8,500), the Davenport-Moline-Rock Island IA-IL MSA (+8.3%, +13,600), and the Champaign-Urbana MSA (+7.8%, +8,400). Total nonfarm jobs in the Chicago Metro Division rose by +7.3%, +241,400. The industries that saw job growth in a majority of metro areas included: Retail Trade and Leisure & Hospitality (fourteen areas each); Other Services and Government (twelve areas each); Mining and Construction (eleven areas); Manufacturing, Transportation, Warehousing and Public Utilities and Education & Health Services (ten areas each); and Wholesale Trade and Professional & Business Service (nine areas each).
Over-the-year, the unemployment rate decreased in all 14 metropolitan areas; the areas with the largest unemployment rate decreases were the Rockford MSA (-11.9 points to 8.4%), the Carbondale-Marion MSA (-11.0 points to 5.1%) and the Elgin Metropolitan Division (-10.3 points to 5.3%). The Chicago-Naperville-Arlington Heights Metropolitan Division unemployment rate fell -7.9 points to 7.9%. The unemployment rate also decreased over-the-year in all 102 counties.
Illinois’ Unemployment Insurance Trust Fund faces $5 billion deficit. Unemployment insurance benefits are paid by the Illinois Department of Employment Security (IDES). The program is funded by the Illinois Unemployment Insurance (UI) Trust Fund, a rainy-day fund built up though taxes paid by employers. With unemployment spiking at high double-digit rates during the height of the COVID-19 pandemic, the Illinois UI Trust Fund was depleted. Furthermore, the insolvent fund was forced to borrow money from the U.S. Department of Labor in order to enable the continued payout of benefits already promised to unemployed workers.
This put the Illinois UI Trust Fund deep into the red. IDES reported to policymakers in mid-May that the UI debt to Washington, D.C. had already reached $4.2 billion. This meant that the system was $5.2 billion “in the red,” counting at least $1 billion to restore the rainy-day portion of the fund to a significant positive level. Current projections call for this accumulated debt and repayment requirement to rise up to $8 billion.
Congress has granted the states a temporary clock stoppage on pandemic UI debt. No interest is due on this massive debt through the summer of 2021. However, the clock will start up again in September 2021. Starting after Labor Day, Illinois and its UI Trust Fund will begin to owe interest to Washington, D.C. on these billions of dollars in UI debt. Knowing that federal interest would soon come due, House Republicans demanded in May that Illinois allocate a significant portion of its one-time American Rescue Plan Act (ARPA) federal aid money to partially pay down this massive debt. However, the Pritzker Administration and Democrat majorities in the General Assembly only allocated a crumb ($100 million) of ARPA money to chip away at this massive new UI debt.
The remainder of this debt will have to be paid for in other ways by Illinois employers and workers. This multi-billion-dollar UI debt load is separate from other massive debts owed by Illinois, including general-revenue bonded debt, non-general-revenue bonded debt, and unfunded pension obligations.
Changes coming to Illinois college sports scene. A decision this week by the U.S. Supreme Court has continued the overall upheaval facing teams, players, and athletic directors. A lengthy rulebook, enforced for decades by the NCAA, has up until now strictly limited the forms of compensation that can be paid to or spent on behalf of college student-athletes. This week’s Supreme Court decision in the case of NCAA v. Alston did not directly remove these limits, but it ended the legal justification that has been used up until now to give them legal standing. Major Illinois universities and their student-athletes, including players at the University of Illinois in Urbana-Campaign, are discussing the new ruling and its effect on their lives.
The Supreme Court ruling follows up on actions taken by the Illinois General Assembly in the spring 2021 legislative session. These actions included a move to allow Illinois sports bettors to place bets on Illinois college teams, and a legal move to allow student-athletes to negotiate for compensation for the use of their names, images, and likenesses by commercial sponsors. The name-image bill has been sent to the governor’s desk for expected final action. Illinois college athletes could be in a position to sell the use of their names and likenesses as soon as July 1, 2021. The Illinois college sports betting proposal has been passed by the House by a vote of 96-11-1, and sent to the Senate for concurrence.