In Illinois, when it rains, it really pours.
This week, according to an Associated Press report, Illinois is quickly depleting its “rainy day” fund to pay for day-to-day expenses. The fund’s purpose is to help Illinois weather an economic downturn, recession or other unexpected events. Experts say that the fund should have a balance of $1.5 billion to $3 billion. As of August 13th, the fund had a balance of just $180 million. And that balance is expected to be zero within a couple of weeks. The AP went on to report that “Illinois was ranked as the least prepared state of those with a (rainy day) fund because its account has been used to help pay day-to-day bills when there’s not enough in the general operating fund”.
At the same time, it becomes clearer each day that the state’s “stopgap” spending plan does not even stop any gaps. Human service providers around the state indicate that any payments they receive will not allow them to hire back staff they lost, and many still face shutdown at the end of the year if the stopgap lapses. Similarly, public universities cannot retain students and faculty as they leave in droves for other states.
This week’s news shines a bright light on another question. In a period of such prolonged fiscal distress, in which we have strained our social service infrastructure to the breaking point, endangered the future of institutions of higher education, and further disrupted state services and programs, why is the Rauner Administration about to give away almost 1 billion dollars to Wall Street banks like JPMorgan Chase?
Illinois is in danger of having to make a bulk payment of almost $1 billion to Wall Street banks this year. This payment would be triggered by a failure of the Rauner Administration to secure extensions of six Letters of Credit which accompany the state’s interest rate swap agreements.
As of July 31, the governor’s office was able to request extensions of these Letters of Credit from the six banks that hold them. Obtaining the extension would keep the almost $1 billion available for paying the state’s daily expenses. Not requesting those extensions, is like giving big Wall Street banks an early Christmas present — a very expensive one.
Rather than pursuing those extensions, Governor Rauner’s administration has quietly begun to make full and early payments to Wall Street banks. Rauner’s Tollway Authority has already paid out an interest rate swap early, resulting in JPMorgan Chase and Goldman Sachs receiving a combined $2.7 million in “termination payments.”
It is bad enough that we have let the rainy day fund run down to zero. Now the Governor seems to be letting a billion dollars run off to Wall Street banks. That’s much more than just a drop in the bucket.