Journalist in Residence
I remember my consumer education teacher at Galesburg High School explaining how to achieve a good credit rating.
We learned that the worse your credit rating, the harder it is to borrow. And when people with bad credit do borrow, they pay a much higher interest rate.
Here are my teacher’s tips on having good credit:
- Pay your bills on time.
- Don’t spend more than you earn.
- Don’t borrow too much.
- Don’t make financial promises you can’t keep.
If only our current state leadership could have sat through that class 30 years ago.
They might have learned something.
Standard and Poor’s Rating Services just dropped Illinois’ credit rating to A- from A. There is not another state in the union with credit as lousy as ours. We are worse off than California.
We got in this predicament the same way a person with bad credit would.
- Illinois doesn’t pay its bills on time.
- Last year the state spent $738 million more than it took in.
- The state is dripping with debt.
- Under new accounting rules, the state’s unfunded pension liabilities exceed $200 billion.
Since Gov. Pat Quinn took office in 2009, the three major rating agencies have downgraded the state’s credit worthiness 11 times.
Because of this Illinois now pays 1.45 percentage points more than the nation's top-rated states on 10-year bonds.
And we are now just one more downgrade away from junk-bond status.
“It really important to remember that we have had 20 downgrades in the entire history of the state and 11 of them have been under Pat Quinn,” said state Senate GOP leader Christine Radogno. “We have seen a period of time here that we have been woefully lacking in leadership and the ability to get something done. I think that has led to the downgrade.”
It’s easy to dismiss percentage points and terms like “junk-bond status” as Wall Street concerns of little importance to the rest of us.
But paying higher interest rates on bonds may mean less money for schools, fewer state troopers patrolling highways and even longer lines when you renew your driver’s license.
More importantly, the feedback from rating agencies provides an independent voice giving a prognosis on our state’s financial health.
And that prognosis is clear. Illinois is CTD – circling the drain.
Illinois politicians like to trot out familiar bromides such as: “There are no easy solutions.”
There may not be easy solutions, but it’s worth noting that 49 states have found better ways to manage their finances than Illinois has.
Places like Kansas are actually considering eliminating state income taxes. Illinois lawmakers, on the hand, jacked up our tax rates 67 percent two years ago. Rhode Island has embraced pension reform while Illinois has dithered.
And before we start hearing that Illinois needs to raise its taxes again to improve its credit, please note that the state is taking in more tax revenue now than it has at any time in its 195-year history.
Yeah, you read that right.
We are taking in money at a steady clip, but still heading toward bankruptcy.
Illinois’ problems are on the spending front.
The credit rating agencies know it, and you should, too.