KeNo's Housing and Economic Portal: Friday October 15 Housing and Economic stories

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TOP STORIES:

Illinois Financial Health Grows Worse, Comptroller Hynes Says - (www.bloomberg.com) Illinois’s deteriorating financial condition threatens to swallow up more than half its general- fund budget in the next fiscal year, Comptroller Dan Hynes said.

The financial picture drawn by Hynes in a report yesterday projects a fiscal 2012 deficit of $15 billion or more, while this year’s budget calls for $26 billion in spending. The state’s financial condition “continues to deteriorate,” Hynes said, citing a 36 percent surge in fiscal 2010 bills to be paid from current-year revenue. The amount of unpaid obligations for the current year may balloon to $8 billion by June 30, when fiscal 2011 ends, Hynes said. That figure may increase if the state doesn’t make $3.7 billion in pension payments due this year, he said. The deficit and late payments of current debts may create “chaotic fiscal conditions as the situation snowballs,” he said. “The ability of the state to maintain any reasonable level of education and social-service funding -- and just as importantly, to pay for those services on a timely basis -- will be severely jeopardized,” Hynes said.

California Welfare Money Spent At Las Vegas Casinos - (www.kesq.com) Nearly $69 million in welfare money meant to help California's neediest families have been spent or withdrawn at locations such as Hawaii, Las Vegas casinos and cruise ships from Miami. The finding reported Monday in the Los Angeles Times is based on data compiled since 2007 by the California Department of Social Services. Data showed that the biggest chunk of out-of-state money - $11.8 million - was spent at casinos or withdrawn from ATMs in Las Vegas. The paper said there were also questionable transactions in Hawaii, Miami and Guam. The investigation showed out-of-state spending on state-issued aid cards was less than 1 percent of the $10.8 billion spent by welfare recipients from January 2007 to May 2010.

California Has to Delay Bills to Avert IOUs, Controller Says - (www.bloomberg.com) California may have to issue IOUs unless lawmakers agree to delay paying some of the bills that accumulated as Governor Arnold Schwarzenegger and legislative leaders negotiated a budget compromise, a spokeswoman for the controller’s office said. The deferrals are needed because California racked up $8.4 billion of delinquent bills as it operated without a spending plan for more than three months, said Hallye Jordan, spokeswoman for Controller John Chiang. That’s more than the $5 billion bridge loan TreasurerBill Lockyer is lining up from a group of Wall Street banks to tide the state over. Schwarzenegger and top lawmakers said Oct. 2 that they agreed on how to close a $19.1 billion deficit and end a stalemate that has left the most populous U.S. state without a spending plan since the July 1 start of its fiscal year. Chiang said repeatedly that a prolonged impasse could force him to issue IOUs for a second-straight year in order to conserve cash to make priority payments such as debt service. “Nobody wants to do IOUs because of the damage it will do to our credit ratings right as we will need to borrow,” Jordan said. “IOUs are an option nobody wants.”

Cities in Debt Turn to States, Adding Strain - (www.nytimes.com) Harrisburg, the capital of Pennsylvania, dodged financial disaster last month by getting money from the state to make a payment to its bondholders. It did so even though the state warned that the money had to be used for city workers’ pensions. Now Harrisburg is calling on the state again. On Friday, the city said it could not meet its next payroll without money from the state’s distressed cities program. Across the country, a growing number of towns, cities and other local governments are seeking refuge in similar havens that many states provide as alternatives to federal bankruptcy court. Pennsylvania will have 20 cities and smaller communities in its distressed-cities program if Harrisburg receives approval. Michigan has 37 in its program; New Jersey has seven; Illinois, Rhode Island and California each have at least one. This is on top of troubled housing, power and hospital authorities. The increasingly common pleas for state assistance — after two relatively quiet decades — reflect the yawning local budget deficits that have appeared in the last two years.

Moody's warns of Irish downgrade as recovery falters - (www.reuters.com) Moody's warned on Tuesday that it may cut Ireland's credit rating again, pointing to the huge bill for cleaning up its banks announced last week, a weak economic recovery and rising borrowing costs. Ireland's services sector shrank for the first time in six months in September, a survey showed separately, following data last week which showed its manufacturing sector was back in recession. The beleaguered Irish government says it could cost up to 50 billion euros ($68.5 bln) to unravel banks' property losses, driving the cost of Dublin's borrowing to three times that of Germany and prompting renewed jitters about debt elsewhere in the euro zone. The banks bill will quadruple national debt levels to 155 billion euros or over 100,000 euros per household. "Ireland's ability to preserve government financial strength faces increased uncertainty," Dietmar Hornung, Moody's lead sovereign analyst for Ireland, said in a statement.