State treasurer doesn’t want to be ‘a pessimist’
BY STEVE METSCH email@example.com August 8, 2011 3:52PM
Updated: September 24, 2012 6:25AM
As Illinois Treasurer Dan Rutherford spoke Monday about the state’s bleak financial situation, Wall Street was taking another beating.
The state’s problems might be the tougher of the two to fix, he indicated. While conceding that there’s not much incentive for vendors to work with the state because of its problems paying bills, Rutherford hopes that when it comes to the stock market, folks with 401(k) accounts will continue investing.
“You need to have good financial advisers. It’s the best opportunity we have out there right now,” Rutherford said, speaking with media after he addressed a luncheon meeting of the Chicago Southland Chamber of Commerce at the Tinley Park Convention Center.
Rutherford has not lost faith in the lately volatile stock market, which saw the Dow Jones industrial average fall more than 634 points Monday.
“I think (after) what we saw
happen (last week) and what we saw happen (Monday), the market will start to turn around,” Rutherford said.
Still, he didn’t sound completely sold when asked why he was confident.
“A lot of it is psychological,” Rutherford conceded. “If the treasurer of Illinois doesn’t say it’s going to turn around, then it’s a negative psychology.”
During the luncheon, he painted a rather bleak picture of the state’s finances, saying Illinois deserved close to a failing grade in terms of its credit ratings.
Comparing the state to a student in a class, he said Illinois would “get a D-minus on an A to F scale.”
Illinois is tied with California for the worst bond rating among states.
“The lower your rating, like any person or bank, your credit risk is higher. You pay higher interest,” he said.
He offered as an example Illinois having borrowed $3.7 billion in the bond market in April.
“The interest, being as bad as we are, is $1.3 billion, so approximately one-third of the principal that we borrowed, we have to pay back in interest,” he said.
It could get worse. The federal government’s credit rating, which was lowered Friday for the first time in history, from AAA to AA+, could have a negative trickle-down effect on states and communities, leading to higher interest rates for the money they borrow as well.
“It’s a realistic picture,” Rutherford said. “I don’t want to be unrealistic, and I don’t want to be a pessimist, but I think we can be realistic.”
While he urged the state to cut spending, he offered no specific targets.
After apologizing for delivering his “cheery report,” Rutherford added that the outlook isn’t promising for businesses owed money by the state, either.
“Right now, there is not a good incentive for vendors to do business with the state. I’m going to tell it like it is. I’m not going to sugarcoat it,” Rutherford said.
He criticized a lack of accountability in state government.
“The state government does not have a balance sheet, and if they did and it was like it is today, they’d be thrown in jail like any company in the private sector,” he said.
After Rutherford spoke, state Rep. William Davis (D-East Hazel Crest) said it’s not easy to cut spending and cover the state’s $8 billion deficit.
“He talked about (having) no more debt,” Davis said. “What about restructuring debt? If there was an opportunity to restructure our state debt, get better interest rates and pay our vendors, that’s something we should have done.”
Davis also offered no specific areas in which to cut spending but said, “It always seems that we are always resurfacing or rebuilding roadways that don’t need it.”