Illinois CDS Default Probability Above Iraq, Unpaid Bills $4.71 Billion

The Illinois Comptroller's Office released the state's fiscal year 2010 results and said "Illinois ended the year in the worst fiscal position in its history". They have a backlog of $4.712 billion in unpaid bills and fund transfers. Taxes took a hit as well, sales tax receipts were down 6.9%, corporate income tax receipts fell 20.5% and individual income tax receipts fell 7.7%. The Governor proposed a "$1.3 billion “revenue failure” short-term borrowing for late July".

On May 17, 2010 I reported that Illinois had $4.5 Billion In Unpaid Bills for FY Q3, so unpaid bills are up $200 million. Today I saw that Illinois CDS (credit default swaps) were trading above Iraq when measured in CPD% (cumulative probably of default). According to CMA's most actives, Illinois 5Y CDS closed at 361.38 basis points with a 27.31% CPD, while Iraq 5Y CDS closed at 440.70 bps and 26.99% CPD (table snapshot below). California CDS is trading right below Iraq on the highest default probability list (343.67 bps, 26.65% CPD). What the hell happens now. Federal bailout? Legalize marijuana (tax revenue)? Higher tax rates? Google buyout? Municipal merger? Or default.

Sovereign CDS Highest Default Probabilities (more info at CMA)

I quoted a few paragraphs from the Illinois Comptroller's July Quarterly that dig into numbers.
"Throughout fiscal year 2010, both the state’s financial condition and cash flow position continued to deteriorate rapidly, as spending pressures were left largely unabated and as the recession continued to impact state revenues. Illinois ended the year in the worst fiscal position in its history. At the end of June, the backlog of unpaid bills and fund transfers in the Illinois Office of the Comptroller (IOC) stood at $4.712 billion. This compares to last year’s end of year payables of $2.785 billion. Just as important, the delay in paying vouchers was 153 working days this June compared to 99 days at this time last year. Some transfers to other state funds have been delayed for the entire fiscal year and the state was unable to transfer $276 million back to the Budget Stabilization Fund on June 30th. Both the amount payable and the days delayed are record highs.

"The chart of adjusted General Revenue Fund (GRF) balances shows the balance on June 30, 2010 to be a negative $4.692 billion. This is the lowest end of year balance on the chart and will be the lowest budgetary balance in history after accounting for spending in the state’s lapse period."
"While base revenues decreased 4.2% in fiscal year 2010, it is the decline in economic revenue sources that greatly impacted the IOC’s ability to pay the state’s bills. Corporate income tax receipts were down 20.5%, sales tax receipts have decreased $465 million or 6.9%, and individual income tax receipts fell $712 million or 7.7%. These declines were partially offset by transfers into the General Funds. With the failure in economy-driven revenues, the Governor has proposed a $1.3 billion “revenue failure” short-term borrowing for late July."
The full document can be found at

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