(The Center Square) – According to a new report on financial red flags, Illinois has a higher debt ratio than any other state and Chicago is the most financially tenuous place in America.
Reason Foundation used audited financial reports from state governments and the nation’s 100 largest cities, counties and school districts to evaluate them in eight measures of financial health.
Reason Foundation Research Director Geoff Lawrence said Illinois is way upside down, with a debt ratio of 276%.
“It has way more debt than assets, $80 billion in total assets versus $220 billion in debt, so if you were to try to liquidate all of the state’s assets to pay off all its debts, it would be impossible,” Lawrence told The Center Square.
The report also flagged Illinois for liabilities per capita and unrestricted net position.
Lawrence said Chicago residents are facing heavy city and county debt on top of federal and state debt.
“In addition to what you owe to the federal government in terms of outstanding debt per citizen, you owe substantial amounts as well to every level of local government,” Lawrence said, adding that the city continues to dig the hole.
“They outspent revenues by about $580 million in the last year for which we have data,” Lawrence said.
Chicago received seven out of a possible eight red flags, narrowly missing the eighth.
Lawrence said Chicago owes $77 billion against $49.8 billion in assets, not including Chicago Public Schools debt of more than $93,000 per student.
“That means for a prolonged period, the city is going to have to start spending significantly less money than it’s bringing in, and we haven’t seen any evidence that the city is willing to do that yet,” Lawrence said.
The report authors said analysis of Detroit’s financial condition at the end of fiscal year 2012 would trigger seven red flags, noting that city’s bankruptcy experience in 2013 bodes poorly for Chicago.
“If the city doesn’t turn this around, they’re eventually going to be looking at insolvency, potentially defaulting on debt, maybe going into a municipal bankruptcy proceeding to try to restructure their debts,” Lawrence said.
The report gave Cook County three red flags, in part due to a debt ratio of 269% and per capita debt of $3,999 for each taxpayer.
“When considering the effect of overlapping jurisdictions, the most financially tenuous place in America is clearly Chicago, where the city exhibits seven red flags while the school district exhibits five, Cook County exhibits three, and the state of Illinois also exhibits three,” the report concluded.
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