Tuesday, August 6, 2013

Ty Fahner Puts Illinois Taxpayers on Hook for $130 Million

Ty Fahner Puts Illinois Taxpayers on the Hook for $130 Million, Boasts about It, Then Denies It.

In a recent interview, an avuncular Gov. Pat Quinn bemoaned the penalty Illinois will now face as a result of a recent downgrade in bond ratings by Moody’s and Standard and Poor’s.   Unaware of the strong armed interference of the Civic Committee of the Commercial Club and its leader Ty Fahner, Quinn mistakenly assumed his usual myopic focus: it must be the pensions (http://wuis.org/post/quinn-says-lower-credit-rating-costly). 

Indeed, the abyss dug by decades of stealing from the public sector pensions and not paying back what was due has generated a nearly $100 billion debt service for the state.  On the other hand, Quinn was oblivious of the part the leader of the Civic Committee and his fellows played (or boasted they had played) in the downgrading of Illinois’ bond rating. Moody's downgraded Illinois' $27 billion of general obligation debt to A3 from A2, with a negative outlook after state lawmakers last week failed to pass a plan to deal with a $100 billion unfunded public pension liability” (http://articles.chicagotribune.com/2013-06-06/business/chi-moodys-downgrades-illinois-20130606_1_pension-reform-negative-outlook-ratings-services 

The following month, another rippleMoody's Investors Service slashed Chicago's general obligation and sales tax ratings by three notches to A3 from Aa3 due to the city's large and growing pension liabilities and related budget troubles. 

In another recent and bizarre interview, Commercial Club President Tyrone Fahner of the Civic Committee bragged of his organization’s influence and direct involvement in the downgrade of general obligation debt for the state.  Always the stern and media-minded patriarch, Fahner described in some detail how the Civic Committee had chastised the members of the bond rating agencies for considering anything but a serious downgrade to affect political and public reaction.

Fahner: “The Civic Committee, not me, but me and some of the people that make up the Civic Committee, some of the same names I mentioned before, did meet with and call, in one case it was in person, a couple of calls to Moody’s, Fitch and Standard & Poor’s, and say, 'How in the hell can you guys do this? You’re an enabler to let the state continue. You keep threatening more and more and more.' And I think now we’ve backed off, because we don’t want to be the straw that breaks the back, But if you watch what happened over the last few years, it’s been steadily down. Before that, it’s been the blind eye, and that’s a whole different topic, as you know, about how the rating agencies act and don’t act. That’s more in your field and stuff. It has been irresponsible. We have told them that we thought they were being irresponsible, but we stopped that a couple months ago. I do know that we suggested that they talk to the governor, the governor’s staff to see if he could give them comfort on where the state was going, and I think that’s one of the reasons why we’re really close now. I hope we’re close”

NOTE: As a result of the downgrades, Illinois will pay an extra $130 million in interest on a bond issue this week due to lowered credit ratings presumably because the state has not been able to solve its pension crisis, but perhaps because of influence by the bully pulpit of the Civic Committee of the Commercial Club of Chicago and its well-heeled corporatist members. 

In an email to Rich Miller of Capitol Fax, Fahner now says he misspoke.   He describes his comments as “confusing and inarticulate…”   He remembers saying that such an action would not have been “the responsible thing for me to do…” so he couldn’t have done it.  A look back at the transcript undermines his excuse quite nicely.

Remember always that Mr. Fahner is a forceful lobbyist, promoting and pushing his non-profits and PAC's (We Mean Business, Illinois Is Broke, Civic Committee) to remind or even teach Illinois that pensioners are a problem - even when they are not the cause of the debt Illinois has wracked up.

And perhaps Ty Fahner is now realizing what his bombastic counseling of the state's financial evaluators can do in the long run?

"'There are investors who won't buy Illinois or bonds with Illinois labels at any price. They just see it as toxic,' said Brian Battle, director at Performance Trust Capital Partners, a Chicago-based investment firm. That means the state pays 'the biggest penalty by a long, long shot.'"
"Battle compared the Illinois situation to someone who has a good job and plenty of revenue. But 'we just spend like crazy, don't pay our credit cards and haven't saved for retirement,' he said.
"Take the $1.3 billion in bonds Illinois is expected to sell this week to improve highways, rebuild a 40-year-old elevated train line in Chicago and buy land for an airport. Battle estimates the state will pay more than $18 million in extra interest each year than states such as Virginia or Maryland, which have high credit ratings.
"That's an additional $450 million over the 25-year life of a bond issue. In personal terms, it's $36 taken directly from the pockets of each of Illinois' nearly 13 million residents. And that's for just one bond sale"  (http://www.huffingtonpost.com/2013/06/25/illinois-credit-rating-st_n_3496264.html).

Nice Work, Tyrone.  Well done, Civic Committee. 


  1. Fahner and his cronies are not out to provide solutions but merely to condemn the teacher's pension......that's it in a nutshell. Typical of the way politicians, or those who think they are connected to politics, work in this state. They are not out for the good of the people in the state of Illinois, only for their own, selfish interests. So does this surprise me what the Civic Committee led by Fahner did, not in the least.

  2. This article should be published on the front page of every paper in Illinois. Why should teachers be at the heart of this attack? Because we have been villified by everyone as weak and incompetent. Fahner is truly just piling on to a perceptionn that is far from true. He wouldnn't last a week in a Chicago classroom. Then ask him about our far from lavish retirement. He and his cronies need to mind their own business and/or be cell mates with Blagovich!

  3. Wasn't the most recent Illinois bond sale oversold? By three times? Meaning bond purchasers thought it was a great deal and 200% were not able to purchase bonds.