Illinois treasurer to governor: No 'junk' for credit trunk

The state's Democratic treasurer issued Illinois Gov. Bruce Rauner an unsolicited to-do list for staving off fiscal failure Monday, directing the Republican to get behind the state's first budget in two years and "dial down the rhetoric."

Treasurer Michael Frerichs, at times sounding like a boarding-school headmaster, told a Chicago news conference that Rauner must go to New York. There, Frerichs said, the multimillionaire former private equity investor must persuade credit-rating agencies that he's committed to the $36 billion spending plan that lawmakers enacted last week over his vetoes and to hold off on knocking Illinois' creditworthiness to "junk" status.

Rauner's office rejected the call and refused to pledge support for the enacted budget — which ended the nation's longest state budget standoff since at least the Great Depression — and instead labeled it out of balance and urged lawmakers to continue negotiating. Frerichs said such a response "signals the possibility that the governor will not implement the budget package, thereby inviting downgrade."

Two major bond houses gave Illinois a reprieve last week after approval of a budget built on $5 billion income tax increase. A third, Moody's Investors Service, warned that despite the expected infusion of cash, the Prairie State's $14.7 billion heap of overdue bills and $130 billion deficit in employee pension accounts still invited calamity. Junk status would force the state to pay even higher rates of interest on its debt.

"The governor is a very successful investor. As such, he understands the danger of junk bond status," Frerichs said. "I also believe that he has never navigated the hallways of government, because he has never served in government; he made his fortune taking significant risks, but always with the ability to walk away.

"The nuance of legislating and budgeting was, is and remains foreign to him," the first-term treasurer said. "We need to embrace pragmatism. The governor has yet to do that."

Frerichs was pointedly partisan but his remarks lacked the malice that continues to pervade the Capitol. Rauner has named the income-tax increase, a 32 percent jump in the personal tax rate, for his nemesis, Democratic House Speaker Michael Madigan of Chicago. In retaliatory fashion, when addressing the past-due bill pile which has tripled in 2 ½ years, Democratic Comptroller Susana Mendoza references the "Rauner Backlog."

"Dial down the rhetoric," Frerichs said. " ... Such vitriol is not productive."

Rauner was having none of it Monday.

"Madigan's 32 percent permanent tax increase will not solve the problems created by decades of unbalanced budgets, unfunded pension liabilities, borrowing and high debt," spokeswoman Eleni Demertzis said in a statement. "Even with the tax increase, this budget remains $2 billion out of balance."

Rauner announced an office shakeup Monday. He named 34-year-old Kristina Rasmussen chief of staff. Rasmussen was president and CEO of the conservative Illinois Policy Institute, to which Rauner is a major contributor. She replaces 33-year-old Richard Goldberg, who leaves the $180,000 post to return to private-sector consulting.

Other Frerichs prescriptions for Rauner include taking advantage of budget-law authority to borrow $6 billion. The interest rate would be at a premium, but far less than the 12 percent annual late-payment interest attached to the overdue bills

And he wants Rauner to make clear his intentions on an education-funding overhaul the Legislature overwhelmingly endorsed in May. The budget requires that no general state aid go to schools unless it's through the legislation's newly crafted formula to get more money to poorer schools with fewer resources. Rauner promises a veto, saying it's too generous to cash-strapped Chicago Public Schools.


Associated Press writer Sophia Tareen contributed from Chicago.


Contact Political Writer John O'Connor at . His work can be found at'connor