Author Topic: IL Mustachians - What are your thoughts/plans given our state's financial mess?  (Read 6282 times)

Trede

  • Stubble
  • **
  • Posts: 113
  • Age: 49
  • Location: IL
Those who don't live in IL might not realize that our state legislature has two days left to pass a state budget before the start of the next fiscal year (July 1).  We'd be entering our third year without a state budget.  The state's credit rating from a couple of sources is one level above junk, and the state has been warned that if we go into a new fiscal year without a budget, expect to hit junk bond status.  Here's one of several national-level stories on the matter as background:

https://www.bloomberg.com/news/articles/2017-06-28/illinois-is-in-a-6-billion-budget-hole-and-flirting-with-junk

I'm wondering if other IL Mustachians are adjusting their FIRE plans or thinking through options with an eye on this hot mess.  Mr. Trede and I are already planning to FIRE outside of this state (honestly, can't wait to leave), but I've got a very nice paying job and where we want to go I'm not likely at all to find an opportunity anywhere close to my current level.   I've no faith that IL will set itself right however, and my thoughts are to how many years we have to make our escape before the house won't sell or some other severe financial impact screws up our plans.

Is anyone else here in IL and thinking through options, or can help me structure "what ifs" on the financial impact to residents?  My best guess, making comparisons to Puerto Rico, is that we'll hit junk status, keep digging a financial hole, and about two years from now a special event will happen (federal government steps in?).  Our governor gets ousted in 2018, but that won't lead to financial responsibility.  Also, when the next market correction hits, the situation gets even worse.  I've even thought about whether we should sell the house and rent, just to get the equity out before ... whatever happens.

Linea_Norway

  • Walrus Stache
  • *******
  • Posts: 5211
  • Location: Norway
I have nothing to do with IL, but your alternative with cashing in the house and renting a place for some years sounds sensible to me. They say that nobody can look into the future and see what house prices will do. But in this case you might be able to make a well estimated guess, more than usual. Selling on a house price top is seldom wrong.

secondcor521

  • Handlebar Stache
  • *****
  • Posts: 2167
  • Age: 50
  • Location: Boise, Idaho
  • Big cattle, no hat.
    • Age of Eon - Overwatch player videos
I would give serious consideration to the sell-and-rent strategy.

Also, for what it's worth, I doubt the federal government would step in to help rescue Illinois any time before January 2021.  There would be too much political hay to make.  Also, the federal debt is a continuing concern, and any bailout would likely add to that problem in a measureable way.  They might make Illinois-folk happy for a bit, but they'd probably piss off a lot of people in the other 49 states.  It could also result in bailout requests from other states like CA and NY.

What I see is the state declaring bankruptcy (more likely) or a bailout from the IMF (much less likely).  I could additionally imagine wholesale political change at the state government level, but I'm not sure why that hasn't happened yet or how that would play out if it did.

It's really a bummer because I'm sure there are plenty of good, hardworking Illinois-folk who are going to get hurt at some point.

My opinions and predictions are of course worth what you paid for them.

Dictionary Time

  • 5 O'Clock Shadow
  • *
  • Posts: 84
We want to move to Indiana.

We're in a holding pattern while the youngest finishes high school. Nothing wrong with IN schools or particularly great about our school, it would just be a hard transition for him to make.  My husband calls him our "Illinois Anchor Baby."

So I'm hoping that even if the SHTF by Spring 2019, housing prices won't be hurt too much by then.  I am banking that the transactional costs of selling and renting for 2 years would be higher than any drop in prices.  We're in central IL, and haven't really seen much of a boom lately, who knows.


Capsu78

  • Pencil Stache
  • ****
  • Posts: 700
  • Location: Chicagoland
Yes, we have both Illinois anchor children as well as Il anchor grandchildren under 15 minutes away.  As fundamentally as I agree with heading for the exits, I have another pull that says I will not place a fustercluck of incompetent state and local governments going back 3/4 of a century run me off from my family.  I just need to knuckle under and accept it as a very high cover charge.

TheStachery

  • Guest

SV19

  • 5 O'Clock Shadow
  • *
  • Posts: 17
My wife and I both live in IL but have plans to move to Texas within the next ten years. We have plenty of family down there to make the transition easier. We currently rent due to paying off other debts but honestly we may just continue to rent until we're ready to move.

Only reason we have not already moved is because while she would be fine professionally (she's an RN), I don't feel as confident in finding work.

wevan

  • 5 O'Clock Shadow
  • *
  • Posts: 15
We want to move to Indiana.

We're in a holding pattern while the youngest finishes high school. Nothing wrong with IN schools or particularly great about our school, it would just be a hard transition for him to make.  My husband calls him our "Illinois Anchor Baby."
On the other hand, keep in mind that it'd probably take a year (or longer?) before Indiana colleges would give you in-state tuition rates.  If he's planning to go to school there, it might help to move sooner rather than later?

Inaya

  • Handlebar Stache
  • *****
  • Posts: 1621
  • Age: 34
  • Location: Chicago, IL
I was already planning to move back to NM for LCOL when I FIRE. Currently living in downtown Chicago, renting at a good rate from my cousin--it's a sweet deal and I see no reason to give it up until FIRE (as long as he continues to rent to me). I had considered buying a place in my current building with an I to making it a rental when I FIRE, but I've decided that might not be the best plan. Might reconsider if the property tax freeze goes through. The current financial situation doesn't affect me all that much, but it makes me sad for all the people who are suffering from the lack of social services. I've become disillusioned with one of the orgs I donate to, so I might donate that money to a cause affected by the impasse.

Tris Prior

  • Magnum Stache
  • ******
  • Posts: 2794
I have no idea what to do about this. I have an anchor elderly mother so I'm here as long as she is (and based on family history she's probably got another 20 years in her). I rent, so I don't have to worry about unloading property.

I fantasize about moving out of Chicago all the time but I'm not really sure what fits my wishlist and has a decent COL (public transport-friendly, blue state, no cold winters).

Like Inaya, the lack of social services really worries me. My previous Chicago neighborhood had a lot of crime and drug issues because it was a hub for social services for the very mentally ill. All that got shut down, along with the shelters and supportive housing, and these folks all ended up on the streets, literally - we have tent cities under our viaducts. Where else were they supposed to go?

I'm not sure I see it getting better. I'm volunteering with Alderman Pawar's gubernatorial campaign and he has some ideas for raising revenue (legal weed, progressive income tax so that the uber-wealthy pay their fair share - yes, I know that is probably not a popular idea on this board!), but I am honestly not certain whether one person can turn it around, even if he does manage to get elected despite being a progressive who isn't white or wealthy. I worry that we're just too far in the hole.

secondcor521

  • Handlebar Stache
  • *****
  • Posts: 2167
  • Age: 50
  • Location: Boise, Idaho
  • Big cattle, no hat.
    • Age of Eon - Overwatch player videos
I fantasize about moving out of Chicago all the time but I'm not really sure what fits my wishlist and has a decent COL (public transport-friendly, blue state, no cold winters).

Bend, Oregon maybe.

Dictionary Time

  • 5 O'Clock Shadow
  • *
  • Posts: 84
We want to move to Indiana.

We're in a holding pattern while the youngest finishes high school. Nothing wrong with IN schools or particularly great about our school, it would just be a hard transition for him to make.  My husband calls him our "Illinois Anchor Baby."
On the other hand, keep in mind that it'd probably take a year (or longer?) before Indiana colleges would give you in-state tuition rates.  If he's planning to go to school there, it might help to move sooner rather than later?

Since he's the third, we have looked into it and if our whole household moves to the state he wouldn't have the 12 month waiting period.

What I can't believe is that this is a slow-motion train wreck and no one in any position wants to do anything to fix it.  I don't know what the end game is - maybe they are in the know about a bailout, or they are going to make it so unpleasant that a huge tax increase sounds better, or they figure it's the next guy's problem.

Bicycle_B

  • Handlebar Stache
  • *****
  • Posts: 1825
  • Mustachian-ish in Live Music Capital of the World
If renting is as cheap as buying, then maybe selling now makes sense.  More so if you live in a university area, since the university system is being hit particularly hard.  Precaution makes extra sense if your job is directly dependent on state funds. 

I have had family in all of these situations.  Only one family member left in IL now, down to zero houses owned.  Have vaguely pondered whether purchasing rentals near university AFTER a bigger crash could make sense, but only decided to wait and see.

I think Illinois due to its own mistakes is becoming the poster child whose problems will make other states take care of their own finances.  California improved after the recession, Illinois chose to keep shooting its own feet.

YttriumNitrate

  • Pencil Stache
  • ****
  • Posts: 536
  • Location: Northwest Indiana
I work in Illinois and live in Indiana (riding home on the South Shore line as a type this). My general impression is that in Illinois services are going to go down, and taxes are going to go up. With locked in legacy costs and a shrinking/stagnant population these results seem to be a forgone conclusion. Really, it's just a question of how the pain gets distributed. My guess would be that in 2020, Illinois' income tax will be back to 5%, property taxes will have gone up a bit, and many of the first-to-be-cut services will remain cut.

Trede

  • Stubble
  • **
  • Posts: 113
  • Age: 49
  • Location: IL
Thanks to all for responding.  I thought some might enjoy an update.  The IL House passed a budget with separate bills for revenue and spending, the revenue side increasing both personal and corporate taxes.  The IL Senate passed both the next day.  That same day, our governor vetoed the budget, on the grounds it did not include anything on his reforms agenda (such as a freeze on property taxes, etc.).  The IL Senate immediately voted to override his veto.

We're now waiting to see if the IL House can also muster the votes to override the veto.  Why aren't they voting today?  UNABLE TO FIELD A QUORUM.  That's right.  Not enough representatives can manage to show up to vote.  They are hoping to field a legislative team on Thursday.

HeadedWest2029

  • Stubble
  • **
  • Posts: 172
Another central Illinois resident.  I suspect the experience of Illinois woes will vary greatly from person to person depending on location (Chicagoland property prices vs central Illinois on down south), county property tax rates, and industry.  In central Illinois property prices are very low, but my county property taxes are stupid high (in terms of effective tax rate).  I work for a social services agency so we've been hammered by the uncertainty, but have weathered the storm way better than most.  I too plan on retiring elsewhere (Colorado, PNW, New Mexico, abroad...so many choices).  However, like others I'm anchored by family / friends, social networks, good outdoor opportunities nearby, overall low cost of living, and a satisfying place to work.  Illinois will need to cut spending, increase the tax base, and somehow prevent a mass exodus without triggering a recession when we've avoided a solid recovery during one of the biggest bull markets ever.  I don't think we have the horses in government currently to navigate this successfully.

Where I'm at in Illinois, I've never looked at real-estate as an investment.  At best I hope for it to match inflation.  Always good idea to check the numbers though https://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html

Abe

  • Handlebar Stache
  • *****
  • Posts: 1261
For the people wanting to flee, what specifically are you worried will happen in the short and long term? I do expect income tax to go up at some point, and probably property taxes depending on the locality - neither sound like a "head for the hills" scenario to me. Is there something else to worry about? If you're FIREd there isn't much that a state government could do to really put a dent in things (unless everyone is planning on Medicaid, which probably will get a big cut regardless of Illinois' mess).

I'm moving to California in two days so have no skin in the game anymore. Just interested in your concerns.

chasesfish

  • Magnum Stache
  • ******
  • Posts: 3027
  • Age: 37
  • Location: Texas
    • Years in the making, I created a journal!
There's a reason most of IL's companies seem to be moving to Texas....no income taxes,  similar property taxes, and lower cost housing than Chicago.  Its also not so darn cold in the winter.

Good luck figuring that mess out, really sucks to be paying for promises made and not funded 20-30 years ago to pensioners.

Fishindude

  • Handlebar Stache
  • *****
  • Posts: 2068
I own a farm in southern IL but live in an adjacent state.   The states problem is not a lack of money or income, their problem is a spending problem and it's just about to hit a brick wall.
Hard decisions are going to have to be made to get things in order which will include reworking of existing pension plans and elimination of a bunch of unnecessary state government employees and layers of bureaucracy. 

They won't be able to double state income or property taxes overnight or anything stupid like that to make up the shortfall, people won't stand for it.  They are going to have to cut budgets, eliminate jobs, cut benefits, any any other unnecessary state spending.   

Most of Illinois land mass is rural, small & mid-size towns, with good hard working people.  It's a shame the big city politicians control the purse strings and have driven the states finances into the gutter.

chasesfish

  • Magnum Stache
  • ******
  • Posts: 3027
  • Age: 37
  • Location: Texas
    • Years in the making, I created a journal!
I own a farm in southern IL but live in an adjacent state.   The states problem is not a lack of money or income, their problem is a spending problem and it's just about to hit a brick wall.
Hard decisions are going to have to be made to get things in order which will include reworking of existing pension plans and elimination of a bunch of unnecessary state government employees and layers of bureaucracy. 

They won't be able to double state income or property taxes overnight or anything stupid like that to make up the shortfall, people won't stand for it.  They are going to have to cut budgets, eliminate jobs, cut benefits, any any other unnecessary state spending.   

Most of Illinois land mass is rural, small & mid-size towns, with good hard working people.  It's a shame the big city politicians control the purse strings and have driven the states finances into the gutter.

There's a really interesting comparison to this in Georgia, where they have the opposite problem.  The state has the same demographics, predominately rural with one large city.  For whatever reason, the legislature ends up being controlled by the rural voting block so money is funneled away from metro Atlanta to the rural areas.  Its great in theory, until you end up with a 30 year traffic boondoggle that cripples the state's ability to grow.  Almost all traffic through the state routes through Atlanta too.

SimpleCycle

  • Pencil Stache
  • ****
  • Posts: 886
  • Location: Chicago
Like Abe, I'm not really sure what I'm supposed to be worrying about.  I feel for those affected (my daycare provider has been pretty screwed by this mess) and I want it straightened out, but basically worst case scenario is my taxes go up a bit.  I own a home in Chicago, and I basically feel like the city's problems are priced into the market.  I think the housing market is in a bubble for reasons unrelated to the state crisis, but since my home is a place to live and not an investment, I just KOKO.

Trede

  • Stubble
  • **
  • Posts: 113
  • Age: 49
  • Location: IL
I guess I feel like I'm living with a ticking time bomb that will affect my house value and my ability to sell it, as well as the collapse of the social net in the state and yes, to a lesser extent, my property and income taxes.  I don't even mind selling my house for a little less if IL manages to limp along, but I have this fear that I'll either have to sell it for a lot less (leading to OMY for a really crappy reason) or it won't move at all in a few years.  I guess I've got no concept of how steep the cliff is that IL is marching toward.  Do I have a few years yet and my worries are overblown?

I honestly think our state government is so bad that they won't continue to work on the financial mess (the latest budget bills don't really solve the problems).  Passing this budget (House votes to override Rauner's veto this afternoon) in my mind is better than another year like the last two, but I've yet to hear the answer to "and then what?"

frugaliknowit

  • Handlebar Stache
  • *****
  • Posts: 1649
For now, I am anchored here by my job and because Chicago is so bikeable, where I can live without owning a vehicle.  This more than offsets the higher taxes I will have to pay in the future.  I own a small one bedroom condo that's paid for (which if "I could turn back time...", I would NOT have bought when I did...)  Once my job expires or I FIRE, I will consider an alternative.

Sibley

  • Magnum Stache
  • ******
  • Posts: 3456
  • Location: Chicago, IL
I work in downtown Chicago, but just bought a house in northwest Indiana. Am also starting to look around at jobs that might improve me commute, or the micromanagement that has been creeping in at the office.

I deliberately looked at Indiana, as I didn't want to pay the housing prices or property taxes of Illinois.

Inaya

  • Handlebar Stache
  • *****
  • Posts: 1621
  • Age: 34
  • Location: Chicago, IL
On a slightly related topic, has anyone else not gotten their IL tax refund yet? I submitted mine and March, but at mytax.illinois.gov , it's shown We have received and are currently processing your return. for months.

Bicycle_B

  • Handlebar Stache
  • *****
  • Posts: 1825
  • Mustachian-ish in Live Music Capital of the World
On a slightly related topic, has anyone else not gotten their IL tax refund yet? I submitted mine and March, but at mytax.illinois.gov , it's shown We have received and are currently processing your return. for months.

Reminds me of when I took my dad to a dentist a couple of years ago and they wouldn't take his paid-for-by-State-of-Illinois dental plan.  Already at that time, the state's payments to such providers were over a year late.  I hope your refund comes sooner than that.

@Trede, I think my dad's example suggests that things will be gradual mostly.  This has been building up for years already.  I guess no one can tell whether it will spike at point and in retrospect you say "I should have sold the house on August 3 of 2017", but it's hard to know "the date" even if it exists.  Gradual problems are already in process, therefore my guess is continued gradual problems.  In which case I think the wise move is limit your risks but move at a pace that is sensible in your own life.  Anyway, good luck.

HeadedWest2029

  • Stubble
  • **
  • Posts: 172
On a slightly related topic, has anyone else not gotten their IL tax refund yet? I submitted mine and March, but at mytax.illinois.gov , it's shown We have received and are currently processing your return. for months.

I got mine in March. You may want to inquire

TheStachery

  • Guest
Now that they passed this budget, its going to mean big tax hikes for all in IL.  A family making 100k can expect an additional 1200.00 in taxes.  I worry that corporations in IL will either leave or lay off employees to make up for the new corp tax hike.  Everyone in IL just took a big paycut, and possibly could lose their job.  I don't see how this helps the IL economy.

Glad I don't live there.

saijoe

  • 5 O'Clock Shadow
  • *
  • Posts: 96
I am in the Northern Chicago suburbs.  I own my home and am pretty close to being able to FIRE.  The property taxes is what will keep me from staying.  I pay pretty close to $9K for a home valued at $200K. 

I have read that no other state has school funding so closely tied to property taxes.  That means the haves (I guess I'm in that category) have very good schools and the have-nots have very poor schools.  We were here because of family and good schools.  But the kids are gone, so we'll likely leave.  And we'll exacerbate Illinois' bigger problem, the people who pay the bills get fed up and leave. 

TheStachery

  • Guest
I am in the Northern Chicago suburbs.  I own my home and am pretty close to being able to FIRE.  The property taxes is what will keep me from staying.  I pay pretty close to $9K for a home valued at $200K. 


I live in a LCOL area.  on a 300k house i pay $1600.00.   We also don't have state income tax.  We also don't have snow removal either.  Also, some of the best schools in the US.

saijoe

  • 5 O'Clock Shadow
  • *
  • Posts: 96
Let me guess the state...Tennessee?

Tris Prior

  • Magnum Stache
  • ******
  • Posts: 2794
On a slightly related topic, has anyone else not gotten their IL tax refund yet? I submitted mine and March, but at mytax.illinois.gov , it's shown We have received and are currently processing your return. for months.

I would call and inquire; that seems like an unnecessarily long delay. I was shocked to get my refund 2 weeks after my accountant transmitted it, because I assumed it would be delayed due to IL having no money.

Abe

  • Handlebar Stache
  • *****
  • Posts: 1261
The housing market is a fair point - but I bet a lot of people don't look that closely at property taxes when looking for housing. Maybe they should, but don't. It would affect budgeting for early retirees if the taxes go up substantially. It won't necessarily require relocation to a different state. For example I Chicago I'm paying a $3k less property tax than you on a $500k property. I guess then the worry is then that the negative publicity about Illinois' lack of leadership will make companies and thus employees leave Illinois? That's a valid concern. I do think that long-term effects will be significant if you are still working. However, so much of a Early Retiree's fortune is dependent on global factors that I'd be surprised if these local issues make a big dent in the outcome.

pablo

  • 5 O'Clock Shadow
  • *
  • Posts: 5
I would give serious consideration to the sell-and-rent strategy.

Also, for what it's worth, I doubt the federal government would step in to help rescue Illinois any time before January 2021.  There would be too much political hay to make.  Also, the federal debt is a continuing concern, and any bailout would likely add to that problem in a measureable way.  They might make Illinois-folk happy for a bit, but they'd probably piss off a lot of people in the other 49 states.  It could also result in bailout requests from other states like CA and NY.

What I see is the state declaring bankruptcy (more likely) or a bailout from the IMF (much less likely).  I could additionally imagine wholesale political change at the state government level, but I'm not sure why that hasn't happened yet or how that would play out if it did.

It's really a bummer because I'm sure there are plenty of good, hardworking Illinois-folk who are going to get hurt at some point.

My opinions and predictions are of course worth what you paid for them.

Sadly for Illinois, bankruptcy is not an available option for states. The federal bankruptcy code that you might be familiar with  - Chapters 7, 9, 11, 13, etc, apply to all sorts of entities (such as individuals, corporations, non-profits, and NON-state municipalities such as cities or counties) EXCEPT for states. Recall from the US constitution that states are sovereign. An Illinois state default would likely end up being an extremely messy contract law-based process that would take years and years to unravel in both federal and Illinois courts.