Obama Urges Congress to Pass Law Letting Puerto Rico Declare Bankruptcy; Great Idea, Let Illinois Do

Tsing Tao

Tsing Tao

Well done, Mr. President. Let's see if Congress has brain enough to sign it.

---------------
Puerto Rico is bankrupt. The key problem is that while municipalities can declare bankruptcy, states and territories cannot.

President Obama recognizes the problem. He says No Federal Bailout for Puerto Rico. Instead he urges Congress to pass a bill allowing Puerto Rico to declare bankruptcy.

The White House threw cold water Monday on the notion of bailing out Puerto Rico from its financial crisis, instead urging Congress to consider changing the law so the island can declare bankruptcy.

On the heels of a dismal economic report, Puerto Rico's governor has warned that the commonwealth can't pay its $72 billion public debt, delivering a serious blow to Puerto Rico's recession-addled economy. But White House spokesman Josh Earnest said the federal government would provide financial expertise and access to existing resources — but not a bailout.

The Obama administration declined to offer Detroit a bailout, and the city declared bankruptcy under Chapter 9 of the Bankruptcy Code in 2013.

As a U.S. territory, Puerto Rico can't file for bankruptcy under that chapter, which is limited to municipalities such as Detroit. But Puerto Rican Gov. Alejandro Garcia Padilla has said he's considering asking Congress to change the law so that Puerto Rico's public agencies could declare bankruptcy under Chapter 9 — an idea that seemed to gain traction at the White House.

Earnest said the White House was encouraging Congress to explore possibilities to allow Puerto Rico to make use of Chapter 9, which would allow the commonwealth to restructure its debt amid a nearly decade-long economic slump. Garcia is seeking to defer debt payments while Puerto Rico negotiates with its creditors.Idea Long Overdue

I welcome this action. But why limit the bill to Puerto Rico?

I say open this up to states like Illinois that will be doomed to the same fate eventually.
Read more at http://globaleconomicanalysis.blogs...congress-to-pass-law.html#7BwG7pUxLYpHvEfU.99
 
Good post. It is likely the State of Illinois' only viable alternative.

http://www.pepperlaw.com/publicatio...-pension-obligations-in-chapter-9-2014-10-20/

"In a significant Oct. 1 verbal bench ruling, U.S. Bankruptcy Chief Judge Christopher Klein of the Eastern District of California determined that the city's relationship with CalPERS is contractual and, therefore, its pension obligations can be impaired through bankruptcy. Apparently, while California law may prohibit Stockton from terminating its relationship with CalPERS, the statute may be preempted by the Bankruptcy Code and thus unenforceable. Moreover, assuming that pension benefits arise from contract, and the Bankruptcy Code allows for the modification of contractual rights, such benefits would not be immunized from reduction through a plan of adjustment. Coincidence or not, U.S. Bankruptcy Judge Steven Rhodes of the Eastern District of Michigan also recently decided in In re City of Detroit, 504 B.R. 97, 153-54 (Bankr. E.D. Mich. 2013), that, with respect to the city of Detroit, "pension rights are contractual rights ... subject to impairment in a federal bankruptcy proceeding." The Oct. 1 ruling may come somewhat as a shock to many who view pension obligations as sacrosanct property rights that are constitutionally protected."

Look at the obscene public pensions Illinois pays out:

http://dig.abclocal.go.com/wls/documents/Illinois pensions.pdf
 
bone said:
Good post. It is likely the State of Illinois' only viable alternative.

http://www.pepperlaw.com/publicatio...-pension-obligations-in-chapter-9-2014-10-20/

"In a significant Oct. 1 verbal bench ruling, U.S. Bankruptcy Chief Judge Christopher Klein of the Eastern District of California determined that the city's relationship with CalPERS is contractual and, therefore, its pension obligations can be impaired through bankruptcy. Apparently, while California law may prohibit Stockton from terminating its relationship with CalPERS, the statute may be preempted by the Bankruptcy Code and thus unenforceable. Moreover, assuming that pension benefits arise from contract, and the Bankruptcy Code allows for the modification of contractual rights, such benefits would not be immunized from reduction through a plan of adjustment. Coincidence or not, U.S. Bankruptcy Judge Steven Rhodes of the Eastern District of Michigan also recently decided in In re City of Detroit, 504 B.R. 97, 153-54 (Bankr. E.D. Mich. 2013), that, with respect to the city of Detroit, "pension rights are contractual rights ... subject to impairment in a federal bankruptcy proceeding." The Oct. 1 ruling may come somewhat as a shock to many who view pension obligations as sacrosanct property rights that are constitutionally protected."

Look at the obscene public pensions Illinois pays out:

http://dig.abclocal.go.com/wls/documents/Illinois pensions.pdf
More...
I think the pension models were based on 8% a year on their investments. At one time I considered 6% a year on a conservative diversified portfolio to be reasonable. But times have changed. More like 4% today. We all have to adjust. But I never counted on 8%.
 
Ricter said:
Ridiculous internet paywall.
More...

Pulls up the article directly for me... no paywall or nothing.

Illinois lottery winners have to wait for payout due to budget impasse
http://www.chicagotribune.com/news/...payments-delayed-met-0828-20150828-story.html

After years of struggling financially, Susan Rick thought things were looking up when her boyfriend won $250,000 from the Illinois Lottery last month. She could stop working seven days a week, maybe fix up the house and take a trip to Minnesota to visit her daughter.

But because Illinois lawmakers have not passed a budget, she and her boyfriend, Danny Chasteen, got an IOU from the lottery instead.

"For the first time, we were finally gonna get a break," said Rick, who lives in Oglesby. "And now the Illinois Lottery has kind of messed everything up."

Under state law, the state comptroller must cut the checks for lottery winnings of more than $25,000. And lottery officials said that because lawmakers have yet to pass a budget, the comptroller's office does not have legal authority to release the funds.

Prizes of $25,000 or less will still be paid at lottery claim centers across the state, and people who win $600 or less can cash in their ticket at the place where they bought it.

But the bigger winners? Out of luck, for now.

While lottery officials could not immediately say how many winners' payments were delayed or provide the total amount of those payoffs, the agency's website lists multiple press releases for winners since the current fiscal year began July 1. Including Chasteen, those winners represent millions of dollars in prizes.

The lottery is a state agency like many others, and we're obviously affected by the budget situation," Illinois Lottery spokesman Steve Rossi said. "Since the legal authority is not there for the comptroller to disburse payments, those payments are delayed."

While Rossi said winners will eventually receive their money once a budget is in place, the promise is cold comfort for Rick.

"You know what's funny? If we owed the state money, they'd come take it and they don't care whether we have a roof over our head," Rick said. "Our budget wouldn't be a factor. You can't say (to the state), 'Can you wait until I get my budget under control?' "

Rick, 48, and Chasteen, 56, were expecting the money to come this week after he turned in his winning ticket July 20 to the lottery claim center in Rockford. Instead, they got a phone call this week from lottery officials saying the payment would be delayed because of the budget impasse.

"I was kind of in shock," Chasteen said. "I called them back the next day (and) said, 'Why am I not getting my money?' ... I think it's all wrong they're doing it this way. They should pay the money we're owed."

Rick said she also spoke with another lottery official, who tried to reassure her that the couple would get their money as soon as lawmakers pass a budget.

"And he tries to tell me it could be any day now," she said. "So I went online, and every article I read says they're not even close (to passing a budget). So don't give me that line. It could be months. You're collecting interest on our money that we should be collecting."

Rossi would not speculate on what effect the delays might have on the lottery's revenues if people choose to stop playing until the state resolves the budget crisis, and he was not aware of any effort to pass a special measure to allow the comptroller to pay out winnings while lawmakers and the governor haggle over the budget.

State Rep. Jack Franks, D-Marengo, has been a frequent critic of the state's handling of the lottery and said this is just another example.

"I sort of like the business model, because if we take the money in and never have to pay, how do we lose?" Franks said sarcastically.

"Our government is committing a fraud on the taxpayers, because we're holding ourselves out as selling a good, and we're not — we're not selling anything," Franks said. "The lottery is a contract: I pay my money, and if I win, you're obligated to pay me and you have to pay me timely. It doesn't say if you have money or when you have money."

Longtime lottery and gaming consultant Matthew Smith said Illinois lawmakers and lottery officials should have found a way to ensure winners were promptly paid regardless of whether there was a budget in place because failing to do so risks destroying consumer trust in the lottery.

"Any other brand that would come back and say, 'Well, we promised we would have this product, this service, and you will get it but we just can't tell you when' — any other brand that would do that to you, you would never use again," said Smith, vice chairman of Shapiro+Raj. "Is it going to affect their play? I think in the short term, if the state is able to find a way to get (winners) paid and paid quickly, and kind of puts this aside as a glitch, they can probably save things."


But if the delays stretch on indefinitely, Smith said, word will spread — especially if it affects people who play regularly.

"If that news just continues to go viral, and it goes back to their neighborhoods and people are talking about it, I think it could have an impact," Smith said. "And even if it affects sales by a percent or two, that's bad for the lottery."

Rick said she and Chasteen had to cancel their trip to see her daughter, which they planned to pay for out of Chasteen's lottery winnings. She said delays in payment will only discourage people from playing because it will seem like false hope that they will win.

"Who do you think buys lottery tickets most of the time?" Rick said. "Not millionaires. People who don't have a lot of money. You're messing with all those dreams."


 
gwb-trading said:
Pulls up the article directly for me... no paywall or nothing.

Illinois lottery winners have to wait for payout due to budget impasse
http://www.chicagotribune.com/news/...payments-delayed-met-0828-20150828-story.html

After years of struggling financially, Susan Rick thought things were looking up when her boyfriend won $250,000 from the Illinois Lottery last month. She could stop working seven days a week, maybe fix up the house and take a trip to Minnesota to visit her daughter.

But because Illinois lawmakers have not passed a budget, she and her boyfriend, Danny Chasteen, got an IOU from the lottery instead.

"For the first time, we were finally gonna get a break," said Rick, who lives in Oglesby. "And now the Illinois Lottery has kind of messed everything up."

Under state law, the state comptroller must cut the checks for lottery winnings of more than $25,000. And lottery officials said that because lawmakers have yet to pass a budget, the comptroller's office does not have legal authority to release the funds.

Prizes of $25,000 or less will still be paid at lottery claim centers across the state, and people who win $600 or less can cash in their ticket at the place where they bought it.

But the bigger winners? Out of luck, for now.

While lottery officials could not immediately say how many winners' payments were delayed or provide the total amount of those payoffs, the agency's website lists multiple press releases for winners since the current fiscal year began July 1. Including Chasteen, those winners represent millions of dollars in prizes.

The lottery is a state agency like many others, and we're obviously affected by the budget situation," Illinois Lottery spokesman Steve Rossi said. "Since the legal authority is not there for the comptroller to disburse payments, those payments are delayed."

While Rossi said winners will eventually receive their money once a budget is in place, the promise is cold comfort for Rick.

"You know what's funny? If we owed the state money, they'd come take it and they don't care whether we have a roof over our head," Rick said. "Our budget wouldn't be a factor. You can't say (to the state), 'Can you wait until I get my budget under control?' "

Rick, 48, and Chasteen, 56, were expecting the money to come this week after he turned in his winning ticket July 20 to the lottery claim center in Rockford. Instead, they got a phone call this week from lottery officials saying the payment would be delayed because of the budget impasse.

"I was kind of in shock," Chasteen said. "I called them back the next day (and) said, 'Why am I not getting my money?' ... I think it's all wrong they're doing it this way. They should pay the money we're owed."

Rick said she also spoke with another lottery official, who tried to reassure her that the couple would get their money as soon as lawmakers pass a budget.

"And he tries to tell me it could be any day now," she said. "So I went online, and every article I read says they're not even close (to passing a budget). So don't give me that line. It could be months. You're collecting interest on our money that we should be collecting."

Rossi would not speculate on what effect the delays might have on the lottery's revenues if people choose to stop playing until the state resolves the budget crisis, and he was not aware of any effort to pass a special measure to allow the comptroller to pay out winnings while lawmakers and the governor haggle over the budget.

State Rep. Jack Franks, D-Marengo, has been a frequent critic of the state's handling of the lottery and said this is just another example.

"I sort of like the business model, because if we take the money in and never have to pay, how do we lose?" Franks said sarcastically.

"Our government is committing a fraud on the taxpayers, because we're holding ourselves out as selling a good, and we're not — we're not selling anything," Franks said. "The lottery is a contract: I pay my money, and if I win, you're obligated to pay me and you have to pay me timely. It doesn't say if you have money or when you have money."

Longtime lottery and gaming consultant Matthew Smith said Illinois lawmakers and lottery officials should have found a way to ensure winners were promptly paid regardless of whether there was a budget in place because failing to do so risks destroying consumer trust in the lottery.

"Any other brand that would come back and say, 'Well, we promised we would have this product, this service, and you will get it but we just can't tell you when' — any other brand that would do that to you, you would never use again," said Smith, vice chairman of Shapiro+Raj. "Is it going to affect their play? I think in the short term, if the state is able to find a way to get (winners) paid and paid quickly, and kind of puts this aside as a glitch, they can probably save things."


But if the delays stretch on indefinitely, Smith said, word will spread — especially if it affects people who play regularly.

"If that news just continues to go viral, and it goes back to their neighborhoods and people are talking about it, I think it could have an impact," Smith said. "And even if it affects sales by a percent or two, that's bad for the lottery."

Rick said she and Chasteen had to cancel their trip to see her daughter, which they planned to pay for out of Chasteen's lottery winnings. She said delays in payment will only discourage people from playing because it will seem like false hope that they will win.

"Who do you think buys lottery tickets most of the time?" Rick said. "Not millionaires. People who don't have a lot of money. You're messing with all those dreams."
More...
They're probably trolling Canucks. Thanks for posting it.
 
gwb-trading said:
Pulls up the article directly for me... no paywall or nothing.

Illinois lottery winners have to wait for payout due to budget impasse
http://www.chicagotribune.com/news/...payments-delayed-met-0828-20150828-story.html

After years of struggling financially, Susan Rick thought things were looking up when her boyfriend won $250,000 from the Illinois Lottery last month. She could stop working seven days a week, maybe fix up the house and take a trip to Minnesota to visit her daughter.

But because Illinois lawmakers have not passed a budget, she and her boyfriend, Danny Chasteen, got an IOU from the lottery instead.

"For the first time, we were finally gonna get a break," said Rick, who lives in Oglesby. "And now the Illinois Lottery has kind of messed everything up."

Under state law, the state comptroller must cut the checks for lottery winnings of more than $25,000. And lottery officials said that because lawmakers have yet to pass a budget, the comptroller's office does not have legal authority to release the funds.

Prizes of $25,000 or less will still be paid at lottery claim centers across the state, and people who win $600 or less can cash in their ticket at the place where they bought it.

But the bigger winners? Out of luck, for now.

While lottery officials could not immediately say how many winners' payments were delayed or provide the total amount of those payoffs, the agency's website lists multiple press releases for winners since the current fiscal year began July 1. Including Chasteen, those winners represent millions of dollars in prizes.

The lottery is a state agency like many others, and we're obviously affected by the budget situation," Illinois Lottery spokesman Steve Rossi said. "Since the legal authority is not there for the comptroller to disburse payments, those payments are delayed."

While Rossi said winners will eventually receive their money once a budget is in place, the promise is cold comfort for Rick.

"You know what's funny? If we owed the state money, they'd come take it and they don't care whether we have a roof over our head," Rick said. "Our budget wouldn't be a factor. You can't say (to the state), 'Can you wait until I get my budget under control?' "

Rick, 48, and Chasteen, 56, were expecting the money to come this week after he turned in his winning ticket July 20 to the lottery claim center in Rockford. Instead, they got a phone call this week from lottery officials saying the payment would be delayed because of the budget impasse.

"I was kind of in shock," Chasteen said. "I called them back the next day (and) said, 'Why am I not getting my money?' ... I think it's all wrong they're doing it this way. They should pay the money we're owed."

Rick said she also spoke with another lottery official, who tried to reassure her that the couple would get their money as soon as lawmakers pass a budget.

"And he tries to tell me it could be any day now," she said. "So I went online, and every article I read says they're not even close (to passing a budget). So don't give me that line. It could be months. You're collecting interest on our money that we should be collecting."

Rossi would not speculate on what effect the delays might have on the lottery's revenues if people choose to stop playing until the state resolves the budget crisis, and he was not aware of any effort to pass a special measure to allow the comptroller to pay out winnings while lawmakers and the governor haggle over the budget.

State Rep. Jack Franks, D-Marengo, has been a frequent critic of the state's handling of the lottery and said this is just another example.

"I sort of like the business model, because if we take the money in and never have to pay, how do we lose?" Franks said sarcastically.

"Our government is committing a fraud on the taxpayers, because we're holding ourselves out as selling a good, and we're not — we're not selling anything," Franks said. "The lottery is a contract: I pay my money, and if I win, you're obligated to pay me and you have to pay me timely. It doesn't say if you have money or when you have money."

Longtime lottery and gaming consultant Matthew Smith said Illinois lawmakers and lottery officials should have found a way to ensure winners were promptly paid regardless of whether there was a budget in place because failing to do so risks destroying consumer trust in the lottery.

"Any other brand that would come back and say, 'Well, we promised we would have this product, this service, and you will get it but we just can't tell you when' — any other brand that would do that to you, you would never use again," said Smith, vice chairman of Shapiro+Raj. "Is it going to affect their play? I think in the short term, if the state is able to find a way to get (winners) paid and paid quickly, and kind of puts this aside as a glitch, they can probably save things."


But if the delays stretch on indefinitely, Smith said, word will spread — especially if it affects people who play regularly.

"If that news just continues to go viral, and it goes back to their neighborhoods and people are talking about it, I think it could have an impact," Smith said. "And even if it affects sales by a percent or two, that's bad for the lottery."

Rick said she and Chasteen had to cancel their trip to see her daughter, which they planned to pay for out of Chasteen's lottery winnings. She said delays in payment will only discourage people from playing because it will seem like false hope that they will win.

"Who do you think buys lottery tickets most of the time?" Rick said. "Not millionaires. People who don't have a lot of money. You're messing with all those dreams."
More...
that article is so profound on so many levels. My first question is why do we need a budget to pay winners? Aren't the winnings already sitting there in the jackpot?

Second you would think even more than social security the lottery is the most sacred trust between the government and the poor. If they can't even honor that one....

what we need is a good muni analyst that can advise us what states to avoid buying tickets in. Like maybe a lottery rating. AAA states have a lower payout but are safer than buying BBB tickets which claim they will pay more (if you can ever get it.)
 
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