State of Illinois General Obligation Bonds Rating Agency Presentation Information Summary October 2 and 3, 2017
Table of Contents 1. Illinois’ Strong and Diverse Economy 3 2. FY 2018 Budget Update 9 3. Pensions 14 4. Debt Overview 18 5. Bill Backlog and Plan of Finance 23
Presentation Participants – Governor’s Office of Management and Budget Scott Harry Kelly Hutchinson Director Director of Capital Markets Alexis Sturm Kim Fowler Chief of Staff Chief Legal Counsel Charlie Weikel Director – Governor's Office of Policy & Operations 1
The State’s Credit Fundamentals Have Improved Significantly Issuance of the General Obligation Bonds will pay off approximately $6.0 billion of outstanding bills and is expected to result in the receipt of additional federal funds By the end of fiscal year 2018, the bill backlog is expected to be approximately $7.5 billion, a nearly 50% reduction Inherent Credit Strengths Recent Developments Sovereign State with significant revenue flexibility Passage of fiscal year 2018 Budget Illinois’ economy is the 5 th largest in the United Permanent increase in personal income tax and States and 18 th largest worldwide corporate income tax rates to 4.95% and 7.00% respectively Statutory provisions gives priority to debt service over other State expenditures Passage of Tier 3 Pension Plan and funding changes GO Bond debt service has a continuing appropriation Passage of Senate Bill 1947 remedied education funding disparities Debt service is limited to no more than 7% of General Funds and Road Fund Appropriations, Reauthorization of Edge Tax Credits to allow the without a waiver from the Treasurer and State to compete for major economic development Comptroller projects Debt service requirements decline by over $978 Reduced risk to swap counterparties by million after FY 2019 due to pension bonds renegotiating rating triggers maturing, providing significant flexibility Note: Amounts related to the plan of finance and bill backlog are estimates 2
1. Illinois’ Strong and Diverse Economy
Illinois’ Strong and Diverse Economy Illinois has a strong economy with a diverse workforce Illinois is home to 36 Fortune 500 companies similar to the nation – Only New York, California and Texas have more The City of Chicago was named “top metro for corporate Broad employment base with no industry accounting for relocation(s)” for the 4 th year in a row 3 more than 20% – Recent major relocations to Illinois include Mars and The State is well-positioned for long-term stability Conagra through economic cycles Chicago’s diversified economy is a major attraction for workers and recent graduates across the nation, bringing educated and skilled workers into the State Illinois Non-Farm Employment by Industry 1 Fortune 500 Companies Headquartered in Illinois 2 2016 2015 Company Industry Category Rank Rank 17 19 Walgreens Boots Alliance Food and Drug Stores 24 24 Boeing Aerrospace & Defense Mining, Logging, Construction 33 35 State Farm Insurance Cos. Insurance: Property and Casualty (Mutual) 3% Information and 45 41 Archer Daniels Midland Food Production Other Services 74 59 Caterpillar Construction and Farm Machinery 6% Financial 83 80 United Continental Holdings Arlines Activities 84 81 Allstate Insurance: Property and Casualty (Stock) 6% 89 95 Exelon Utilities: Gas and Electric 105 97 Deere Construction and Farm Machinery Trade, 109 94 Mondelez International Food Consumer Products 111 123 AbbVie Health Care Transportation 112 109 McDonald's Food Services and Utilities 124 122 US Foods Wholesalers: Food and Grocery 20% 127 111 Sears Holdings General Merchandisers 135 138 Abbott Laboratories Medical Products and Equipment Manufacturing 197 173 Conagra Brands Food Consumer Products 9% 199 220 CDW Information Technology Services 202 211 Illinois Tool Works Industrial Machinery 277 283 Discover Financial Services Commercial Banks 281 286 Baxter International Medical Products and Equipment Professional and 283 285 W.W. Grainger Wholesalers: Diversified Business Leisure and 304 369 LKQ Wholesalers: Diversified Services Hospitality 322 334 Tenneco Motor Vehicles & Parts 16% 10% 337 281 Navistar International Construction and Farm Machinery 338 315 Univar Wholesalers: Diversified 359 391 Anixter International Wholesalers: Electronics and Office Equipment 388 258 R.R. Donnelly & Sons Publishing, Printing Government Education and 391 436 Jones Lang LaSalle Real Estate 14% Health Services 392 377 Dover Industrial Machinery 15% 427 767 TreeHouse Foods Food Consumer Products 433 451 Motorola Solutions Network and Other Communications Equipment 439 442 Old Republic International Insurance: Property and Casualty (Stock) 450 446 Packaging Corp. of America Packaging, Containers 456 456 Ingredion Food Production 462 471 Arthur J. Gallagher Diversified Financials 487 477 Essendant Wholesalers: Electronics and Office Equipment 1. U.S. Department of Labor, Bureau of Labor Statistics 2. Fortune.com 3. Site Selection Magazine. 3 Illinois’ Strong and Diverse Economy
Illinois’ Robust Economic Indicators Per Capita Personal Income 1 Average Non-farm Employment and Unemployment 1,2 Illinois’ Per Capita income is ranked 4th among the 10 largest states. Employment increased with jobs exceeding 6.0 million in 2016. $54,000 6,300 12.0 6,200 $52,000 10.0 Employment (Thousands) 6,100 $50,000 Unemployment Rate (%) 6,000 $48,000 8.0 5,900 $46,000 5,800 6.0 $44,000 5,700 4.0 $42,000 5,600 $40,000 5,500 2.0 5,400 $38,000 5,300 0.0 $36,000 2011 2012 2013 2014 2015 2016 1H2017 Illinois United States Great Lakes IL Employment IL Unemployment Rate National Unemployment Rate Median Household Income Upward Trend in IL Real GDP 3 Illinois MHI has grown 4.5% annually on average since 2011, outpacing the In Q1 of 2017 Illinois’ economy ranked 5th in the nation and 18th in the US (3.1%) and neighboring states (3.1%). Income as measured by both PCI and world at $804 Billion (behind Florida and ahead of The Netherlands). MHI remains well above national averages. $700,000 $62,000 $690,000 Millions of Chained 2009 Dollars $60,000 $680,000 $58,000 $670,000 $56,000 $660,000 $54,000 $650,000 $52,000 $640,000 $50,000 $630,000 $48,000 $620,000 2012 2013 2014 2015 2016 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 1Q17 Illinois National Source: U.S. Department of Commerce, Bureau of Economic Analysis; Bureau of Labor Statistics 1. YTD averages 2. As of August 2017, not seasonally-adjusted and preliminary and subject to change 3. Bureau of Economic Analysis 2017, data as of 7/2017. 4 Illinois’ Strong and Diverse Economy
Demographic Analysis Population Demographics by Age Illinois is the 5th most populous state in the nation and has grown The State’s population mix by age mirrors the US but has a lower each decade through 2010 with a modest YoY decline in 2016. percentage of people over 65. 13.0 under 18 12.5 18 to 24 12.0 millions 25 to 44 11.5 45 to 64 11.0 > 65 yrs 10.5 0% 5% 10% 15% 20% 25% 30% 10.0 U.S. Illinois 1970 1980 1990 2000 2010 2016 Highly Educated Population Illinois is home to top ranked universities bringing talented and educated individuals to the State. Illinois residents with college degrees is 32.3%, well above the US at 29.8% and the Great Lakes States at 26.2%. Source: US Census, US Bureau of Labor Statistics. 5 Illinois’ Strong and Diverse Economy
Illinois’ Expansive Transportation Network Unparalleled Air Transportation Network Illinois is a Major Hub for Both Land and Water The State is home to the 2nd and 25th busiest airports in the US in Freight Flows O’Hare and Midway. O’Hare is the Best Connected Airport in the US according to MIT’s Airport Connectivity Quality Index Unparalleled Rail Transportation Network Five Major Trucking Routes Intersect in the State Illinois is also the only state where all 7 class I railroads in the United States operate. Train transit ridership is also up nearly 54% over the past decade. Source: US Census, US Bureau of Labor Statistics, IDOT, USDOT, World Business Chicago. 6 Illinois’ Strong and Diverse Economy
2. FY 2018 Budget Update
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