Bond risk analysts at CMA recently assigned Illinois a Cumulative Probability of Default (CPD) of 24.63% - meaning there is a 1 in 4 risk that Illinois will default on its bonds.
The chart below illustrates Illinois's ranking among its closest default risk peers. The scale across the top is the CPD for these governments - the probability of them defaulting on their bonds within 5 years. This analysis indicates that Illinois is now considered about as risky an investment as Portugal, Dubai and Iraq.
CMA's default risk ranking as of 6/24/10:Greece 68.39%; Venezuela 58.56%; Argentina 48.59% (not shown)
Pakistan 38.92%; Ukraine 35.71%; Dubai 29.03%; Iraq 28.84%; Portugal 24.82%; Illinois 24.63%; California 24.24%
No pleasure can be taken detailing the bleak finances of our state. But it illuminates the extreme optimism upon which incorporation hopes appear based. If professional risk analysts project a 25% chance the state will not perform on its general obligation bonds, it seems ill-advised to assume the state will faithfully live up to its other financial obligations. This seems particularly evident given the economic havoc already witnessed throughout our educational system. Additionally, many local governments in our area are struggling with financial instability caused in part by our state's failure to fulfill its responsibilities.
Thankfully, Candlewick Lake has adapted to living within its modest budget. As state government support for municipalities proves ever more undependable, perhaps we should take comfort in the reality that we live in a thoroughly enjoyable and self reliant community.
http://www.cmavision.com/market-data
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