June 11 (Bloomberg) -- Bill Daley, a former White House chief of staff and JPMorgan Chase & Co. executive, has filed papers to run for Illinois governor next year, setting up a fractious primary in a state plagued by political gridlock.
The son and brother of two former Chicago mayors, Daley plans to challenge Democratic incumbent Governor Pat Quinn, who leads a state with the nation’s worst bond rating and most underfunded pension. The primary is March 18.
“We can no longer stand idly by while our pension debt bankrupts our schools and robs our children of a better future,” Daley, 64, said in a statement. “From the stinging injustice of inequality to the painful toll of unemployment, the people of Illinois are paying a perilous price for political failure.”
The victor of the 2014 general election probably will inherit deep fiscal challenges that have emerged over decades and have remained unsolved in a state where Democrats control the legislature and the governorship.
In a statement today, Quinn’s campaign defended his record and said he had gotten “big things done for the people of Illinois,” including construction projects, education changes and new ethics laws.
“Governor Quinn continues to lead the fight for comprehensive pension reform, marriage equality and gun-safety and he will not stop fighting until these are law,” according to the statement.
Daley, his new challenger, was secretary of the U.S. Department of Commerce in President Bill Clinton’s administration from January 1997 to July 2000.
After leaving the administration and serving as president of SBC Communications for more than two years, Daley joined New York-based JPMorgan in 2004, serving as Midwest chairman and the bank’s head of corporate responsibility.
Daley was chief of staff for President Barack Obama from January 2011 to January 2012.
Potential and announced Republican candidates for governor include businessman Bruce Rauner, Illinois Treasurer Dan Rutherford, state Senator Kirk Dillard and state Senator Bill Brady.
Democratic Attorney General Lisa Madigan, 46, daughter of the state’s House of Representatives speaker and Democratic Party chairman, is “seriously considering a run,” according to a statement from Gina Natale, a campaign aide.
With the exception of Obama, there are no bigger Midwest political names than Daley and Madigan. Their Democratic dynasties have dominated Chicago and Illinois government for much of the past half century. They’re also part of families that, in varying degrees, have participated in a culture of kick-the-can-down-the-road budgeting.
Quinn, 64, last week called lawmakers back for a June 19 special session, less than two hours after Moody’s Investors Service cut the state’s credit rating, citing an unresolved pension crisis.
Legislators on May 31 adjourned without taking final votes on dueling proposals to reduce an unfunded liability of almost $100 billion in the state retirement system that grows $17 million daily. It was the third time in less than a year that lawmakers didn’t pass measures to address the shortfall.
Paralysis over the deficit led Moody’s to drop its grade on general-obligation bonds issued by Illinois one step to A3 on June 6. It’s the fourth-lowest investment grade and the weakest among U.S. states. The cut affects $32 billion of debt. A lower rating typically signals higher borrowing costs.
Moody’s reduction pushes Illinois’s rating two steps below the company’s grade on California debt, the second-lowest level among states.
Investors in the $3.7 trillion municipal market demand 1.43 percentage points of extra yield over benchmark debt to own bonds of Illinois issuers, the most among states tracked by Bloomberg Fair Value indexes. The gap over debt issued by California is just 0.52 percentage point.
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