Dear Mr. Berko:

Dear E.P.:

California is a bloody mess. That Left Coast state has a deficit of $23 billion, equal to 20 percent of its budget. But the lucky folks in Illinois really take the cupcake with a budget deficit of $15 billion, which is 41 percent of the state’s annual revenues. Most Illinois politicians are as crooked as a barrel of snakes (as slippery, too) and make the Russian Mafia look like a playground for grade-school children.

Though that statement may seem too unkind to some, what other explanation can account for the state’s slaughterhouse financial condition? To mitigate some of the pain, the Legislature is going to raise taxes again. This year, the personal income tax will be bumped from 3 percent to 5.3 percent, $1 will be added to the cigarette tax, and the corporate tax will zoom from 4.8 percent to 10.9 percent.

Meanwhile, Illinois Speaker of the House Michael Madigan and Gov. Pat Quinn have proposed a $15 billion revenue bond to cover the 2011 deficit. Well, some of the wallahs on the Street claim that the state could miss a few payments on its municipal bonds.

That won’t cut the mustard, because the state’s pension plan is underfunded by $130 billion (according to Northwestern University’s Kellogg Graduate School of Management) and still assumes an 8 percent rate of return on its pension investments.

Thanks to union lobbyists with satchels of cash, typists, clerks, secretaries and other mid-level employees can retire at 55 at 80 percent of their final four-year salaries, plus stacked-up overtime and annual cost-of-living adjustments. Some of these folks collect more than $200,000 a year.

The cost to insure Illinois bonds against default exceeds the cost to insure Afghanistan’s bonds.

Yet Moody’s still gives Illinois double-A and triple-A ratings, even though the state has the highest perceived default risk of any of the 50 states plus Puerto Rico. As a result, some long-term, 25-year Illinois municipal bonds yield more than 8 percent, and some short-term municipals (three to five years) yield 5.5 percent, and mind you, these yields are tax-free.

If you look into www.municipalbonds.com, you will find hundreds of current Illinois municipal bonds with prices and yields that will jolt the fillings from your molars. Frankly, I think many of them will survive. So if your risk tolerance is stratospheric, consider the Illinois Financial Authority Revenue, due in 2040 and yielding 8.25 percent; a Belleville Business District taxable municipal bond, due in 2029 with a 14.5 percent yield; and an Illinois Financial Authority Smith Village, due in 2020 with a 9.5 percent yield.

If you had the courage to buy the Standard & Poor’s 500 issues between February and April of 2009, when Armageddon was around the corner, those purchases would be enormously profitable today. Well, it looks like it’s Armageddon time in Illinois. So if you have a brilliant broker, vodka in your veins and can gargle with battery acid, there may be some uncommon opportunities in Illinois.

Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, Fla. 33429 or e-mail him at malber@adelphia.net. ©2011 Creators.com