CBOE Holdings Inc. CEO Bill Brodsky derided the state of Illinois for financial problems, such as underfunding of state pension funds, just weeks after the state passed a new law that will reduce the taxes that his Chicago-based options exchange pays.
“I’m embarrassed to live here,” Mr. Brodsky said in answer to a reporter’s question at an annual CBOE media lunch Tuesday. His remark was in reference to a bond-rating downgrade by Moody’s Investors Service Inc. last week to A2, that agency’s lowest for any state. “We need people to come together and recognize the gravity of the situation and work together to a solution.”
His comments follow the passage last month by the Illinois Legislature of a bill that revamps the state’s tax rates for CBOE and futures exchange CME Group Inc. by sharply reducing the number of trades taxed as Illinois sales because many trades are transacted over electronic systems by parties outside the state.
“It was just more, from our perspective, an equitable way of taxing trades that do not have an origin in Illinois,” he said.
Mr. Brodsky declined to specify CBOE’s tax cut, noting it will depend on trading volume. Still, New York-based analyst Niamh Alexander of Keefe Bruyette & Woods Inc. last month estimated CBOE will save about $6 million annually while CME gets a $63 million benefit.
“We have to face up to the pension situation more than anything else — that is the most critical issue," Mr. Brodsky said at the lunch. “They’ve been kicking the can down the road since May, at least, when the Legislature tried to act on it and didn't. We need a holistic, substantive solution that really deals with the problem.”
Mr. Brodsky noted that he’s a member of the Commercial Club of Chicago executive group that has been pushing for reform of the state’s pensions. The state has fallen short on addressing its financial troubles while the city of Chicago and Cook County have made progress, he said.
“The city is taking serious steps to deal with its financial problems,” Mr. Brodsky said. “I think the county is taking serious steps to deal with its financial problems. The state has yet to take serious steps to deal with its financial problems.”
In response to a question about how the state’s financial troubles affect his company, Mr. Brodsky said the situation lowers the quality of life for CBOE employees and makes it more difficult to recruit workers to Chicago because they can see that “sooner or later there’s going to be a big price to pay.” He made similar comments at the lunch last year.
Lynne Marek is a writer for Crain's Chicago Business, a sister publication of Pensions & Investments.