Study: Illinois Lost $53M In Bond Sale Due To Poor Finances
A new report from the University of Illinois’ Institute of Government and Public Affairs found that the state paid more for borrowing last week because of its bad credit rating. Martin Luby compared the terms of last week’s bond sale with those the state got back in 2006. Then, Illinois’ credit rating was much better. He says the state lost an estimated $53 million dollars on last week’s bond sale.
Governor Bruce Rauner’s administration points out that Illinois got a better interest rate than it did on its last bond sale, which took place in 2014. Luby agrees, but he also says the market has improved since then.
“The problem with that is it’s not on a relative basis. It’s better for everybody compared to the 2014 bond sale," he said. "So while the state has a lower interest rate on these bonds compared to its ’14 bonds, if the state would have sold it’s bonds at a much higher credit rating, they would have seen an even lower interest cost.”
The state sold $480-million dollars in bonds last Thursday to fund capital construction projects. The study found estimated losses could grow to more than $400 million a year if Illinois' fiscal troubles continue.
Illinois has massive pension debt and lawmakers are deadlocked over a state budget. Gov. Rauner says the bond sale was appropriate because money will be used for capital improvements, not daily operations.