Illinois’ Budget Impasse Leads to ‘Out of Control’ Interest Payments
Illinois may have a budget (for another few months anyway, with legislators and the governor on the hook for passing another one before the new fiscal year begins in July), but the two-year stalemate continues to put a drag on the state’s finances.
According to a new report from Comptroller Susana Mendoza’s office, Illinois racked up $1.14 billion in interest owed because the state didn’t have the cash to pay its bills on a time – a figure that nearly matches, even surpasses, the $1.04 billion in late payment interest accrued the 18 years prior to the historic budget imbroglio.
The figures published by the comptroller Tuesday stand to cloud the state’s planned attempt at going to the bond market Wednesday for a $500 million general obligation bond sale to finance capital projects
“The state is actually … facing a double whammy when they go to market tomorrow,” said Yvette Shields, Midwest regional editor for The Bond Buyer.
Shields says rates have risen since Illinois last sold bonds, so Illinois will have to pay higher costs to accommodate that.
“At the same time, the market, investors, have gotten a lot more jittery about whether gridlock, budget gridlock, is going to return, especially with the election looming. And they’re also really worried about the state’s ability to tackle its really daunting $130 billion pension liability, unfunded liability,” Shields said. “So you’re facing, kind of, that double whammy basically because of this ongoing uncertainty over what’s going to happen with the budget. The undercurrent of it all is that the state is at the lowest investment grade rating, right? One cut away from junk bond status.”
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