Illinois sold $750 million worth of bonds this week to Bank of America Merrill Lynch with a large interest penalty still weighing down the state, thanks to its two-year budget crisis.
The state has had its credit rating downgraded at least seven times since Governor Bruce Rauner took office. As a result, the Illinois bonds have the “widest spread for a state GO bond by far.”
The spread refers to the higher borrowing costs that the state will pay over the market’s benchmark scale. Overall, Illinois will pay $655 million in interest on the bonds.
During the more than two-year impasse, Rauner pushed the state to the brink, holding the budget hostage in order to pass non-budgetary reforms.
In July, lawmakers passed a state budget without the involvement of the Governor. The bipartisan coalition ultimately decided the Governor’s agenda – which would have pushed the state into a third consecutive year without a budget – would do irreparable damage to the state’s finances and institutions.
In 2015, when Governor Rauner first took office, the state’s unpaid bill backlog was $6 billion. No Illinois governor will have done more damage to this bill backlog than Governor Rauner, who has tripled the debt held by the state.
While the budget became law over Rauner’s objections, state of Illinois still owes more than 60 entities at least $10 million each, a review by the Chicagoland Chamber of Commerce found. Thirteen are owed $100 million or more.
The borrowing is part of the state’s plan to pay down the debt accumulated.
The interest payments on the debt is also becoming an increasing burden. The Comptroller’s office predicted that number to grow by $700 million in interest in this budget year – more than twice the state’s previous record.
Other Illinois entities have faced economic collateral damage, including schools, universities, social service agencies, and healthcare providers.