Illinois taxpayers will have to shell out an extra $551 million to cover the cost of borrowing because of the state’s deteriorating bond rating, according to a new report released Monday.
CHICAGO (AP) — Illinois taxpayers will have to shell out an extra $551 million to cover the cost of borrowing because of the state’s deteriorating bond rating, according to a new report released Monday.
The Civic Federation of Chicago, a nonpartisan research group, analyzed $9.6 billion in borrowing by Illinois over the last year and compared it to interest being paid by other state and local governments with bond ratings comparable to Illinois’ before its was lowered.
"This is a catastrophe for Illinois," the group’s president Laurence Msall said because that extra money could have been spent on other needs and services.
The $9.6 billion borrowed between September 2009 and July was second only to the $10 billion borrowed for unfunded pension liabilities in 2003, when ex-Gov. Rod Blagojevich was in office, according to the report.
Gov. Pat Quinn’s administration defended the borrowing as the state grapples with a $13 billion budget hole.
"These bonds, which were sold at attractive rates, are bringing immediate and long- term benefits to the state when it comes to putting tens of thousands of people to work and improving our roads, schools and bridges. These investments will pay dividends back to the state and its citizens for years to come," said Kelly Kraft, Quinn’s budget spokeswoman, in a statement.
The budget lawmakers passed at the end of the spring session that is based on leaving bills unpaid and borrowing more money, a prospect that concerns Msall’s group. Quinn had proposed raising the income tax, but lawmakers wouldn’t go for it.
John Sinsheimer, the state’s director of capital markets, questioned the federation’s methodology and its eye-popping number, although he didn’t offer an alternate figure.
While Illinois has suffered through downgrades, its bond rating is investment grade and it’s getting attractive interest rates, Sinsheimer said.
The federation’s report said Illinois will feel the pinch of its debt as it struggles to recover economically.
Most of the additional interest will be due during the early years of the bonds, when Illinois will still be financially stressed, according to the report. It will come to about $73 million in 2011, the group said.
Quinn’s opponents were quick to jump on him for the borrowing.
"The cost associated with the fiscal mismanagement not only costs us jobs but it costs us valuable resources," Republican Bill Brady said after announcing sweetened tax credits for businesses that create new jobs.
The Green Party’s Rich Whitney said it was ironic Brady would propose tax credits for businesses while the state is drowning in red ink. Whitney blamed state officials for not taking action such as raising the income tax in a way that would protect poor and middle-class workers and give homeowners a break on property taxes.
"Doomsday is here and they keep doing the same thing," Whitney said.
Independent candidate Scott Lee Cohen said Quinn should eliminate some special funds the state has designated for specific purposes and use that money so that it doesn’t have to pay more interest on debt.
There are hundreds of those special funds, and they total between $5 billion and $6 billion at the end of each month, Kraft said. Sinsheimer said there are restrictions on how that money can be used, although lawmakers gave Quinn permission to borrow some of it to pay overdue state bills.
"We continue to kick the can down the road," Cohen said.
Copyright 2010 The Associated Press.
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