If you take out a home loan at a sky-high interest rate — say 12 percent — and two years later interest rates drop by half, it’s a no-brainer to refinance. You’ll pay less now and down the road.

Illinois Comptroller Susana Mendoza used that example to make a strong case for why the state should sell $6 billion in bonds to refinance a big chunk of our state’s $15.3 billion backlog of unpaid bills. Late payment penalties on a lot of those bills are a whopping 12 percent. We’re throwing away $2 million of taxpayers’ money every day just on late fees.

After weeks of being noncommittal — because nobody likes to borrow — Gov. Bruce Rauner announced Thursday he will go through with the bond sale. The governor understands that Illinois already is borrowing anyway, from all those people the state owes money, so it’s only smart to refinance and lower the cost.

The challenge is to do this right. Which is hard for government. Especially in Illinois.

EDITORIAL

Money is famously fungible, meaning if you get more here, you can spend more there. So it is essential that whatever money the state already is spending to pay off back bills, even before the bond issue, continues to be spent for that purpose. Or, we fear, the big bond issue won’t really result in an extra $6 billion going toward paying those old bills. It will only, at least in part, free up other money now being used for that purpose — creating a new slush fund.

Exactly that happened decades ago when Illinois created the State Lottery. All that lottery money was supposed to go toward funding for public education, and it did — but much of it just replaced existing education money that then was used for other purposes, good or bad.

It is unlikely Illinois will get a low interest rate of about 3 percent because of the hits Illinois’ credit rating took during the budget crisis, but even 6 percent would be a relatively good deal for the state compared with the eye-popping 12 percent currently being paid on some bills. Additionally, payments of some bills, such as Medicaid, trigger a dollar-for-dollar matching contribution from the federal government.

It will be Mendoza’s job, with a heavy assist from the governor, to sort out exactly which bills to pay first. As Laurence Msall of the Civic Federation asks, “Does this plan prioritize high-interest payments?”

If Illinois is going to borrow big, it had better pay back big.

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