After months of pressure, Gov. Bruce Rauner announced Thursday that he’ll sell $6 billion in bonds to help pay off Illinois’ staggering bill backlog —a debt that dragged the state down with interest penalties reaching $2 million a day.
Illinois Comptroller Susana Mendoza has been pushing for the bond sales for more than a month, as has state Treasurer Michael Frerichs, both Democrats.The state’s bill backlog remained at $15.1 billion as of Thursday, according to the comptroller’s ledger.
Per the budget agreement reached in July, Rauner was authorized to offer up to $6 billion in general obligation bonds, which would allow the state to lower the interest rate it pays on its debt. The rate — up to 12 percent a year — was costing Illinois taxpayers $2 million a day in late payment interest penalties, according to the comptroller’s office.
The governor directed staff to initiate a bond issuance to refinance “high-cost debt” by borrowing from banks at a lower interest rate.The bonds must be used to pay for general funds or state employees’ group health insurance costs that racked up before the impasse ended, according to the governor’s office.
“We’re choosing to exercise borrowing authority because it’s better to have Wall Street carry our debt than Main Street Illinois,” Rauner said in a statement announcing the decision.
The governor blamed “deficit spending for many years” for the unpaid bill backlog: “The state has been, in effect, borrowing from local service providers, including nonprofits and small businesses, because it takes months for them to get paid,” Rauner said in a statement.
The governor’s office said the budget didn’t account for an increase in debt service costs to cover the bill backlog — and Rauner’s office said he will find “several hundred million dollars in possible spending reductions to address this budgetary shortfall.” Those cuts were not specified.
“The governor also would like the General Assembly to return to Springfield this fall to work with him to balance the budget and enact structural reforms that could save much more,” the governor’s office said in a statement.
Mendoza in a statement said the decision marked a “good day for taxpayers.”
“Refinancing our debt at a much lower interest rate — just like any sensible homeowner with a high mortgage rate would do — will provide payment for services rendered to thousands of people across the state and save Illinois taxpayers billions of dollars over the life of the bonds,” Mendoza said in a statement.
Frerichs, too, applauded the decision but called it “long overdue.”
“Gov. Rauner finally made a good decision,” Frerichs said in a statement. “It is frustrating to know that his delay likely cost taxpayers $62 million in interest payments.”
Business groups lauded the bond issuance, as well. Chicagoland Chamber of Commerce Acting CEO Michael Reever called it a “responsible first step toward a stronger Illinois.”