Bad Credit Rating Cost Illinois At Bond Sale
A new analysis found that Illinois lost out on millions of dollars when it sold bonds last week.
Martin Luby with the University of Illinois’ Institute of Government and Public Affairs compared the recent bond sale to one in 2006, when Illinois had a much better credit rating.
He found that if the state had the credit it did then, it could have brought in about $53 million more. “Until the state is able to present a balanced budget, or make improvements make some progress in getting to dealing with the structural budget deficient, we will expect that the state is still going to have to pay these types of penalties on its bond sales. ”
The state sold $480 million in bonds last Thursday as a means of borrowing to fund capital construction projects.
Gov. Bruce Rauner’s administration points out that Illinois got a better interest rate than it did on its last bond sale, which took place in 2014. Luby agrees, but he also says the market has improved since then.
“The problem with that is it’s not on a relative basis. It’s better for everybody compared to the 2014 bond sale. So while the state has a lower interest rate on these bonds compared to its ’14 bonds, if the state would have sold it’s bonds at a much higher credit rating, they would have seen an even lower interest cost.”