 State Sen. Larry Bomke,
R-Springfield, explained that the Quinn administration took out a
short-term loan in mid-July and -- even though federal treasury
rates have been cut nearly in half -- the state will end up paying
about $8 million more in interest when compared with a similar loan
taken out last year.The key difference is that Illinois has seen
its credit rating plummet. One major credit rating agency ranks
Illinois as tied for worst in the nation with California, while two
other agencies have Illinois just one notch above California. The
state has had eight credit downgrades since Quinn replaced impeached
Gov. Rod Blagojevich.
Also during the week, dozens of measures were signed into law as
the deadline nears for the governor to act on legislation passed
during the spring legislative session.
And, in another development, a conservative think-tank is calling
for reform of the state's "fiscal note" process to make it more
effective in helping legislators estimate the true cost of new laws.
At least one Republican senator has already agreed to sponsor the
legislation.
In regard to the state borrowing, a short-term state loan
recently drew an interest rate of 2.11 percent, which is nearly a
full percentage point, or more than 80 percent higher, than a
similar loan taken out in August of 2009. That's despite a U.S.
Treasury rate of about 0.26 percent or about half of the 2009
one-year U.S. Treasury rate of about 0.5 percent.
The short-term loan of $1.3 billion carries with it about $19
million in interest -- which is an $8 million to $9 million premium
that can be attributed to the state's lower credit score.
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Meanwhile, the Illinois Policy Institute is advancing a reform
that would make the state's fiscal note process a more meaningful
tool to highlight the impact legislation has on Illinois' finances.
Fiscal notes are incorporated into legislation as a way to
estimate the cost of the initiative, as well as any savings, revenue
gains or losses that may result from the proposed bill becoming law.
Unfortunately, Illinois' fiscal notes often fail to provide
accurate estimates.
As a result, it's often difficult, if not impossible, for
legislators and the public to determine what a bill's true cost will
be. The proposed reform would require fiscal notes whenever the
proposed legislation involves spending or taxation; include a
minimum five-year forecast; and require the notes to be authored by
a neutral source, not the state agency that will be affected by the
legislation.
[Text from file sent on behalf of
Sen.
Larry Bomke by Illinois
Senate Republican staff]
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