Illinois to sell bonds, but cannot tap
all the proceeds
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[June 16, 2016]
By Dave McKinney and Karen Pierog
CHICAGO (Reuters) - Illinois will sell
$550 million of bonds on Thursday but lacks authority from the state
legislature to spend all of the proceeds due to an ongoing budget
impasse.
"The General Assembly needs to grant appropriation authority to
fully expend the proceeds from the bond sale, although existing FY16
appropriations could be used to expend a portion of them," Catherine
Kelly, a spokeswoman for Governor Bruce Rauner, said on Wednesday.
Her statement followed a news conference earlier on Wednesday with
the Republican governor and his transportation department head, who
warned of the imminent shutdown of hundreds of construction projects
if the Democrat-controlled legislature does not approve Rauner's
temporary budget plan.
All but $20 million of the state's general obligation bond issue is
earmarked for mass transit and road construction projects.
The odd timing of the announcement on the eve of the state bond sale
handed Rauner's Democratic rivals in the state legislature fodder to
question the first-term governor's actions.
"We're hoping none of his activities or staff work is going to drive
up borrowing costs like it did for the Chicago Public Schools in
February," said Steve Brown, spokesman for Democratic House Speaker
Michael Madigan.
The school district delayed, then downsized its bond sale, after
Rauner threatened a state takeover of CPS and said the system was
headed for bankruptcy, comments Chicago Mayor Rahm Emanuel called
"shameful" because of their possible impact on the bond sale.
Rauner on Wednesday pleaded with Democratic lawmakers to return to
session to pass a spending plan that would keep the state operating
until January and fully fund K-12 schools.
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A subway car rides along the tracks towards The Trump International
Hotel and Tower in downtown Chicago, Illinois,
United States, April 18, 2016. REUTERS/Jim Young
"Allowing the crisis to continue is wrong," Rauner said, referring
to the ongoing impasse that has left Illinois as the only state
without a fiscal 2016 budget.
Illinois has been dependent on court orders and a muddle of ongoing
and stopgap appropriations to continue operating and lawmakers have
not reached any agreement on a budget for the fiscal year that
begins July 1.
The state's GO bonds trade at wide spreads over Municipal Market
Data's benchmark triple-A yield scale. But Illinois' upcoming debt
issue will likely benefit from yields in the municipal market that
are at or near record lows as cash-heavy investors chase scarce
supply of bonds issued by states, cities, schools and other issuers.
Illinois' already low credit ratings were downgraded last week ahead
of the sale.
(Editing by Matthew Lewis and Jacqueline Wong)
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