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 The state of Illinois borrowed $750
million Nov. 29, issuing general obligation bonds to finance capital
construction projects as well as information technology improvements.
But debt doesn’t come cheap in a profligate state. The three top ratings
agencies reaffirmed Illinois’ grim finances, despite the state’s recent
record-breaking income tax hike.
Moody’s Investors Service and S&P Global each rated the bonds at just one notch
above junk. Fitch Ratings put them at two notches above junk. Illinois is home
to the worst credit rating of all 50 states.
Due to the state’s poor finances, Illinois taxpayers continue to be penalized by
the “widest spread for a state [general obligation] bond by far,” according to
Municipal Market Data’s Chief Market Analyst Randy Smolik, as quoted in Reuters.
The “spread” refers to the higher yield of Illinois bonds versus that of
top-rated bonds.
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As Illinois is home to
the nation’s worst pension crisis, this penalty will persist until
state lawmakers enact substantial reforms.
“Without changes to the promised retirement debt, the state will be
swallowed up,” said John Mousseau in advance of the bond sale,
according to The Fiscal Times. Mousseau is the fixed income director
at Cumberland Advisors.
“It’s an actuarial certainty.”
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