Mike FrerichsIllinois will look to the bond market for the second time this year, but some observers question why the state with the lowest credit rating in the country would be issuing more debt.

Illinois plans to issue $550 million in bonds June 16 to be spent on capital projects.

State Treasurer Michael Frerichs said buyers will still line up to buy the state’s debt because Illinois is required to pay bondholders even without a budget. But last week’s credit downgrades by Moody’s Investors Service and S&P Global Ratings likely will drive up the cost to borrow.

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“If we experience credit downgrades, we’re going to pay more in interest,” Frerichs said. “That is more money that is going out to Wall Street that can’t be used for things like education or our care for seniors.”

State Rep. Stephanie Kifowit, D-Oswego, said more debt is not the answer to Illinois’ problems.

“I think it’s just a recipe for disaster,” Kifowit said. “I wouldn’t float this bond issue. I would recommend against it and recommend wholeheartedly getting a budget and proper revenues in place.”

A municipal bond buyer with BlackRock investments told media outlet Bloomberg that the other buyers of public debt should close the spigot when Illinois sells more bonds on Thursday. He said Illinois’ unfunded pension systems and lack of a budget should be enough for buyers to turn away requests for more loans.

In its preview of the coming bond sale, the state warned buyers that any missed payments could get tied up in the court system. A credit agency also questioned Illinois’ ability to make payments without a budget.

A University of Illinois study found that the state received $53 million less in a January $480 million bond sale than it could have received with better credit.


(Copyright WBGZ / www.AltonDailyNews.com)