A press release from Governor Bruce Rauner:
Gov. Rauner takes budget actions
Announces borrowing plan to pay down bill backlog, calls on General Assembly to help fix Illinois’ still out-of-balance budget
SPRINGFIELD (Sept. 7, 2017) – After conducting a thorough review of the out-of-balance fiscal year 2018 budget passed by the General Assembly in July, Gov. Bruce Rauner today announced he intends to exercise borrowing authority to issue $6 billion in bonds to pay down a portion of the state’s bill backlog.
“Illinois has been deficit spending for many years, resulting in a huge unpaid bill backlog. The state has been, in effect, borrowing from local service providers, including nonprofits and small businesses, because it takes months for them to get paid,” Gov. Rauner said. “My preferred solution has always been for state government to reform its spending, and for a strong, competitive economy to grow family incomes faster than the cost of government.
“Unfortunately, the General Assembly passed a tax hike and an out-of-balance budget over my veto.
“Even with a permanent income tax increase costing the average Illinois household more than $1,000 a year, the budget is more than $1 billion out of balance and is still growing the unpaid backlog.
“We’re choosing to exercise borrowing authority because it’s better to have Wall Street carry our debt than Main Street Illinois.”
A significant portion of the bill backlog is currently subject to late-payment interest penalties at rates of up to 12 percent annually.
The governor directed his staff to initiate a bond issuance to refinance this high-cost debt by borrowing from banks at a much lower interest rate, which will result in considerable savings to the state.
The General Obligation Bond Act was amended by the legislature as part of the fiscal year 2018 budget package.
It grants the state the authority to issue up to $6 billion in general obligation bonds as Income Tax Proceed Bonds.
The Income Tax Proceed Bonds must be issued before Dec. 31, 2017, and must be used to pay for expenses vouchered from general funds or state employees’ group health insurance costs that were incurred before July 1, 2017.
Bonds issued under this authority must be paid within 12 years from the date of the sale and require level principal payments each year.
For example, a $6 billion issuance would require 12 annual principal payments of $500 million, plus interest payments depending on the interest rate.
The legislature-passed budget did not account for the increase in debt service costs to cover the bill backlog bond issuance.
The governor’s office is identifying several hundred million dollars in possible spending reductions to address this budgetary shortfall.
The governor also would like the General Assembly to return to Springfield this fall to work with him to balance the budget and enact structural reforms that could save much more.
“Illinois cannot afford to repeat the mistakes of the past,” Gov. Rauner said.
“We have to work together to truly balance the budget.
“We must protect residents from further tax hikes while ensuring the most vulnerable receive the services they need.
“Building upon the success of the recent bipartisan education funding law, we can find common ground for real solutions.”
If nothing else, constantly telling the public the budget is unbalanced is a step in the right direction.
Hopefully his staff harps on this subject every week, and lobbies the media every week.
One press release on the subject every 3 months is not going to get the message across to the masses.
Use some of that surplus revenue Illinois receives from the benefit of being a sanctuary state.
Perhaps Rauner can pledge this “sanctuary status asset” as collateral for the loan of 6 Billion Dollars in order to obtain a more advantageous interest rate.
Te press release informs the public of some of the games in the 2018 budget that was passed when the General Assembly over rode the Governor’s veto on the following three bills on July 6, 2017:
Senate Bill 6 (SB 6), the spending bill (appropriations bill / Democrat budget bill), became Public Act 100-0021 (PA 100-0021).
Senate Bill 9 (SB 9), the revenue bill (included the state income tax hike), became Public Act 100-0022 (pa 100-0022).
Senate Bill 42 (SB 42), the budget implementation bill (BIMP), which included the contents of SB 10 (Assignment of Receipts – an option for home rule municipalities to earmark state tax revenues directly to bondholders by setting up a special corporation to “save” interest money now at the expense of less flexibility in the future), became Public Act 100-0032 (PA 100-0023).
PA 100-23 also includes the Income Tax Proceeds Bond Act.
SB 6 supposedly stipulated that an evidence based funding formula must be used to distribute state revenues to local school districts, and supposedly there was no way to accomplish that without creating a new state law.
After the House failed to override Governor Rauner’s veto on SB 1 (evidence based funding formula), SB 1 became Senate Bill 1947 (SB 1947), which included the contents of the previous SB 1, and SB 1947 was signed by Governor Rauner into law as Public Act 100-0465 (PA 100-0465) on August 31, 2017.
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Bond buyers are insisting on earmarked tax revenues or higher interest rates, neither of which is good for taxpayers.
The caution flag is up.
Typo.
Senate Bill 42 is Pubic Act 100-0023.
Mark, I have a question, Who Are The Bond Buyers.
I do realize the Bond Holders are always paid.
It is time for all Bond Holder’s names to be published, to see who they are.
We might have a real a Scandal Here.
Like the Village of Lakewood, when they bought the Golf Course, who were the Bond Holders that profited.
You can’t borrow/tax your way out of debt.
Besides, attempting to do so will only encourage the DEMOCRATS to spend more.
This is their history.
How much in interest will we be paying?
Between the required payment of the bond interest which will result in a State tax increase AND the emergence of court ordered tax increases to fund pensions, expect the exodus from Illinois to speed up!
Betcha Brucie and the ‘tiny dancer’ are working to giveaway what is left of Illinois to Jeff Bozos!
Probably the only thing stopping Jeff is the lack of good public education in Illinois but when you think about it, maybe that is the attraction of Illinois – ‘dumbed down’ work force that will work for pennies to remain in a ‘sanctuary state’.
The bankrupt State of Illinois borrowing $6 Billion is the definition of insanity.
There is no State even close to the miserable and disastrous rating by S&P of the State of Illinois.
BBB ratings for Illinois in 2016 and 2017.
Next time you see a Democrat politician, Democrat voter, government union member from such as the teacher’s union, school board member, tell them they are mostly responsible for the sad state of fiscal affairs in Illinois.
If I remember right, this borrowing may be unconstitutional.
The state constitution limits the amount the state can borrow.
The budget pushed through by the Dems already maxed out that amount.
Therefore, this new borrowing may be unconstitutional.