Illinois Bond Rating Costs Taxpayers $500 Million

By Prescott Carlson in News on Aug 30, 2010 8:30PM

You know how certain credit cards have the interest rate tied to your credit report, so if your credit score goes down, your interest rate gets jacked up on credit purchases going forward, even if you've made all your payments for that card on time? The current Illinois bond situation is kind of like that.

According to a new report from the Civic Federation, Illinois' ever slipping bond rating means that as the state continues to take on new debt via bonds as a means to "balance" the budget, it comes with more and more of a cost. Federation President Laurence Msall has been making the media rounds, trying to alert taxpayers that the rating is costing taxpayers an extra $551 million dollars in interest on just its 2010 debt alone. Msall told Crain's Chicago Business:

"[The report] demonstrates that our state's inability to come to terms with the continuing fiscal crisis has a large and measurable cost... Illinoisans will be forced to pay more for their government while it delivers fewer services."

In the same Crain's article, the Illinois director of capital markets said that while he agreed the federation's numbers are probably accurate, it's a cost of doing business so that capital projects such as new schools and road work continue and provide valuable construction jobs.

This isn't the first time the Civic Foundation has railed against Illinois' love of municipal bonds -- in April of this year the group strongly opposed Gov. Pat Quinn's proposed 2011 budget because it "borrows [$4.7 billion] to pay for operations while continuing to ignore the massive backlog of unpaid bills."