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|State Confident It Can Borrow Budget Money
|The state will have to borrow billions to keep its budget afloat. Will anyone be willing to lend?
The state is looking at a minimum of $4 billion in borrowing, not counting $3.7 billion that the governor wants to borrow to make state contributions to pension funds. Even though the state's financial condition is poor -- an accumulated deficit of $13 billion, a constrained state budget, bills unpaid -- budget director David Vaught says he's not concerned about finding lenders.
"Those investors who understand the powers of a sovereign state with a strong economy of two-thirds of trillion dollars know the state can re-pay its debt, and they're willing to buy our debt, so no, I don't have that concern based on direct market feedback," Vaught said.
The state issued debt in January and had more bidders than there was debt to sell, which actually drove down the interest rate. Rating agencies have downgraded Illinois debt recently, but Vaught says that would change if lawmakers pass the 1 percentage point income tax increase the governor wants.
In addition to the bond markets, the state is planning to borrow internally from funds other than the General Revenue Fund. Many of those funds have surpluses which in the past have been "swept," meaning the money was taken from them and placed in the General Revenue Fund. The governor's plan now is to borrow from those funds to the tune of $1 billion, and pay the money back with interest
The state also plans to secure $1 billion by getting an advance on its tobacco settlement funds, which are $300 million a year for the next 17 years.
(Illinois Radio Network)
|07 03 10 by Newsroom
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