Credit-poor Illinois may seek to borrow $2 billion


Share
Posted Online: April 11, 2013, 10:06 pm
Comment on this story | Print this story | Email this story
Illinois Watchdog
SPRINGFIELD — Like a person with a huge stack of unpaid bills, Illinois has terrible credit. But lawmakers at the statehouse want to borrow $2 billion nonetheless.

An Illinois House panel on Wednesday approved a plan to borrow $2 billion to pay Illinois' 6-month-old stack of unpaid Medicaid bills.

"This is money we owe," said state Rep. Barbara Flynn Currie, D-Chicago. "We can talk all we want about the problems that remain on the table … But in the meantime, we owe these providers real money."

The Illinois Comptroller's office says the state owes $2.6 billion to hospitals, doctors and pharmacists for Medicaid costs.

But state Rep. David Harris, R-Arlington Heights, said it's not what the state owes, but what the state will pay to borrow the money that is the bigger problem.

"It's (like) an individual with a credit card who gets a great rate and says 'I can relieve the pressure by borrowing'," Rep. Harris said. "We're not solving the problem of spending too much. We're not solving the problem by paying down our old bills in a reasonable way."

Harris and other Republicans say Illinois' bad credit is going to drive up the interest rate on the $2 billion bond sale.

Greg Cox, a lobbyist who helped craft the borrowing plan, said Illinois likely will pay nearly 5 percent interest to borrow the $2 billion. That is more than the state agreed to pay when it borrowed $800 million earlier this year. And 5 percent interest is nearly three times what California is paying to borrow money.

"The thing no one likes to talk about Illinois bonds is, there is always a market for them," Cox told lawmakers Wednesday. "The rate is high. Why would you buy a California bond, when you can buy an Illinois bond at (5 percent interest)?"

But Rep. Harris said there is simply too much debt in the state.

"Our bonded debt has increase 25 percent over the last decade," he was quick to note.

In addition to the $2.6 billion in old Medicaid bills, the state owes nearly $5 billion more to businesses, local governments and school districts. Illinois has the worst-in-the-nation pension debt at nearly $130 billion.

"As opposed to paying $60 million in prompt payment interest, we will be paying about $40 million on this (borrowing)," said state Rep. Frank Mautino, D-Spring Valley, adding that borrowing money now will save Illinois money in the long run.

Rep. Mautino said, by using the federal Medicaid match and redirecting money back into the state's coffers, Illinois can pay off the $2 billion in five years rather than 10 years.

But state Rep. David McSweeny, R-Cary, said Illinois needs to show investors and taxpayers that the state is willing to cut costs before it borrows more.

"We need to adopt pension reforms before we even consider this," he said.

The Illinois House has passed a few pension reform measures, but final reform plan has not surfaced.The new borrow plan now heads to the full House for uncertain vote.

















 



Local events heading








  Today is Saturday, Aug. 2, the 214th day of 2014. There are 151 days left in the year.

1864 -- 150 years ago: Because of the National Fast, no paper will be issued from this office tomorrow.
1889 -- 125 years ago: Attracting considerable attention is a sunflower stalk 15 feet high and still growing in the yard of Dr. C. Speidel on 23rd Street in Rock Island.
1914 -- 100 years ago: The municipal bathing beach proposition came up again at the city commission's meeting and a proposition passed, provided that a locker room be constructed at the foot of 7th Street for the accommodation of the bathers.
1939 -- 75 years ago: Plans for erecting a $14,000 warehouse to replace the frame structure at the rear of the Augustana Book Concern were announced.
1964 -- 50 years ago: Hours for tours of the new Deere & Co. Administrative Center on John Deere Road will be changed, effective Monday.
1989 -- 25 years ago: Tuesday night at the Great Mississippi Valley Fair in Davenport the Nitty Gritty Dirt Band gave its fans more than they possibly could have expected. The band took the stage at 9:07 p.m. and didn't leave until 10:40.









(More History)