Gov. Bruce Rauner acknowledged Thursday that Illinois has no choice but to borrow up to $6 billion to tackle a financial crisis largely caused by excessive borrowing, reversing earlier declarations that the state with the nation’s worst credit rating wouldn’t take on more debt under his watch.
The Republican governor said in a statement that he changed his mind from statements this summer because the budget the Democrat-controlled Legislature approved in July over his veto is still not balanced, despite an income-tax hike. Included in that budget is a provision granting Rauner authority to borrow the money.
“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,” Rauner said. “We’re choosing to exercise borrowing authority because it’s better to have Wall Street carry our debt than Main Street Illinois.”
The Commission on Government Forecasting and Accountability, the Legislature’s bipartisan budget agency, determined last month that $5.5 billion of the debt is assessed a 12 percent annual late-payment interest fee. Despite Illinois’ low credit rating, the commission believes borrowing $6 billion would carry a 6.5 percent rate or less.
That means interest payments of no more than $2.5 billion over a 12-year repayment schedule for bonds compared with as much as $8 billion at the current rate.
Comptroller Susana Mendoza, the state’s check writer, said the action will mean an end to “pouring gasoline on a $2 million fire,” referring to the daily interest payments for which taxpayers are on the hook.
“It’s going to give me an opportunity to provide some immediate relief to many providers who have waited an unconscionable period of time to get paid for services they’ve already provided to the people of Illinois,” the Democrat said in a telephone interview.
The backlog tripled in size during a two-year standoff over an annual budget between Rauner and Democrats who control the Legislature. Rauner also called Thursday for lawmakers to return to Springfield this fall to help him fix shortfalls. Sen. Donne Trotter, a Democratic assistant majority leader from Chicago who sponsored the borrowing plan, said spending authority was added to allow Rauner to cut because lawmakers couldn’t get the governor’s Cabinet members to suggest spending reductions last spring.
Rauner spokesman Jason Schaumburg said details about how much will be sold at once and when are being worked out. The bonds must be sold by year’s end.
The bill is SB1 .