Civic Federation: Higher interest costs will harm Illinois taxpayers

From press release

SPRINGFIELD, Ill.—In a sign of Illinois’ worsening fiscal climate, a recent study by the non-partisan Civic Federation suggests state taxpayers will pay more than $500 million in extra interest costs on bonds sold in the past 12 months as a result of the recent credit rating downgrades.

According to the organization, the extra interest costs are a direct result of the inability by the governor and current legislative leadership to effectively manage Illinois’ finances.

“Due to Springfield’s failure to stabilize Illinois’ finances, Illinois residents will pay nearly 21 percent more for one year of borrowing than they would have if the state had maintained its credit ratings,” said Civic Federation President Laurence Msall. “This report demonstrates that our state’s inability to come to terms with the continuing fiscal crisis has a large and measurable cost, which is in addition to the obvious toll the crisis has taken on service providers.”

The organization compared the interest rates Illinois is paying, as a result of its current low credit ratings, with rates paid by other state governments with the higher credit ratings the Land of Lincoln had in December 2008. This comparison shows Illinois is paying more than $500 million more than it would have if Illinois had not been downgraded, with $300 million of that higher total coming due in the next five years.

Today, Illinois’ credit rating is now tied with California for the lowest in the nation, according to Moody’s, and eight of the total 17 downgrades in Illinois’ history occurred during the past 18 months. The Civic Federation notes that these downgrades were triggered by our high pension debt, large bill backlog and other budget factors.

The study covered the $9.6 billion in bonds Illinois sold from September 2009 through the most recent bond sales in July 2010, including the $3.5 billion in pension bonds sold in January 2010. In the first six months of calendar year 2010, Illinois sold more bonds than any other state, according to the Bond Buyer.