Illinois Budget, Bonds

State of Illinois sells $750 million in bonds. The General Obligation bond issuance was announced on Wednesday, November 29. $655 million in Series 2017A bonds were issued for major capital construction projects that include road repair, bridge renewal, and school construction. Illinois is continually issuing new capital construction bonds for transportation and infrastructure upkeep. The 2017A bond package will have a final maturity of 2042 and will bear a true interest cost of 4.33%. The nominal interest cost sometimes differs from the true interest cost, as in this case, when the bonds are priced to market as a slight discount or premium.

$95 million in Series 2017B bonds were issued to finance information technology projects. The Illinois Department of Information Technology, created by executive order issued by Gov. Rauner, has begun a multiyear process to move the State’s information technology (IT) platforms from an obsolescent platform of incompatible mainframes, which is what Rauner’s team found in Springfield when they came into office in January 2015, to a new platform of secure cloud-based data storage and processing. The 2017B bond package will have a final maturity date of 2027 and will carry a true interest cost of 3.71%.

The relatively low interest rates reflect the stabilization of Illinois’ credit ratings. The bonds are rated Baa3 by Moody’s Investors Service, BBB- by S&P Global, and BBB by Fitch Ratings. Illinois’ underwriter was able to show bond buyers that the State has not been marked down to “junk bond” credit rating status. However, Illinois’ continuing pattern of overspending and budget woes meant that the State and its taxpayers still have to pay higher interest rates than other American public-sector borrowers.

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