Quinn looks to borrow $4.7 billion

March 12, 2010 4:41:31 PM PST
A key component of Illinois Governor Pat Quinn's budget plan calls for the state to borrow $4.7 billion.

When it comes to borrowing money for his already deeply indebted state, Quinn has no shame.

"We're going through a tough time. But the bottom line is Ilinois is strong and there are a lot of people out there who want to lend money to us," said Gov. Quinn.

So, who are these people who would invest billions in the bonds of a state government with a $13 billion deficit, which includes $6 billion in unpaid bills?

"Well, there's a buyer for just about anything in this world," said Professor Woods Bowman, DePaul University.

Bowman is a former state house member and chairman of an appropriations committee. He says Wall Street investors love bonds issued from desperate locals, like like Illinois.

"Junk bonds are what people who buy the bonds call them. People who sell them call them high yield bonds which is the equivalent to higher interest rates," said Bowman.

"I have some very talented people who know what they are doing when it comes to putting out an issuance to get as low interests and good terms as possible," said Gov. Quinn.

But, Laurence Msall of the Chicago Civic Federation says, investors watch the news and know the situation, and will soak credit-challenged Illinois for hundreds of millions of dollars above and beyond what the state already pays interest.

"It is a financially reckless approach to use borrowing and to push your bills from one year to the next," Msall said.

Still, as the governor says and the experts agree, Illinois will not have problem selling its bonds or getting a loan. The lenders or bond buyers know that in the end they will get their money.

"The investor would know that the state has the power to tax so if the state runs out it could compel citizens to give it more money through taxation," Bowman said.

The governor has included borrowing as part of his five point budget balancing act. There is strong resistance to the idea in the Republican caucuses of both the House and Senate. Democrats are mixed on more loans.


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