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Illinois Sells Three Batches Of Bonds To Help Pay Down Bill Backlog


Illinois has taken another step toward paying down nearly $16 billion in overdue bills.
That money is owed to hospitals, electric utilities, drug rehab centers — basically anyone who has a contract with state government.

The state began issuing bonds Tuesday, effectively refinancing the debt to cut interest penalties, but it will be a long road back to normal.

“It took two years of budget stalemate to build the backlog up to $16 billion, so it’s going to take time to pay it down,” Gov. Bruce Rauner said. “Illinois won’t even get the money from this bond sale right away — there are more to be sold later this month.”

Proceeds from Tuesday’s bond sale will be augmented by the planned sale of $4.5 billion in general obligation bonds next week, which the governor’s budget office says could cut the backlog of bills in half by June 2018.

The thing is, there are late-payment penalties on a lot of that debt — ranging from 9 to 12 percent a year. Comptroller Susana Mendoza's office estimates the late-payment interest penalties total about $900 million.

The bonds were sold in three issues of $500 million each with different maturity dates, the governor’s office reported. The interest rates are 1.67 percent for the one-year maturity, 1.75 percent for the two-year maturity, and 3.95 percent for the 12-year maturity.

That’s pretty high compared to other states, but Illinois has to pay more because it has the lowest credit rating in the country. Analysts have blamed that on a “dysfunctional” government. The state has been accruing late payment interest of 9 percent to 12 percent on a portion of its backlog obligations.

“The state received strong bids today for its bonds and is pleased with the market’s favorable reception of the sale,” said Scott Harry, director of the Governor’s Office of Management and Budget. “This bodes well for the state’s financing coming next week.”

Illinois will return to the capital markets later this year with a $750 million general obligation bond issue for 2018 capital projects, the governor’s office said.

  • Illinois Public Radio State House Reporter Brian Mackey contributed to this report.