Using its worst-in-nation credit rating, Illinois agreed to pay $12 million to borrow $550 million Thursday to head off the July 1 funding cut off for mass transit and road construction projects.
The Chicago Tribune reports the state will pay an interest rate of 3.65 percent. Governor Rauner's office said it is the "lowest interest rate the state has ever received for a general obligation bond sale with a similar final maturity."
States with good credit - and functiona budgets - pay around 2 percent.
Trying to put a good spin on the deal, Rauner spokeswoman Catherine Kelly said, "It's clear from today's bond sale that investors realize Illinois now has a governor that is trying to turn the state around and right its financial ship."
Rauner's office said the money will allow "critical road construction projects and other transportation projects to continue," but offered few specifics about how the money would be spent. Mass transit projects will receive $330 million and $200 million will be spent on road construction, with the remaining $20 million going to other construction projects, the governor's office said.
The administration also was vague about how much of the money can be spent without an appropriation from the General Assembly, saying only that "a portion" of the proceeds could be expended without action from the legislature. That's significant, considering Rauner and lawmakers remain unable to agree on spending for higher education, government operations and social service programs that have gone underfunded or entirely unfunded for nearly a year.
Two Wall Street ratings agencies issued downgrades to the state's credit ratings last week and Standard & Poor's pegged the state's credit rating at BBB+, three notches above junk status. The credit downgrades came days after BlackRock Inc., the world's largest money manager, suggested Illinois should be denied market access because of its budget and pension problems.
Read the Trib's article here: