St. Louis Post-Dispatch

Illinois: "Buddy, can you spare $900 million?"

Thursday, July 15, 2010

SPRINGFIELD, Ill. • Illinois is going to market today to borrow $900 million through bond sales. It's part of what may ultimately be some $4 billion in borrowing to get the state through this fiscal year.

Illinois is looking at a potential $13 billion budget deficit — the equivalent of about 50 percent of its entire operating budget — due to the recession and years of overspending. As a result, the state is an estimated $6 billion behind in paying what it owes to public schools, hospitals and private businesses that do work under contract for the state.

The Legislature, facing elections in November, couldn't agree on either tax hikes or significant budget cuts to bring the budget into balance. Instead, lawmakers went home for the summer to campaign for re-election, telling Gov. Pat Quinn to do whatever he saw fit to keep the lights on. Quinn has announced some $1.4 billion in spending cuts, but it's nowhere near enough to close the gap, so massive borrowing is still part of the mix.

Adding to the problem: That borrowing is going to be millions of dollars more expensive for the state than it should be, because of Illinois' reduced credit rating, due to (drum roll please) the state's failure to address its fiscal crisis.

"The state has not demonstrated the political willingness to take action during the fiscal crisis to restructure its budget to achieve balance and has relied almost exclusively on borrowing to close its sizeable budget gaps," the credit firm FitchRatings said in a statement last month, in announcing the reduction of the state's credit rating.

It isn't just Illinoisans who are nervous about this. CNN Money today has as story up that asks whether Illinois is "Our very own Greece," referring to that nation's debt-driven fiscal meltdown.