Illinois' debt to vendors keeps climbing, hits $16 billion
Despite avoiding a credit downgrade with the budget package passed in July, Illinois still carries a massive backlog of bills that recently hit $16 billion, and the state’s plan to address it is to incur more debt, according to a report from Zero Hedge, a global finance website.
Gov. Bruce Rauner vetoed the budget package and called it a disaster, but it was nevertheless passed through a General Assembly override. Credit ratings services S&P and Moody’s welcomed the budget deal, without which both had threatened to downgrade Illinois’ already poor credit rating to junk bond status, which no state has ever faced.
While the budget was a positive development in regards to the state's credit, it has not had a similar effect on the state’s actual debt, Zero Hedge reports. Over the past two years, Illinois' debt has increased three-fold without a budget in place, and the new budget doesn't appear to offer any relief.
Illinois Comptroller Susana Mendoza has advocated issuing $6 billion in bonds to pay down the debt, which would allow the state to stop accruing late payment penalties on its debts to vendors and service providers. Zero Hedge and Rauner note that while the budget authorizes the bond issue, it does not appropriate funds to pay the bond principal and interest payments. Rauner said the state would need $500 million to do so.