Loan bill unites both sides of the aisle in the House
A money-saving idea found favor with both parties during the May 29 House floor debate.
Passing the House 115-0, SB 2858 enables the comptroller to borrow funds from the treasurer to pay down $1 billion in back bills. The bill is sponsored by Rep. Greg Harris (D-Chicago), who said the bill was initiated by Treasurer Mike Frerichs, would also earn the state money on interest on both ends of the transaction.
“The treasurer purchasing debt from the comptroller’s office would be earning more in the interest rate markets than it is currently earning from private investments," Harris said. “On the comptroller’s side, we would be saving substantial money because the rate of interest we would be paying the treasurer would be far below market rates.”
Given current market conditions, the transaction could bring in anywhere from $35 to $100 million annually in additional general revenue funds, a notion that all GOP representatives liked, starting with Rep. Peter Breen (R-Lombard).
After moving the debate from short to standard, Breen pointed out that at any given time, the treasurer has between $11 to $14 billion dollars on hand. Even though much of the money is used for various purposes, including cash flow, he said it is possible for the treasurer to use $500,000 to $1 billion to pay state debt instead of investing it in a local bank.
“He would do an agreement with the comptroller to actually pay off some of our back bills and get a little higher rate of return, say 3.5 percent instead of the 2 percent at the bank, and the bills would get paid so we would save money as a state,” Breen said.
With little time left to debate, Rep. Keith Wheeler (R-Oswego) yielded his time to Breen, who questioned the opposition from Gov. Bruce Rauner’s office.
“There very well may be opposition, but no one has come and spoken to me personally,” Harris said.
After Breen confirmed that both the treasurer and the comptroller have the legal authority to pay back bills by way of SB 2858, Rep. David Harris (R-Arlington Heights) said the decreasing the interest rate from 12 or 9 percent to approximately 3.5 percent is ideal.
“Some on my side of the aisle may think that this is an expansion of the treasurer and it is," he said. "And because it is a Democrat treasurer, we should look askance at this bill. Well, ladies and gentlemen of the House, I am here to tell you [that] this is one of the most creative and innovate programs to save money that has ever come before the House.”
However, Rep. Jeanne Ives (R-Wheaton) was not as enthusiastic, first noting that Mark Glennon, who runs Wirepoints, brought the notion to the public sphere more than a year ago.
“It is not a new concept," Ives said. "It is all in how it is executed and what happens.”
Why not just pay down the bills directly instead of taxing ourselves, she asked. After further explanation by Harris, Ives seemingly warmed up to the idea, noting that as long as it is not just the dog chasing the tail, it could work.
The bill passed the House unanimously, and the Senate concurred in a 49-1 vote on May 31. The bill will now move to the governor’s desk.