Illinois taxpayers will pony up at least $130 million extra in interest payments for a bond sale this week due to lowered credit ratings because lawmakers have failed to solve the state's $97 billion pension crisis.
Two weeks after two credit-rating agencies downgraded the state's rating to an all-time low, the state sold $1.3 billion in bonds Wednesday to pay for capital projects around the state. Among them are an upgrade of Chicago's elevated rail system, improvements to highways and university campuses and the purchase of land for a suburban airport south of Chicago.
Gov. Pat Quinn's office announced the costs of the bond sale, explaining that the $130 million -- to be paid over the 25-year life of the bonds -- is the difference between what the state paid this week and what it would have paid when it had a better credit rating just three years ago. It now has the worst rating of any state in the nation.
"Legislative inertia has a price, and today the price for taxpayers was an extra $130 million," Quinn said in a statement. "As I've warned repeatedly, this is an emergency."
State Treasurer Dan Rutherford said his office calculated that Illinois is paying $235 million more than it would have paid when it enjoyed a high credit rating in the early 1990s. There have been 13 downgrades for Illinois over the last four years by multiple agencies, all tied to the Legislature's inaction on pension reform.
Rutherford, a Republican who has announced a challenge to Quinn in next year's election, said another ratings downgrade is likely in store if lawmakers continue to punt on the pension issue.
"We've had all sorts of (deadlines) and benchmarks," Rutherford told The Associated Press. "Each time a date has been given and there has (been inaction)...it has had a direct consequence on the bond rating."
The announcement came a day before lawmakers were scheduled to meet downtown Chicago to again discuss finding a compromise to the state's nearly $100 billion shortfall in state employee retirement funding. Quinn has given them a new deadline of July 9 to come up with a solution.
For decades, legislators skipped or shorted payments to state retirement funds, creating the shortfall and making investors nervous year after year. Yet lawmakers in the Democrat-controlled General Assembly adjourned the spring legislative session again last month without a deal. It was the fifth time in 12 months that they left town without solving the crisis.
At a special legislative session earlier this month, lawmakers agreed to appoint a 10-member bipartisan panel to search for a compromise. The six Democrats and four Republicans were expected to meet Thursday morning in Chicago for a first public hearing. Testimony was expected from a number of key players in the discussions, including unions.
Meanwhile, the pressure mounts on lawmakers to act. On Wednesday, the influential CEO of Peoria-based Caterpillar Inc., the state's largest manufacturer, stressed the urgency of pension reform when addressing business leaders at the Illinois Chamber of Commerce's annual meeting in Chicago.
"When you leave here today, I want you to call your local legislators," Doug Oberhelman said. "Tell them that that you have already taken action in your own business to control costs in order to be competitive for the future, and you expect the state to make the same tough decisions that you did."
Quinn's office said this week's bond sale is slated to pay for projects at Western Illinois University's Quad City campus, the Shawnee Mass Transit District, the Madison County Mass Transit district, and school, university and road and rail projects in Galesburg, Champaign, Bloomington, Rockford and Rock Island. It also will fund land acquisition for the suburban Chicago airport and repairs to the city's Red Line transit system.