Illinois stands to be on the losing end of a missed debt deadline, and State Treasurer Dan Rutherford said Friday he wants to be ready just in case.
As Aug. 2 looms, Rutherford said he's positioning his investment teams to deal with the possibly significant effect of an impasse on the state treasury.
“I want my office to be well prepared and positioned to shift investment strategies if the national debt ceiling is not raised," Rutherford said in a statement. "My number one priority is to safeguard the state portfolio from losses, earning a return is second."
If the markets are dramatically affected by the impasse, he said, the state treasury potentially could fail to get $5 million in interest in the first month.
Rutherford warned he would be faced with taking "highly unusual action" with state fund investments. This means reducing the amount of U.S. treasury bonds available for purchase if the ceiling is not raised and the federal government is unable to issue bonds.
“The best—and possibly only—option may be to keep our state funds in non-interest bearing, FDIC-insured transfer accounts," he said. "The money will be safe, but it will not be earning interest.”
Rutherford said he picked "the most fiscally conservative approach for our state's investments" in the event of an impasse.
"The state treasury will be secure.”