Illinois' gubernatorial scandal already has cost the state big bucks.
State Treasurer Alexi Giannoulias said Gov. Rod Blagojevich's arrest last week delayed a $1.4 billion short-term borrowing plan by several days, and said that delay cost Illinois more than $20 million in high interest payments.
"Unfortunately, they now have to pay what amounts to a corruption tax," Giannoulias said, and in the intervening days, the Illinois bond rating took a massive hit.
"Over $20 million. Over $20 million in what amounts to three business days," Giannoulias reported.
Crain's Chicago Business reports that the blended interest rate on the deal — about 4% — is double what the state paid for $1.2 billion in short-term borrowing in April and five times the current yield on short-term Treasury notes. It also is four times the average yield of top-rated six-month municipal notes, according to a Bloomberg index.
Moody's Investors Service lowered it rating on the $1.4 bond sale, Fitch Ratings downgraded the state's overall bond rating and Standard & Poor's placed Illinois on its negative Credit Watch list the day after Mr. Blagojevich was arrested.
The state sold the bonds to raise cash it needs for vendors who have not been paid since May, Giannoulias said.
Chicago Mayor Richard M. Daley has stopped short of calling for Blagojevich to resign, but he said today that the distractions are most likely proving costly.
"Everybody has problems. You have economic problems in every home, in every business, every city, and county and township, and every state. It's not unique, so you need a person 24 hours, 7 days a week, who cannot ever be distracted on any other issue," Daley said.
Regarding the credit rating plunge since last week, a spokesman for the governor said that the state received the "best rate possible given the credit market and the economic crisis plaguing every state in the nation."
