TOPINKA: NO TO NEW BORROWING
Comptroller testifies against adding to debt
SPRINGFIELD – Comptroller Judy Baar Topinka on Tuesday warned against any additional borrowing to pay down the state’s massive backlog of unpaid bills, noting that Illinois already has bonded its way to one of the lowest credit ratings in the nation, and cannot afford to dig deeper into debt.
The alert from the state’s Chief Fiscal Officer came during a House Executive Committee hearing and in response to proposed legislation to borrow $4 billion to pay down more than $9 billion in unpaid state bills. With Illinois already burdened with more than $160 billion in debt, now is not the time to borrow, Topinka said.
“When you’re drowning in debt you don’t start applying for new credit cards,” Topinka said. “The rush of new cash may create a short term feeling of relief but it will make our situation worse, and cost our taxpayers even more, in the long haul.”
If approved by the General Assembly, the latest borrowing plan would authorize the state to take on more general obligation debt than it has in any of the previous 20 years. At the same time, Illinois’ debt from previous authorization continues to grow. The state ended fiscal year 2012 with $27.55 billion in outstanding general obligation bonds, compared to $7.63 billion at the end of fiscal year 2002.
The nation’s bond rating agencies have taken note. In the last four years, Illinois’ general obligation bonds have been downgraded four times by Fitch, three times by Standard & Poors and four times by Moody’s. Most recently, S&P lowered the state’s bond rating from A+ to A with a negative outlook – giving Illinois one of the lowest state credit scores in the nation and costing taxpayers more in interest payments.
For its part, Moody’s reported that Illinois ranked fourth-highest among all states in total net tax-supported debt – and eighth highest in net tax-supported debt per capita. If the new borrowing plan is approved, Illinois would pass New Jersey and carry the third-highest tax-supported debt in the nation.
“Too often the state has used borrowing to put off difficult decisions so it can spend for another day – and we’re seeing the consequences of those decisions,” Topinka said. “We must stop the cycle and face reality in order to regain our fiscal footing and stop these unconscionable payment delays.”