Executive Vice President
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On the heels of Illinois’ latest credit rating downgrade, it’s worth taking a trip down memory lane.
Remember this testy exchange from March 2012, when a rep from the governor’s office insisted to FOX Business’ Stuart Varney that Illinois was getting an “an unheard of interest rate” when it came to borrowing? And how Illinois was getting its act together to advance real spending and pension reforms?
Fast forward to the present, when the governor’s office decides to yank a $500 million bond offering due to a drop in lender confidence in Illinois’ credit worthiness.
Here’s the real back story, as outlined by the Institute’s Ted Dabrowski:
Lenders are realizing just how dangerous it is to invest in a state with the lethal combination of runaway debt, unpaid bills and politicians beholden to government employee unions. Those politicians refuse to take on government unions in order to restore Illinois’ fiscal order. Illinois’ out-of-control spending may very well cause larger institutions – insurance companies and the big retirement funds – to shy away from investing more money in Illinois…
…Without those big institutional investors, the interest rates that Illinois will have to pay to borrow will jump significantly. Why? Because without big, institutional investors, Illinois will have to reach out to smaller investors or those who make riskier bets. That, of course, means that it will cost Illinois even more money to borrow because the state will be paying higher interest rates.
The reality of the last 10 months has not been kind to the narrative coming out of Gov. Quinn’s office. The unfunded pension liability went up and the state continued to spend more than it took in. We’re dripping in debt.
Illinois’ destructive “tax, spend, borrow, repeat” habit has sent this state into a death spiral. No amount of spin can change that fact.