Illinois Governor Pat Quinn is considering borrowing $15 billion to pay overdue bills and balance the biggest budget deficit in the state’s history.
The plan is among a range of proposals that Quinn is discussing with state lawmakers as they prepare to return to Springfield Jan. 3 for the final days of the legislative session, said Kelly Kraft, a Quinn spokeswoman.
Illinois faces a budget shortfall of at least $13 billion because of declining tax revenue. The state Senate in November didn’t have the votes to approve the borrowing of $3.7 billion to cover pension-fund contributions for the fiscal year that ends June 30.
“We are working on a variety of options,” Kraft said in an interview today. “Nothing has been finalized. We’re talking with legislators on both sides of the aisle. Our goal is to stabilize the budget.”
Senate President John Cullerton and House Speaker Michael Madigan declined through spokesmen to say if the bond sale would draw enough support to pass.
Cullerton met recently with Quinn to discuss the idea, said John Patterson, a spokesman for Senate Democrats. Steve Brown, a spokesman for Madigan, said it’s “difficult” to react to Quinn’s idea “because it’s not a hard and fast proposal.”
The Senate Republican leader, Christine Radogno, criticized the proposal as lacking specifics about how the money would be paid back.
“A discussion about state finances can’t just be about raising more taxes and borrowing more money,” said Patty Schuh, a spokeswoman for Radogno.
Other ideas under consideration include a 2 percentage-point increase in the state income tax that the Senate approved in 2009. The current rate is 3 percent. The House didn’t take the measure up for a vote.
Quinn’s new borrowing proposal, which the Chicago Tribune reported today, drew criticism from one municipal-bond investor. Matt Dalton, chief executive officer of Belle Haven Investments Inc., in White Plains, New York, questioned the wisdom of borrowing.
“He’s trying to sign up for another credit card,” said Dalton. “That’s going to put a lot of pressure on Illinois.”
The cost of insuring Illinois’s bonds against default rose to the highest level in five months as the state headed for the new year without a plan to finance the pension-fund contributions.
The cost of credit-default swap insurance on the lowest- rated state after California has risen 16 percent since Dec. 3 to $330,000 to protect $10 million of debt, from $285,000, according to data compiled by Bloomberg. That’s the most expensive since July 12, when it reached $335,000.