SPRINGFIELD, Ill. (AP) — A study contends that Illinois wears a “scarlet letter” when it borrows money – which has cost at least $80 million over a five-year period.
The review by the University of Illinois Institute of Government and Public Affairs estimated the state’s “risk premium” in selling bonds to raise money. This cost is on top of additional interest charges paid because of Illinois’ worst-in-the-nation credit rating.
The study found that on bonds sold from 2005 to 2010, bond-buyers demanded the premium based only on the state’s fiscal reputation. It notes the Prairie State’s credit rating has fallen further since 2010.
Authors of the study collected data on all state general obligation bonds sold during the period and calculated interest charges above the extra paid based on credit rating.