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Title:Illinois Still in the "Financial Condition Penalty" Box
Author(s):Luby, Martin J.
Subject(s):penalty
state
university
bonds
financial
prices
fiscal
programs
analysis
costs
Abstract:The state of Illinois recently sold its first bond issue since the Illinois Supreme Court struck down the pension reform legislation in May 2015 and during a period when the state is still without a budget - both of which contributed to its recent credit rating downgrades. The state’s return to the bond markets amid its deteriorating fiscal position provides an opportunity to empirically estimate one of the costs of the state's current financial condition. This Policy Brief calculates what I am calling the “financial condition penalty” the state earned on this bond sale. This calculation is made based on counterfactual analysis that assumes the state sold these bonds at the relative prices received on its bonds 10 years ago when its credit ratings were much higher. This penalty amounted to nearly $53 million on this bond issue. Assuming the state does not improve its financial condition, the annual dollar amount of this penalty will grow substantially in the future as the state needs to increase its use of debt to finance its sizeable infrastructure needs.
Issue Date:2016-01-16
Publisher:Institute of Government & Public Affairs
Genre:Article
Type:Text
Audio
URI:http://hdl.handle.net/2142/110194
Date Available in IDEALS:2021-07-23


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