![]() If aid never materializes, then Illinois will be stuck with the short-term $5 billion loan and no easy way to repay it. Pritzker’s expectation is that the HEROES act will give Illinois enough federal aid to immediately pay down the $5 billion MLF loan.īut Congress has just recessed with no assurance that a package for state and cities will be passed. The $5 billion will come from a three-year loan under the Federal Reserve’s new Municipal Liquidity Facility, a new program that provides loans to governments negatively impacted by the coronavirus. We covered the budget release and that deficit here. The second and larger problem is that lawmakers plan to borrow $5 billion to “balance” the 2021 budget, officially projected to be more than $6 billion in the hole. Moody’s further warned: “The existence of litigation against the backlog bonds would likely keep the state from using this option even if voters in November defeat a proposal to allow the state to raise revenue by imposing a progressive income tax.” Pritzker plans a $1.3 billion bond issuance if his progressive tax hike referendum fails. Their comment does not imply a downgrade, just that everything else equal, the resumption of the suit is a negative for Illinois’ finances: “The ruling is credit negative because it prolongs a legal challenge that, while unlikely to prevail, carries severe risk and could limit the government’s financial options at a time when the coronavirus pandemic is weighing on revenue.” ![]() Moody’s Investors Services commented on the recent court ruling, saying the news is credit negative. To Bar Lawsuit Over Bond Issuance, Court Defies Law’s Most Fundamental Principle.Is the Lawsuit To Invalidate Certain Illinois Bonds Frivolous? An Education is at Hand.For details on the lawsuit, read Wirepoints’ analysis: In question are the $10 billion in bonds issued in 2003 to fund a portion of the state’s pension shortfall and another $6 billion issued in 2017 to pay down some of Illinois’ unpaid bills. But even if it fails, the fact that it’s moving forward could cause problems for the state. What’s being litigated is whether the bonds conflict with Illinois’ constitutional requirement that general obligation bonds be issued only for “specific purposes.” If the lawsuit is successful, it could hurt Illinois’ ability to borrow its way out of the current crisis. John Tillman, CEO of the Illinois Policy Institute, is the plaintiff in the lawsuit that seeks to block the repayment of billions of dollars that remain outstanding on the bonds. Illinois’ battered finances took a hit of sorts recently when an appeals court ruling allowed a challenge to the validity of $14 billion in outstanding Illinois general obligation bonds to continue.
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