Illinois is selling $2.45 billion in general obligation (GO) bonds in an environment of rising global interest rates. The bonds are being sold in four batches, sized as $1.1 billion, $1.0 billion, $200 million, and $150 million, with different terms and maturity dates.
The budget proposed by Gov. JB Pritzker for FY24 includes $46.5 billion in capital appropriations, which far exceeds available cash flow. In addition, the Pritzker administration has created a wholly new $400 million Large Business Attraction Fund. This Fund is designed to achieve one-time incentive enhancement goals, especially with respect to so-called “megaprojects.” If and when a megaproject deal is announced, the deal announcement will claim that the deal will pay for itself over time, but the State will need up-front money right now.
The “Investor Presentation” drafted by the State of Illinois’ underwriters, with the assistance of the Governor’s Office of Management and Budget (GOMB), includes a full section, “Pension Update,” on Illinois’ current pension situation. Illinois’ five State-managed pension systems continue to be severely underfunded with respect to long-term obligations. The five systems currently assume a rate of return on their existing assets of between 6.50% and 7.00, with a weighted average of 6.84%. Should returns drop below this number, the unfunded pension gap of these five systems would further increase. Illinois’ pension systems currently post an unfunded liability number of more than $100 billion. As of the end of FY22, the five systems were 44.1% funded.