(The Center Square) – A report shows the state of Illinois has one of the largest debt liabilities in the country.
The American Legislative Exchange Council, or ALEC, released its annual State Bonded Obligations publication, which highlights the risks posed to taxpayers by excessive borrowing.
State governments borrow for a number of reasons and issue various types of bonded obligations. General obligation bonds serve as a way for local governments to raise funds for projects that create streams of income for things such as roads, parks and infrastructure.
Illinois is one of 10 states with the largest bonded liabilities that make up 66% of the country’s total state government debt, amounting to over $810 billion. Illinois accounts for nearly $58 billion of that total, and that doesn’t include public pension debt and other retiree obligations. The other states are California, New York, Texas, New Jersey, Massachusetts, Washington, Connecticut, Virginia and Michigan.
“At the root of the government debt problem is a government spending problem,” ALEC Research Manager Thomas Savidge said. “It is vital for state leaders to curb the growth of spending and debt on behalf of their constituents and for the fiscal health of their state budgets.”
The total bonded obligations slightly declined over the past year. This is in part because states received billions of federal tax dollars amid the government-imposed COVID-19 lockdowns. As a result, states beat revenue expectations in 2020.
Savidge said Illinois was heading toward a risky place financially if not for the federal tax dollars.
“Without the federal government assistance through CARES and things like the municipal liquidity facility at the federal reserve, Illinois very likely could have defaulted on its debt,” Savidge said.
According to the report, today, state bonded obligations total $1.23 trillion nationally, equal to $3,700 for every man, woman and child in America.
“By using bonds to increase spending today, states are passing the costs on to future generations of taxpayers,” said Jonathan Williams, ALEC Chief Economist and Executive Vice President of Policy. “State leaders can make the necessary changes, such as implementing priority-based budgeting and tax and expenditure limits, to ensure the future financial well-being of their states.”
