“I am very reluctant to saddle our state with that large amount of short-term debt. I believe it would be irresponsible to borrow that entire amount, given the persistent fiscal pain it would cause over the next three years, as we would struggle to repay that entire amount. Our collective intention is to repay this line of credit as early as possible, after either the awarding of stimulus by Congress or a sufficient recovery of state revenues.”
Said another way, $5 billion in additional debt, with such a short repayment period, would likely trigger the credit rating agencies to act sooner than later. Moody’s recently said in an October report, “[Illinois’] ability to weather the coronavirus pandemic without hurting its credit quality will require keeping growth of its long-term liabilities within its capacity to pay.”
Lot of code words, but they follow the same step. Illinois had the meeting of the elders. They chose a path that enters them into bankruptcy, and now have borrowed short term fund from the bankruptcy court. They have defaulted in all but name as the resulting down grade makes forward progress impossible.
Biden will be pestered increasingly for large state bailouts, California, NY and Illinois. Then he has to do a student loan deal. Biden has a nightmare.
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