Illinois' CGFA analyzes Pritzker's budget, sees more bonding

Illinois' bond sales would total $3.2 billion in fiscal year 2027 under provisions of Gov. JB Pritzker's executive budget, the Commission on Government Forecasting and Accountability found in its analysis of the spending plan.

The state's outstanding principal would climb to $29.9 billion and debt service would hit $3.8 billion for general obligation bonds and $435 million for Build Illinois bonds, CGFA said in its analysis, released last week.

After an upgrade to A2 from A3 from Moody's Ratings in October and three upgrades each from Fitch Ratings and S&P Global Ratings since 2021, the state's interest costs on new debt have declined, CGFA said.

A recent sale of taxable bonds brought a true interest cost of 4.95%, compared to the 5.35% true interest cost of taxable bonds sold via negotiated sale in May 2024.

"The state is pleased that recent issuances have seen strong investor demand and successful pricing, which helps ensure the state can finance capital projects at lower costs," a spokesperson for the governor said by email. "This allows state dollars to go further toward key capital projects across the state."

Pritzker's FY2027 plan for new capital projects totals $12.7 billion, with about $9.4 billion pay-go funding and $3.2 billion bonded, CGFA said.

"The Governor's Office of Management and Budget is expected to request additional authorization," the report said. "The request would include $2.457 billion for general obligation capital bonds, $1 billion for an extension to the Pension Acceleration Bond program, and $766 million for Build Illinois bonds."

The $4.223 billion expected request for further bond authorization ? in addition to the $3.2 billion in bond appropriations for FY2027 ? was shared with CGFA by GOMB, CGFA Senior Bond and Revenue Analyst Lynnae Kapp said.

The governor's spokesperson pointed to the governor's budget book and noted that most of the GO increase ? $1.4 billion ? is for deferred maintenance at state and higher education facilities.

The $3.2 billion includes $1.85 billion for the Capital Development Fund for projects at universities, community colleges, state properties, National Guard facilities and armories, and for technology projects.

It also encompasses $766 million for Build Illinois projects, among them Pritzker's proposed Missing Middle Housing Initiative. And it provides $500 million for the Transportation D Fund for downstate transportation construction, as well as $100 million for the Anti-Pollution Bond Fund for the Water Revolving Fund.

The governor also suggested extending the pension buyout program for two years; Illinois has spent hundreds of millions per year for pension buyouts, so $1 billion should cover at least two years, the spokesperson said.

The governor's budget for the Department of Transportation calls for $500 million for Transportation D bonds, plus $6.5 billion pay-go funding for various projects, including $675 million for the newly reorganized Northern Illinois Transit Authority.

The Build Illinois Fund pays debt service on Build Illinois bonds that fund capital projects. Build Illinois funding includes revenue from its 5.55% share of the state's sales tax revenue, with recent sales tax law changes expected to generate additional revenues, according to CGFA.

The Rebuild Illinois Projects Fund draws monies from newly licensed gaming facilities or wagering platforms, new positions, reconciliation payments and any other monies appropriated or transferred.

Future funding for that fund would have to come from additional gaming positions under the allowed cap; racinos being added in Illinois; or future reconciliation payments from the six new casinos, according to CGFA.

Public Act 101-30 authorized bonds from the Rebuild Illinois capital program, which can be paid for by the Capital Projects Fund, excluding statewide road projects. CGFA said public Acts 103-007, 101-30 and 103-0591 enabled bond authorization in multiple GO and Build Illinois categories to be paid for by the Capital Projects Fund, which was originally created to fund the FY2010 Illinois Jobs Now capital program.

Public Act 104-0008 took effect Jan. 1 and changed Illinois' bond acts in several ways. The GO Bond Act had its cap raised by $875 million to $82.66 billion, which includes $750 million tobacco bond authorization that had expired, CGFA said.

Also included were $200 million in pension acceleration bonds and $675 million for the capital facilities category, among the latter $615 million for state facilities projects and $60 million for recreational and conservation projects.

That law also permits GO bonds issued in FY2026 to have unequal principal or mandatory redemption amounts, CGFA said.

And it amends the Build Illinois Bond Act to raise authorization by $740.2 million to $12.099 billion. There is no refunding limit on Build Illinois bonds according to CGFA.