(The Center Square) – A new analysis by the American Legislative Exchange Council shows Illinois is one of the worst states in the country with bond debt.
In its annual State Bonded Obligations, 2020, the ALEC Center for State Fiscal Reform analyzes each state’s level of debt and features policy solutions to address the root of state debt problems: government spending.
Total state bond debt for all 50 states exceeds $1.25 trillion dollars, with Illinois and 9 other states accounting for 64%, or $809 billion of the total.
The report ranks Illinois 47th in the country with over $76 billion in total bonded obligations. That is compared to the top state in the ranking, Wyoming, with only $38 million in total bonded obligations. Only Texas, New York and California have more total bonded obligations than Illinois.
ALEC Chief Economist and Executive Vice President Jonathon Williams said to turn things around, Illinois has to start erasing debt.
“When you’re in the hole the first step is to stop digging it deeper, right?” Williams said. “Looking very closely at any new debt being issued is certainly something to pay close attention to.”
General obligation bonds are backed by the full faith and credit of the state, meaning states cannot default on such debt. That also means that general obligation bonds are the most secure type issued.
Such bonds account for about $463 billion nationwide, or nearly 37% of all state obligations.
The study notes that government debt is an “opportunity cost” for taxpayer money that states could use elsewhere, while debt used for current government spending is the consumption of what could have been productive funds for taxpayers in the future.
“Many states are continuing to use bonds to increase government spending and pass the buck to future generations of taxpayers,” Williams said.
Illinois’ neighbor Indiana ranked second per capita behind Wyoming for the least amount of bonded obligations.
“Indiana has a constitutional debt limit, one of the strictest in the country,” Indiana Sen. Jim Buck said. “This puts us in a good place, especially compared to our neighbors in Illinois who have no debt limit and often us e bonds to cover tax shortfalls. I’m proud of how Indiana has prioritized fiscal responsibility on behalf of taxpayers.”