Bonded Indebtedness and Long Term Obligations, Fiscal Year 2007

              A Message to
Illinois
Taxpayers
February 2008
I present to you the report of the State’s bonded
indebtedness. Bonded debt, sometimes referred
to as long-term debt, is typically used to finance
infrastructure improvements such as road repairs,
new buildings, school construction, etc. This is the
equivalent of taking out a mortgage to purchase a
new home or a home equity loan to make
improvements.
This report of Bonded Indebtedness and Long
Term Obligations presents a complete picture of
the State’s indebtedness in the categories of
General Obligation Bonds, Special Obligation
Bonds and Revenue Bonds.
General obligation debt is backed by the full faith
and credit of the State and is considered direct
debt of the State. Special obligation debt is also
considered direct debt of the State, but is not
backed by the full faith and credit of the State.
Rather, special obligation debt is supported and
repaid only by a dedicated State revenue source
(e.g. Build Illinois Bonds are primarily supported
and repaid through sales tax proceeds).
Revenue bonds are not backed by the full faith
and credit of the State, but are backed by a
specified revenue stream. Revenue bonds can be
considered conduit debt, which implies no
obligation for the State (e.g. Illinois Finance
Authority bonds supported by project revenues or
receipts). Revenue bonds can also be considered
moral obligation debt, which means that if
resources from the specified revenue stream are
insufficient to support the debt service the State is
then obligated (e.g. Metropolitan Pier and
Exposition Authority bonds). Finally, some
revenue bonds are classified as indirect debt,
which means that the asset is the property of a
local government but part of the debt service
comes from State resources (e.g. Illinois Sports
Facilities Authority owns U. S. Cellular Park, paid
in part by the hotel tax).
This report shows that total debt outstanding
remained at $59.4 billion, the same in Fiscal Year
2007 compared to Fiscal Year 2006. This
compares to 3.9% growth in Fiscal Year 2006,
5.5% growth in Fiscal Year 2005, 4.9% growth in
Fiscal Year 2004, and 33.6% growth in Fiscal Year
2003.
General obligation debt decreased $326 million
(1.6%) in Fiscal Year 2007. In Fiscal Year 2006,
general obligation debt increased $358 million
(1.8%) from Fiscal Year 2005.
When debt is issued, independent credit rating
agencies attach a rating to the issue. The ratings
attached to all bonds associated with the State
affect interest payments and the cost to Illinois
taxpayers. Individual bond ratings will vary, but
the general and special obligation bond ratings are
directly related to the financial condition of the
State. As of June 30, 2007, Illinois’ general
obligation bond rating was unchanged at AA by
Standard and Poor’s, Aa3 by Moody’s Investor
Services and AA by Fitch Ratings.
The State’s special obligation bond ratings also
remained the same, ranging from AAA by
Standard & Poor’s for Build Illinois bonds to A1 by
Moody’s for Civic Center bonds.
Conduit debt is up 25% since Fiscal Year 2003,
which can be attributed to increases in debt issued
by the Illinois Finance Authority and the Illinois
State Toll Highway Authority. Moral obligation
debt has increased 8% since Fiscal Year 2003 due
to slight increases at various agencies. Indirect
debt of the State has increased 20% since Fiscal
Year 2003 due to the increase in bonding at the
Regional Transportation Authority through their
Strategic Capital Improvement Program, the
University of Illinois certificates of participation and
the Illinois Sports Facilities Authority.