Bonded Indebtedness and Long Term Obligations, Fiscal Year 2009

              March 2010
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 FinanceAuthority 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 ExpositionAuthority
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 FacilitiesAuthority owns U. S. Cellular Park, paid in part
by the hotel tax).
This report shows that total debt outstanding increased from $58.7 billion in fiscal year 2008 to $60.1 billion in fiscal year 2009, an
increase of 2.4%. This compares to a decrease of 1.2% in fiscal year 2008, no change in fiscal year 2007, a 3.9% increase in fiscal
year 2006, and a 5.5% increase in fiscal year 2005.
General obligation debt decreased $461million (2.4%) in fiscal year 2009. In fiscal year 2008, general obligation debt decreased $513
million (2.6%) from fiscal year 2007.
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 obli-gation
bond ratings are directly related to the financial condition of the State. As of June 30, 2009, Illinois’ general obligation bond
ratings were AA– with a Negative Outlook by Standard and Poor’s; A1 with a Stable Outlook by Moody’s Investor Services; and
AA– with a RatingWatch Negative by Fitch Ratings, Inc. These ratings were downgraded fromAA,Aa3 andAA, respectively, as of
June 30, 2008. In addition, since June 30, 2009 the ratings have again been downgraded to:A+ with a Negative Outlook by Standard
& Poor’s; A2 with a Negative Outlook by Moody’s Investor Services; and A with a RatingWatch Negative by Fitch Ratings, Inc.
The State’s special obligation bond ratings remained the same as fiscal year 2008 since no special obligation bonds were issued during
fiscal year 2009. These ratings ranged fromAAAby Standard & Poor’s for Build Illinois bonds toA1 by Moody’s Investor Services for
Civic Center bonds. However, since June 30, 2009 Build Illinois bond ratings have been downgraded to:AAAwith a Stable Outlook by
Standard and Poor’s; Aa3 with a Stable Outlook by Moody’s Investor Services; and AA with a Negative Outlook by Fitch Ratings, Inc.
Conduit debt is up 28% since fiscal year 2005, which can be attributed to increases in debt issued by the Illinois Finance Authority
and the Illinois State Toll HighwayAuthority.Moral obligation debt has decreased 29% since fiscal year 2005 due to decreases at the
Illinois Student Assistance Commission. Indirect debt of the State has decreased 12% since fiscal year 2005 due to the pay off of
Illinois Department of Employment Security revenue bonds during this period.
Also of note in this year’s report is the total future interest payable of the general and special obligation bonds over the life of the
bonds has decreased $1.0 billion (6.25%), which resulted in a per capita interest decrease of $65 (5.26%) per individual from fiscal
year 2008. This illustrates the importance of maintaining manageable debt levels and minimizing interest cost through sound fiscal
management. However, this projected debt trend will change as the State has passed a new capital plan beginning in fiscal year 2010
of approximately $31 billion of which a portion will be funded by long term debt.
If you have any questions or comments regarding this report, please contact my office through our web site at www.ioc.state.il.us or
call us at (217)782-6000 or (312)814-2451. Your input is important to us and would be greatly appreciated.
DanielW. Hynes
Comptroller
AMessage to Illinois Taxpayers