Debt restructuring would restore honor

Illinois Treasurer Dan Rutherford has changed his mind about debt restructuring. The treasurer previously supported the concept, under which the state would sell low-interest bonds for cash to pay overdue bills to child care centers, school districts, mental health providers, doctors and hospitals, local governments and many others the state has simply failed to pay. But now he says borrowing is unwise, no matter the arguments in support of it. He is wrong on the policy and wrong on the facts.

The treasurer claims we can’t afford to take on more debt — but restructuring is not new debt. The state already owes this money. By restructuring we shift the burden from unwilling creditors who never wanted or expected to be “loaning” the state anything to willing lenders in the bond market.

What’s more, restructuring will stimulate the economy, protecting and creating jobs as bills are paid. It will restore integrity to the state’s relationships with the people it does business with. And we can afford it — a portion of the tax increase passed in January was intended expressly to repay these bonds.

Treasurer Rutherford claims Illinois will have to pay inordinately high interest rates on the bond market. To the contrary, the state is paying high interest rates now, 12 percent to 24 percent APR on many of its past-due bills. Bonded debt is significantly cheaper, especially with the state’s improving revenue picture.

It turns out that the bond market believes in the common sense principle that the rest of us take for granted: Paying your bills improves your credit rating. Matters of finance can be difficult to understand, but this one is really quite simple. The General Assembly should restore some honor to this situation and approve debt restructuring.

John Bouman

President

Shriver Center

Chicago