Ill. first state to borrow from fed relief fund
State will draw $1.2B from Federal Reserve’s COVID-19 Municipal Liquidity Facility
The Federal Reserve building in Washington, D.C.: the Fed is providing Illinois with a $1.2 billion loan through a coronavirus relief fund. (Shutterstock)
By Ted Cox
Illinois is set to become the first state to draw on a $500 billion federal fund meant to provide relief in the coronavirus pandemic.
Bloomberg News is reporting that the state will close later this week on a $1.2 billion one-year loan from the Municipal Liquidity Facility, a $500 billion fund put together by the Federal Reserve to provide state and local governments with relief from lost revenue in the economic collapse stemming from the pandemic.
Alexis Sturm, director of the Governor’s Office of Management and Budget, issued a statement saying: “The Federal Reserve Bank worked closely with our team to make this transaction possible through the Municipal Liquidity Facility, which is an important tool the state is using to answer the unprecedented economic challenges posed by the COVID-19 pandemic.”
Yet, as One Illinois reported early last week, the Federal Reserve is backstopping loans to private businesses, especially major corporations, at no cost, while charging interest on public governmental bodies that draw on the funding. According to Bloomberg, the state is getting an interest rate a full percentage point lower than it was going to be charged when it tried to borrow $2.2 billion in short- and long-term loans a month ago, only to put the bond deal off. But Illinois will still be charged an interest rate of 3.82 percent, consistent with the original rates set by the MLF.
The General Assembly cleared the way for the borrowing during its abbreviated session late last month, allowing the state to draw on the Fed without competitive bids. But it seems as if no lender would have met that lower rate provided by the MLF in any case. The legislature has authorized up to $5 billion in long-term loans.
Sturm added that she appreciated “the General Assembly's willingness to provide additional borrowing flexibility and the support of the comptroller, the treasurer, and the attorney general to work through the issues related to its execution.” The $1.2 billion is expected to provide liquidity and tide the state over as it awaits $1 billion in income-tax payments to be delivered next month, pushed back from the traditional April 15 filing date to provide taxpayers with a little extra time in the midst of the pandemic.
Gov. Pritzker has repeatedly said that Illinois, like every state in the union, will need federal relief funding to make up for revenues lost to the coronavirus crisis — estimated at $2.6 billion this fiscal year and $4.6 billion with the 2021 fiscal year beginning next month. According to U.S. Rep. Cheri Bustos of Moline, the HEROES Act passed by the U.S. House would allot a third of its $3 trillion to state and local governments, but the bill is stalled in the Senate under Majority Leader Mitch McConnell of Kentucky.