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The Bond Buyer

Illinois Proposal to Let Treasurer Buy Unpaid Bills Likened to a 'Shell Game'

CHICAGO -- One analyst says legislation to empower the Illinois state treasurer to provide state funds to buy up overdue bill vouchers could add to future fiscal problems.

"When governments start to think creatively about debt structure and repayment, we get a bit nervous," Lisa Washburn, a managing director at Municipal Market Analytics, wrote in the firm's weekly outlook commentary. "Any short-term fiscal relief from the legislation (if passed) is likely to be outweighed by the longer-term consequences of failing to substantively address the state's financial challenges."

Backers say the legislation will lower the state's interest costs and speed up bill payments to vendors in need of what they are owed.

But another buyside analyst said the vouchers are for a bad investment for the state.

According to Washburn, "the transaction could optically lower the state's headline-producing bill backlog" and "could reduce interest costs," but longer term "it also could be the start of a shell game that saddles the treasurer with less liquid, politically charged investments, defers real progress on addressing the bill-backlog, and could amplify Illinois' fiscal woes if its finances continue to deteriorate

Tim Holler