Illinois Bond Sale Gets Done at a Cost

The Wall Street Journal reports:

Illinois enticed hedge funds, mutual funds and non-U.S. buyers to purchase $3.7 billion in new pension bonds, but the cash-strapped state had to pay dearly to get the deal done.

Illinois officials were forced to promise a yield that is about two percentage points higher than was paid by companies with similar credit ratings in recent bond offerings. The state's bond rating is one of the lowest among the 50 states.

The bond sale is likely to soothe some fears about whether Illinois and other especially troubled governments will be able to tap the capital markets while their budgets are strained by sluggish tax revenue and daunting expenses for health care and pensions. But the fact that Illinois had to borrow from investors to make a required contribution to its pension funds shows the depth of its fiscal problems.

The union run state of Illinois has to pay up.