SPRINGFIELD (IRN) — In an effort to reduce interest payments, Gov. Bruce Rauner signed SB 2858 into law, allowing Illinois to invest funding from other sectors to generate interest monies.
The new law could save the state up to $100 million a year in interest payments, according to Treasurer Michael Frerichs.
“Right now, if the state has a bill that is more than 90 days late, they start paying 1 percent interest per month, so effectively 12 percent interest annually,” Frerichs said. “That is an exorbitant interest rate for the state to be paying when we can borrow money at a lower rate.”
While the funds are coming from other dedicated sources, the monies will only be used to generate interest and not directly pay down debt.
“It’s coming from other funds with dedicated purposes,” Frerichs said. “You can’t take that money out to pay bills, but we can invest that money. We can reduce the amount of interest the state is being charged and keep more of that in the state government.”
The money essentially will be loaned to the comptroller, who will then pay the money back to the state at a lower interest rate, saving as much as 12 percent interest over the course of a year.
The law allows $2 billion to be invested on Illinois’ behalf, which is expected to save the state a generous amount of interest payments.
“We watched as the state was spending hundreds of millions of dollars on interest payments – late interest payments – and we’re not in charge of the budget, but we were questioning what we could do to help out,” Frerichs said.
The new law received one “no” vote in the General Assembly.