Even before the COVID-19 lockdowns, the State of Illinois struggled to
balance its books. In April 2020, Standard and Poor�s Global Ratings and
Moody�s Investors Service slashed Illinois� credit outlook to �negative�
from �stable� over COVID-19�s impact on the state�s fiscal budget.
Essentially the State of Illinois is teetering on the line that could make
it non-investment grade debt. Illinois is home to Chicago, a major city
known for commodities and financial markets. Illinois remains the worst-
rated state in the United States with US$ 137 billion of pension debt and
roughly US$ 7 billion of unpaid bills.

Luckily for the State of Illinois, the U.S. Federal Reserve has a credit
facility to help out states and districts, which is controversial to the
point of having the federal government help bailout state finances.
Illinois has announced US$ 2 billion more in additional borrowing from the
Federal Reserve Bank�s Municipal Liquidity Facility (MLF). Illinois
already borrowed US$ 1.2 billion from the MLF and has repaid US$ 200
million of that loan. Backed by the CARES Act, the Municipal Liquidity
Facility provides a lifeline for state governments. Illinois Governor J.B.
Pritzker notified the Federal Reserve of the State of Illinois� intention
to borrow the funds before the facility expires at the end of December
2020. The mere presence of the Municipal Liquidity Facility calmed the
municipal bond markets earlier in the year. Only one state has borrowed
from the facility � that�s the State of Illinois. Besides Illinois, New
York�s Metropolitan Transit Authority is the only other government in the
country to borrow from the MLF. Other state governments and municipal
authorities were able to tap markets on their own without the facility.

Governor Pritzker plans to have the state payback the line of credit
through pandemic stimulus money (waiting for the bill) or recovery of
state revenues after a vaccine becomes available.

Keywords: Federal Reserve System.

swfinstitute.org/news/82806/broke-state-illinois-pleads-for-fiscal-
bailout-takes-more-money-from-federal-reserve