Illinois' financial crisis explained
WILLIAMSON COUNTY, Ill. - A new, and not-so-flattering phrase, the "Illinois Effect", was coined on Wall Street and is now used to refer to any entity that is financially backwards, or owes more interest on bonds than its peers.
When you scour the web for the morning's latest news, you may see article after article describing Illinois' desperate financial situation.
Sometimes the terminology is confusing, but financial advisor Michael Tison puts it simply: the state is more than $100 billion debt.
The Illinois Effect is affecting the state's reputation.
"The markets are really worried about Illinois' ability to repay everybody." said Tison.
There is a long list of whom the Illinois Effect hurts, starting with local businesses.
"You provide a service to the state of Illinois and you have to wait six months to be paid for that service you offered," said Tison.
Marion Mayor Bob Butler says the state's financial matters have nothing to do with a municipality's ability to remain financially sound.
"Each community will have its own credit worthiness, good or bad, so it really doesn't matter what happens in the state," said Butler.
But advisors disagree.
Financial experts say that Illinois' crisis affects any entity that issues bonds.
That means school districts, cities, and even you.
"Potentially taxes might have to go to pay for this extra borrowing cost," said Tison.
Governor Pat Quinn says because the state has not been able to resolves the financial crisis, they will pay more than $100 million dollars in interest on a bond issue this week.