Bond downgrade more of the same

Bond downgrade more of the same

The state's sorry financial status continues to trickle down, this time affecting the cost of University of Illinois borrowing.

It was just two months ago that Moody's Investors Services downgraded the ratings of bonds issued by the state of Illinois, a move that means taxpayers will pay higher interest rates when the state returns to the bond market for more borrowing.

Last week, Moody's downgraded the bond ratings for six state universities in Illinois, including the University of Illinois. That downgrade means the UI also will have to pay higher interest when it issues bonds to pay for various building programs on campus.

So it goes, the domino theory as it applies to bond ratings in states whose degraded finances raises questions about their ability to repay what they borrow.

That's not to say, of course, that there is doubt about the state's or the UI's ability to pay the interest and principal on the bonds they sell. It's that the risk to the lender is greater, and, consequently, the cost to the borrower goes up.

That's the way the market works. Creditworthy borrowers are rewarded for their prudence by paying lower interest rates.

The Moody's report noted that the UI handles its finances in a responsible fashion. The ratings service concluded that the UI's financial health is good overall, that it has adequate reserves to handle an emergency and has the ability to generate new revenue through tuition increases.

Unfortunately, Moody's pointed out, the UI is related to the state of Illinois, which is in desperate financial shape. Not only is the state reducing its support for higher education because of its myriad of financial woes, but also the money it does appropriate for higher education frequently does not arrive when promised.

This sad state of affairs is no surprise to those who pay attention to state government. But the Moody's downgrade demonstrates once again the higher costs forced on taxpayers by the irresponsible financial practices of our state's elected officials. They pay in so many ways, and this is just one more.

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