Illinois borrows more from Fed as lending program nears expiry

The state of Illinois will borrow another $2 billion from the U.S. Federal Reserve to plug the fiscal hole the pandemic has blown in its budget, bringing to $3.2 billion its total borrowings under the U.S. central bank’s emergency lending program. “Today we have notified the Federal Reserve of our intent to borrow only $2 billion,” Illinois Governor J.B. Pritzker said in a news conference on Wednesday. The amount is less than half the $5 billion authorized by the state’s General Assembly earlier in the year. “Our intent is to return it as early as possible,” he said. The Fed’s municipal lending facility is one of several pandemic lending programs set up by the central bank with money from Congress.

Last week Treasury Secretary Steven Mnuchin asked the Fed to return unused funds from those facilities, effectively pulling the plug on them as of Dec. 31.

Though the Fed’s municipal borrowing facility has had only one other taker - New York’s Metropolitan Transit Authority - the central bank says the creation of the facility itself helped grease credit markets and made it easier for local and state governments to find funding from private lenders.Illinois borrowed its first slug of $1.2 billion from the Fed in June.

Pritzker said he was reluctant to borrow all the money he had authorization for, given the fiscal pain it would cause to pay it back.