Illinois Facing Debt Payments

Illinois is starting to get hit with rising interest payments on debt borrowed. Illinois Policy points out how compound interest is a vicious beast once it takes hold:

According to the fiscal year 2015 budget summary from the Commission on Government Forecasting and Accountability the cost of debt service in fiscal year 2015 is nearly $4 billion on outstanding bond debt of nearly $32 billion. The debt service amounts to more than 11 percent of the state’s anticipated revenues for the fiscal year – 11 percent that can’t be used for essential programs.

Illinois will not be the only heavy spending state to start getting hammered on debt payments. But here is how a debt situation gets out of control:

Primarily as a result of these nontraditional uses of bond debt, the state began fiscal year 2015 saddled with $32 billion in bond debt requiring $4 billion, or 11 percent of its general funds budget, to pay the annual debt service. This represents nearly a 400 percent growth in debt service, more than 300 percent growth in outstanding bond debt, and more than 200 percent growth in debt service as a percentage of general revenues since 2002.

US Federal Government Interest on Debt Payments

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After August, Congress (House/Senate) will convene and raising the debt ceiling will once again be a hot topic. The US Federal Government has not passed a Constitutional required budget in almost six years. In America’s new age economics of moral relativism, spending at any level is o.k. You can get mad at it all you want if you don’t fall into this thinking, but you might as well make a lot of money and/or save your wealth while the masses cheer on this debt driven philosophy.

The Treasury Department just released their “Interest on Debt” payments for the month of July. They paid out $25 Billion in just one month. There are two fiscal months left but so far the US Government has paid out $370 Billion in payments. Most of these payments go to the Federal Reserve and foreign countries.

Here is the federal government link showing how much we have paid out for numerous years. The word “Trillion” pops up real quick when you just start adding up just a small portion of years.

These stats are good to know when thinking about your investments.