Quinn delays $500 million borrowing in wake of state's bad credit rating

The decision was made after officials with the governor's budget office spoke with potential bidders who indicated they would seek interest rates higher than what the state wanted to pay.

"In a bond market when there is uncertainly, you pay an extra premium, which we decided was imprudent to pay," said John Sinsheimer, director of capital markets for the state. "So we pulled them, and will bring the back at a future date when everything has settled down."

It's unclear when the state would return to the market to borrow the money, or if the delay would affect the building schedule of a multibillion-dollar statewide public works program.

Last week, Standard & Poor's downgraded the state's credit rating from A to A-minus. The move left Illinois with the worst ranking in the country, a distinction the state already had earned from Moody's Investors Service. The low ratings are a cause for concern because it means the state could pay more to borrow money, as evidenced by the postponed bond sale.

Sinsheimer would not disclose the offers the state received, saying they were preliminary. When the state issued a similar bond sale last year, it secured an interest rate of 3.9 percent. At the time, Quinn's office hailed the figure as the lowest rate the state had received in decades, despite receiving a credit downgrade just days before.

But the negative hits from rating agencies have come in a flurry over the past six weeks, with the bond houses blaming the lack of action in Springfield on reforming the state's vastly underfunded public employee retirement system.

Quinn has been pushing unsuccessfully for pension changes for a year and is expected to call for action once again during his annual State of the State address next week. The bond sale delay could increase the pressure on lawmakers to act sooner rather than later, particularly if it affects construction of schools and roads in their districts.