Illinois Treasurer Sounds 'Alarm,' Warns Against Lending State More Money

Illinois State Treasurer Dan Rutherford speaks with reporters at the Illinois State Capitol in Springfield Jan. 11. (AP)

Washington's not the only capital grappling with a debt crisis.

Blowing the whistle on his own state, Illinois' top financial official threatened this week to warn the major bond houses against lending his state any more money, saying its shoddy finances pose a "major risk."

State Treasurer Dan Rutherford, a Republican, estimated that Illinois' outstanding financial obligations -- from bond debt, unpaid bills and unfunded retirement benefits -- add up to $42,000 per family.

He noted there's nothing he can do to stop the Legislature from passing a budget that could require the state to borrow even more. A study from the Civic Federation estimated Illinois Gov. Pat Quinn's proposed fiscal 2012 budget carries a $2.4 billion shortfall.

But Rutherford threatened to make borrowing more expensive by telling rating agencies and bond houses not to trust his state.

"The one thing that I can do is I can alert the rating companies and I can alert the bond houses that the treasurer of Illinois is not in favor of furthering the debt," Rutherford said.

The governor's office said it did not understand where Rutherford was coming from, noting that major rating agencies have recently improved the state's outlook.

"We don't even understand the treasurer's position," Quinn budget spokeswoman Kelly Kraft told FoxNews.com. "The facts are Illinois has never had any trouble selling bonds. ... We work in facts."

She said the governor is taking steps to address the state's fiscal problems. She took issue with Rutherford's estimate of $42,000 per family, saying that figure incorporates interest over "many, many years from now."

Rutherford outlined his concerns in a "statement of position" released by his office. The report said Illinois' bond debt has gone from $12 billion in 2002 to $45 billion, and that the largest rating agencies consider Illinois second only to California in credit riskiness. He estimated the unfunded retiree pension and health care liability to be $140 billion.

"Illinois is on the verge of a financial disaster," he wrote. "I am here to sound the alarm."