Illinois will be the first to begin borrowing from the Federal Reserve's Municipal Liquidity Facility, which will lend $1.2 billion to the state to help cover delayed income tax revenues.

The central bank's $500 billion facility will buy $1.2 billion of one-year general obligation certificates from the State of Illinois, which will pay an interest rate of 3.82% to borrow from the emergency lending facility.

The facility, which is open to all 50 states as well as eligible cities and counties, is aimed at helping states and local governments manage their cash flow as the coronavirus pandemic continues to squeeze revenues as their expenses rise.

The transaction will help Illinois "maintain liquidity and cover an estimated $1 billion in revenues" that were delayed because federal officials moved the April 15 deadline for filing 2019 income tax returns to July 15, according to a news release from Gov. J. B. Pritzker's Office of Management and Budget.

"The Federal Reserve Bank worked closely with our team to make this transaction possible through the Municipal Liquidity Facility, which is an important tool the state is using to answer the unprecedented economic challenges posed by the COVID-19 pandemic," said Alexis Sturm, the office's director.

The transaction has a planned closing date of June 5, and Illinois will repay the amount on or before June 5, 2021, the agency said.

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