The Illinois Funds and Bond Proceeds: When a Competitively Bid Investment Earns More

Whether an Illinois issuer should keep bond proceeds in The Illinois Funds turns on what the pool is: a state-administered short-term vehicle whose rate changes daily and whose access terms are published, which frames it for near-term draw money and leaves the core balance of a construction fund an open question.

This page works through the pool's terms, its rate behavior, arbitrage tracking for proceeds parked there, and where a competitively bid investment differs, with the instrument-by-instrument tradeoffs carried by the LGIP vs GIC comparison.

What is The Illinois Funds and who can invest in it?

The Illinois Funds is the State's Public Treasurers' Investment Pool, created in 1975 by statute (15 ILCS 505/17), administered by the Illinois State Treasurer, and open to custodians of the public funds of public agencies.

Those participants are custodians of "Public Funds" for "Public Agencies" as described in 30 ILCS 235/1, so eligibility attaches to public-agency status rather than to any particular bond issue.

Among the investments 30 ILCS 235/2 lists for Illinois public agencies are U.S.-guaranteed securities, U.S. agency and instrumentality obligations, money market funds limited to those obligations, and a Public Treasurers' Investment Pool under Sec. 17 of the State Treasurer Act.

The same section carries no bond-proceeds-specific carve-out, and whether a particular issue's documents admit the pool is a determination for bond counsel, part of the wider Illinois permitted investments picture.

Account terms are light: no account or transaction fees, no minimum investment, as many accounts as a participant needs, and money that may be invested for as little as one day.

Stability, in the Treasurer's description: monthly stress testing to help keep the net asset value at $1.00 per share, risk shared across accounts in proportion to contributions, the State of Illinois counting among the fund's investors, and money in the fund that "cannot be swept by the General Assembly."

The MSRB glossary describes a local government investment pool as a pool set up by a state or local governmental entity to invest the public funds of participating governmental units, the form the LGIP guide covers.

How is The Illinois Funds rate set?

The Treasurer posts a rate that changes daily, published online as the "Illinois Funds Daily Rates" and available by phone, which is why no guide reprints a figure here.

The Treasurer's main pool page says Fitch Ratings has assigned The Illinois Funds its highest money market fund rating, AAAmmf, that the fund is managed "generally consistent with SEC Rule 2a-7," and that the portfolio exceeded $19 billion, with participant counts listed by sector, as of January 31, 2026.

The consistency statement describes how the fund is managed; GFOA's note that LGIPs are not registered with the SEC is a statement about pools in general, not about this pool.

Rule 2a-7 itself governs money market funds: it bars a fund from buying an instrument with remaining maturity over 397 calendar days, caps weighted average maturity at 60 days and weighted average life at 120 days, and bars buying a non-daily-liquid asset if that would leave less than 25 percent of total assets in daily liquid assets, or a non-weekly-liquid asset if that would leave less than 50 percent in weekly liquid assets (17 CFR 270.2a-7(d)(4)(ii)-(iii)), with the daily minimum inapplicable to tax-exempt funds.

Those are limits on money market funds; the Treasurer's page says only that the pool is managed "generally consistent" with the rule, and the pool's own rate is the one it posts daily.

The pool's daily postings carry its current figure, and mGIC's today's reinvestment rates page carries the Treasury yield curve and SOFR from their official sources and links to Treasury's daily SLGS rate table.

What happens to arbitrage and rebate tracking when proceeds sit in the pool?

The pool's convenience does not reach the federal tax rules: the Illinois Funds FAQ materials reviewed for this page contain no statement about bond proceeds, arbitrage or rebate.

The definitions that matter are Treasury's: under 26 CFR 1.148-1(b), an open-end regulated investment company, such as a mutual fund, is not a "commingled fund," while a commingled fund otherwise means a fund holding gross proceeds together with more than $25,000 of other amounts invested collectively.

Where a governmental pool sits against those definitions, and what follows for an issue's yield and rebate computations, is a determination for tax counsel.

The mechanics live in the arbitrage rebate rules, and the recordkeeping habits belong in an issuer's post-issuance compliance procedures.

How does same-day pool liquidity compare with a draw-matched agreement?

The pool's access terms are published in its FAQ materials, while a GIC, as 26 CFR 1.148-1(b) defines it for arbitrage purposes, includes any nonpurpose investment with specifically negotiated withdrawal or reinvestment provisions and a specifically negotiated interest rate.

On the pool side, wire redemptions received before 11:00 a.m., Central time, are processed the same day, ACH purchases made online or by phone cannot be redeemed for 5 calendar days, and funds may be invested for as little as one day.

On the bid side, the GIC withdrawal provisions guide details how those negotiated provisions work.

When does a GIC, full-flex repo or Treasury portfolio earn more than The Illinois Funds?

There is no standing answer: the pool's rate changes daily, while a GIC, full-flex repo or structured Treasury portfolio is bid for a stated term on its bidding date, so the comparison turns on the draw schedule and on where short-term rates move after the bid.

mGIC evaluates and competitively bids guaranteed investment contracts, full-flex repurchase agreements and structured Treasury portfolios matched to anticipated cash needs, with a money-market allocation for faster-than-expected spend-down, while selling none of the three.

Illinois authority differs by instrument: 30 ILCS 235/2 lists Treasuries and agencies, money market funds limited to those obligations, repos on those obligations and the Public Treasurers' Investment Pool among its categories, and no GIC authorization appears in the section.

Repos carry their own conditions: Illinois agencies may invest in repos of government securities under the federal Government Securities Act of 1986, and other repos must meet 30 ILCS 235/2(h)'s terms, including purchase through Illinois-authorized banks or trust companies, a custodial bank, a master repurchase agreement setting out buyer and seller responsibilities, and an authorized officer ascertaining which firm will give the most favorable rate of interest.

Whether anything outside that section, such as the bond-specific statutes and the issue's own documents that this page's research did not check, admits a GIC for a given issue's proceeds is a determination for bond counsel.

The same statute's conflict rules travel with any solicitation: 30 ILCS 235/2(d) bars an Illinois treasurer or financial officer from holding an interest in the agency's investments or their sellers, sponsors or managers, or receiving compensation from them, with narrow statutory exceptions, a bar on the agency's own officers rather than on outside advisors.

How each structure works on its own is the ground of the GIC, full-flex repurchase agreement and structured Treasury portfolio guides.

For a fund with a long core balance, the difference is structural: the bid route strikes a rate for that balance on its bidding date, while the pool pays its posted daily rate on it; which side earns more is a question each bidding date answers, not a rule.

Can an issuer use The Illinois Funds and a bid investment together?

The pool's own terms make a split structure simple, because a participant may open as many accounts as it needs and money may be invested for as little as one day.

A construction fund can hold both at once, near-term draw money in the pool and the core balance bid for a term once the draw schedule firms up, the sequencing the draw schedule guide works through.

Whatever the split, Illinois requires the frame to be written down: investment of public funds by a public agency must be governed by a written investment policy adopted by the agency (30 ILCS 235/2.5), with the governing body adopting the policy for agencies other than the State or a county and the policy kept publicly available.

Where proceeds already sit in the pool, the question is what the pool pays against what providers would bid for the same fund; a reinvestment review starts from the fund's objectives, permitted investments, projected draw schedules, credit parameters, market conditions and timing.

That review is mGIC's entry point: as Bidding Agent it develops bid specifications, solicits qualified providers, manages questions, receives bids and compares rate and non-rate terms, then coordinates documentation and settlement and delivers Bidding Agent and provider certifications to bond counsel.

Its fee for that work is paid by the winning provider rather than the issuer, at or below the safe-harbor maximum in the Treasury arbitrage regulations, and it is disclosed.

To ask for a free, no-obligation reinvestment review or conversation, contact mGIC.

Which investments an issue's documents permit, and how the arbitrage rules treat any structure, are determinations for bond counsel and tax counsel.

Last updated 2026-10-06.

This page is general educational information about municipal finance and federal and state rules as of the date shown. It is not legal, tax or investment advice, and it is not a recommendation about any particular investment. Product availability, legality and suitability depend on the issuer, jurisdiction, governing documents and transaction-specific facts. Final legal and tax determinations remain with the issuer's bond counsel, tax counsel and other advisors.