Illinois expects a drop of as much as $100 million in interest during fiscal 2010 on $8 billion of state investments due to the struggling financial markets, Treasurer Alexi Giannoulias warned last week in a letter to lawmakers.

The letter stated that Illinois now expects to earn about $130 million in the current fiscal 2009 budget, which runs through June 30. The treasurer said the level of returns could range from as low as $15 million to about $86 million during the next budget year, a record low in recent memory. The state earned a high of $431 million in 2001.

The drop in interest earnings is the latest in a series of bad financial news. The state faces a backlog of billions in unpaid bills and a $2 billion deficit in the current and next budget.

Separately, Giannoulias’ office last week charged that Illinois’ Bright Start College Savings program has been mismanaged by Oppenheimer Funds. The state is considering filing a lawsuit that could seek to recoup $85 million of losses that resulted when the bond fund that held the investments lost 38% of its market value. State officials said the fund’s investments were supposed to be limited to investment-grade debt and U.S. Treasury securities.

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