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SPRINGFIELD - Illinois officials are keeping a close watch on Washington, D.C., this week as Congress and President Obama grapple over whether to raise the national debt limit.

With the clock ticking on an Aug. 2 deadline, state government investments - from pension funds to the state treasurer's office - could take a hit if the markets crash in reaction to the impasse.

But, exactly how a default might affect the state remains tough to gauge, primarily because it's never happened before.

"We are fully prepared for a variety of scenarios, but will wait to see what emerges from the ongoing discussions in D.C.," noted a statement from Gov. Pat Quinn.

For a state that continues to have trouble balancing its books, any kind of financial turbulence is unwelcome news.

The state's pension systems are monitoring the situation because it could affect the markets, forcing money managers to scram-ble to keep the current rates of return at reasonable levels.

In the most recent fiscal year, for example, the Teachers' Retirement System recorded a rate of return at 24 percent, bringing the total amount of assets controlled by the system to more than $37 billion.

A downturn on Wall Street or in other financial arenas could reduce that, said TRS spokesman Dave Urbanek.

"Anything that could jeopardize the continuation of those good returns would be a concern," Urbanek said. "It's a concern be-cause there are a lot of unknowns out there."

State Treasurer Dan Rutherford, who invests the state's money, said his goal in the coming weeks is two-fold.

"Let me assure you that the first priority as state treasurer is the security of the state treasury. The second priority is to earn a re-turn on investment," Rutherford said in a statement. "Should the debt ceiling remain and there is a default, the state treasurer's office may have to keep money in non-interest bearing, yet safe, FDIC-insured accounts until this debate is resolved."

Rutherford said 36 percent of the state investment portfolio - $3.6 billion - will have to be re-invested within 30 days. In addition, 58 percent of the state's municipal funds investment portfolio, worth $3.2 billion, will have to re-invested within 30 days.

Quinn is expressing hope a resolution will come before next week.

"The governor expects that there will be a balanced approach that protects the full faith and credit of the United States of Amer-ica," the statement noted.

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