Public finance law includes state and federal laws and regulations governing the financing of public organizations and projects. For example, public finance laws and regulations govern the sale and purchase of bonds to build or improve schools, parks, roads, airports, cultural facilities, recreational facilities, entertainment venues (sports arenas), and other public works projects.

Bonds are debts issued by governments (the debtor), for example, to purchasers of the bonds (the creditors), with a promise to pay the bondholder interest (a coupon) and repay the principal amount upon a certain date (maturity date)—similar to an IOU or loan agreement. Bonds are securities that can often be traded (bought and sold) to and from others on the secondary market.

In Illinois, public finance law is governed by both state statutes and federal regulations. The state laws include provisions for the issuance of bonds by state and local governments to fund public projects such as schools, parks, roads, and other infrastructure developments. These bonds, which are essentially loans from bondholders to the government entity, are used to raise capital for these projects. The bondholders are promised interest payments over the life of the bond and the return of the principal on the maturity date. Illinois has specific statutes that outline the procedures and limitations for issuing bonds, including the Public Funds Investment Act and the Local Government Debt Reform Act. Additionally, the Illinois Finance Authority Act provides for the creation of the Illinois Finance Authority, which assists in financing for public institutions and economic development. On the federal level, the Internal Revenue Service (IRS) regulates the tax-exempt status of municipal bonds, and the Securities and Exchange Commission (SEC) oversees the trading of these securities in the market. Compliance with both state and federal laws is crucial for the lawful issuance and trading of municipal bonds in Illinois.