 In lowering Illinois' bond rating one notch to A1, Moody's pointed
to the state's inability to address its financial problems,
including an unbalanced budget, billions in unpaid bills and
faltering revenues. Moody's said the failure to tackle Illinois'
fiscal issues "underscores a chronic lack of political will that
indicates further erosion of an already weak financial position."
With the new rating, Illinois has now tied California for the worst
credit rating in the nation from Moody's. It's also anticipated that
the other two major credit rating agencies will soon downgrade
Illinois. A lower state credit rating usually translates into higher
costs when the state tries to borrow money.
Though the bond rating was lowered, Moody's did note that
Illinois possesses several "credit strengths," including a strong
ability to raise revenue and reduce expenditures. It also noted
Illinois' diverse economy with higher-than-average wealth levels is
an asset.
However, Moody's said the state's reliance on delaying payments
to vendors, Illinois' extremely large unfunded long-term liabilities
-- including pensions and retiree health care -- and its use of
non-recurring resources to finance state spending pose serious risks
to the state's rating.
Despite these issues, Moody's highlighted progress in certain
areas -- specifically, a bipartisan pension reform measure that
reduces benefits for new state employees. Moody's also cited new
revenue generators related to video gaming, vehicle fees, and taxes
on alcoholic beverages and other products, which will go to help
finance debt related to the state's capital improvement program.
[Text from
Capitol Commentary] |
