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 The Republican governor spoke with the three major credit rating
agencies about his spending plan and agenda, his office said late on
Thursday. Further downgrades would potentially boost the state's
already-high borrowing costs.
"He stressed he is intent on solving the years of financial
recklessness that put us in this fiscal crisis," the governor's
office said.
Rauner, who took office in January, delivered his first Illinois
budget address on Wednesday.
Illinois' credit ratings at A3 and A-minus are the lowest among the
50 states and due to negative outlooks are tipping toward triple-B,
a low investment-grade rating level rarely assigned to states.
A chronic structural budget deficit, huge unfunded pension liability
and big revenue loss from the recent partial rollback of temporary
higher income tax rates are major credit factors for the
fifth-biggest U.S. state.
 Rauner's $32 billion general funds budget for the fiscal year that
begins July 1 aims to chop $6.6 billion from healthcare, local
government revenue sharing, mass transit and other areas.
Controversial pension changes account for a third of the savings.
"Obviously, Illinois is in a difficult position and these proposals
are just proposals," said Ted Hampton, an analyst at Moody's
Investors Service, noting the rating agency would be guided by the
enacted budget and would weigh the risk that included reforms may
not be implemented.
"The governor is certainly aware of the magnitude of the budget
challenges Illinois faces and that's important," Hampton added.
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Standard & Poor's analyst John Sugden said the major focus is how
Illinois will achieve structural balance in its budget regardless of
whether that is accomplished with spending cuts or revenue. He added
however that the state has had some challenges in the past in terms
of delivering on expenditure reduction initiatives.
Illinois is paying a higher price to pay off its debt in the U.S.
municipal bond market than many other governments. The state's bonds
are yielding 140 basis points over the market's benchmark yield
scale for AAA-rated bonds, according to Municipal Market Data. By
contrast California, which has addressed many of its fiscal woes,
has a so-called credit spread that tops out at only 30 basis points.
The governor's budget was met with howls of protest from Democratic
state lawmakers, labor unions, hospitals, and the city of Chicago,
which estimates it would lose about $210 million of revenue sharing
through the end of 2016.
(Editing by Matthew Lewis)
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