Illinois' low credit rating at risk
without budget action : S&P
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[February 07, 2017]
CHICAGO (Reuters) - Failure to
embrace pending legislation in the Illinois Senate to address the
state's longstanding budget problems would represent a "significant
missed opportunity" and risk a credit rating downgrade and hurt economic
growth prospects, S&P Global Ratings said on Monday.
S&P, which rates Illinois BBB with a negative outlook, said legislation
boosting revenue and ending the state's budget impasse could improve the
near-term fiscal outlook, although a rating upgrade would be at least
two years away.
In a report, S&P said it takes no position on elements in the Senate
Illinois is limping its way through a record-setting second consecutive
fiscal year without a complete budget due to an ongoing feud between the
Republican governor and Democrats who control the legislature. A
six-month fiscal 2017 budget expired on Dec. 31.
Last month, the Democratic and Republican leaders of the Senate unveiled
a package of 13 bills aimed at ending Illinois' budget stalemate and
addressing the state's deep fiscal woes. Measures include tax hikes,
cost-saving pension changes and borrowing to pay down $10.7 billion in
The legislation also includes items like workers' compensation changes
and legislative term limits that Governor Bruce Rauner has insisted on
during budget deliberations.
S&P chastised Illinois for a fiscal crisis it called "a man-made
byproduct of policy ultimatums placed upon the state's budget process.
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"We believe Illinois' distressed fiscal condition and dysfunctional
budget politics now threaten to erode the state's long-term economic
growth prospects," S&P Managing Director Gabriel Petek said in a
In a speech on Monday, Democratic Illinois Senate President John
Cullerton said the legislation, with some revisions, will be voted
on by his chamber this week. He warned that delaying a fix until
after the 2018 election would mean the state's current credit
ratings would be cut two notches into junk, the unpaid bill total
would balloon to an estimated $24 billion and even bigger tax
increases would be required.
"If not this plan, then what? And if not now, then when?" Cullerton
Illinois, already the lowest-rated U.S. state, was downgraded last
week to BBB by Fitch Ratings, which cited the state's "unprecedented
failure" to act on budgets.
(Reporting by Karen Pierog and Dave McKinney; Editing by Jeffrey
Benkoe and Dan Grebler)
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