 The move comes just a few days after Moody’s issued a “credit negative” alert
and Fitch Ratings dropped its ratings on Illinois-issued debt instruments.
Moody’s on Thursday downgraded Illinois’ $26.8 billion of general obligation
bonds to Baa1 from A3; Illinois sales tax or Build Illinois bonds from Baa1 from
A3; and the state’s appropriation bonds to Baa2 from Baa1.
The outlook for all three types of bonds remains negative, Moody’s said.
“The downgrades reflect weakening of the state’s financial position during 2015
and our expectation that an ongoing budget stalemate will lead to further
deterioration,” Moody’s said in its announcement.
“Structural budget imbalance, accounts payable, and other fiscal metrics are
back-tracking, despite a favorable economic climate, leaving the state more
vulnerable to the next economic downturn, barring unexpectedly strong and swift
corrective actions,” the agency said.
The rating agency cited three developments it said could make the rating go up:
— Implementation of a realistic plan to provide long-term funding for pension
obligations.
— Progress in reducing the state’s unpaid bills and adoption of legal framework
to prevent renewing the build-up.
— Development of a structurally balanced and sustainable budget.
On the other hand, Moody’s said, if the state does not address its budget
problem and growing backlog of unpaid bills, the rating could be driven
downward. The same holds true, Moody’s said, should the state continue to let
its unfunded pension liabilities grow.
Republican Gov. Bruce Rauner’s administration sees the report as “another
confirmation that years of unbalanced budgets, deficit spending and
mismanagement have damaged Illinois’ fiscal health and major, structural reforms
are needed to restore it,” said Rauner spokeswoman Catherine Kelly.
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 “This is more proof that instead of blocking all reforms and
passing a broken budget that was $4 billion in the hole, the
supermajority in charge of the legislature should partner with the
governor to enact real reforms that will grow jobs and free up more
resources to balance the budget.”
Democrats see things differently.
Senate President John Cullerton, D-Chicago, “joins the chorus of
Republican leaders and rating agencies in asking the Governor to set
aside his personal agenda in favor of a budget plan that reverses
the damage and dysfunction of the last year,” said Cullerton
spokeswoman Rikeesha Phelon.
“The biggest issue facing Illinois is the state budget deficit,”
House Speaker Michael Madigan, D-Chicago, said in a written
statement.
“Two credit downgrades in less than a week have driven home that
important fact. So I urge the governor, again, to put aside his
agenda that Democrats and Republicans alike oppose — an agenda that
will hurt middle-class and struggling families — and instead focus
on a budget that helps all Illinoisans,” the speaker said.
Illinois is concluding its fourth month of fiscal year 2016 without
an overall budget in place as the GOP and Democrats remain at an
impasse that has changed little since May.
However, the state is spending at a rate said to put it on track for
a $5 billion shortfall as it funds primary and secondary education
and items mandated by court order and continuing appropriation.
Moody’s on Monday said it was concerned by the news that Illinois
would not make its November pension-systems payment of about $560
million.
Pension checks will continue to go out, and the state will attempt
to make up for the late payments in the spring.
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