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The downgrade to
just two steps above the "junk" level affects about $26 billion
of Illinois' general obligation debt, as well as $2.75 billion
of sales tax revenue bonds.
An impasse between its Republican governor and Democrats who
control the legislature has left Illinois as the only U.S. state
without a complete budget 11 months into fiscal 2016.
Court-ordered spending and ongoing and stopgap appropriations
have allowed Illinois to keep operating.
Moody's said the long-running partisan standoff is impeding
Illinois' powers to increase revenue or constrain spending.
"The state's structural budget gap equals at least 15 percent of
general fund expenditures, if the state's underfunding of
pension contributions is included," Moody's said in a statement.
It added that without a budget plan to offset a revenue loss
from 2015's rollback of income tax rates, Illinois' chronic
backlog of unpaid bills could reach prior peak levels of about
$10 billion in the coming months.
Even before this latest downgrade, Illinois had the lowest
credit ratings among the 50 states and has had to pay a big
interest rate penalty to sell its bonds.
A $550 million Illinois GO bond issue is slated for competitive
sale June 16. (Reporting By Karen Pierog; Editing by Kim
Coghill)
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