Illinois' Credit Rating, Already Nation's Lowest, Sinks Lower
By Monique Garcia
Fitch Ratings lowered Illinois' bond rating on Monday, citing the "continued deterioration of the state's financial flexibility" as Republican Gov. Bruce Rauner remains locked in a budget fight with Democrats who control the legislature.
The move was just the latest financial ding for Illinois, which already had the lowest rating in the nation amid chronic red ink.
The lowering from from A- to BBB+ follows last week's announcement by Comptroller Leslie Munger that the state's monthly pension payment would be pushed back due to a cash flow problem. While the state has been operating without a complete budget since July 1, various court orders and laws have resulted in money going out the door at last year's spending level. That's put Illinois on course for a multibillion-dollar deficit after the income tax rate was allowed to roll back at the start of the year, bringing in fewer dollars than what's going out the door.
"With the national economic expansion now extending into a sixth year, Illinois has failed to capitalize on economic growth to restore flexibility utilized during the last recession or to find a solution to its chronic mismatch of revenues and expenditures," said the ratings agency. "Once again, the state has displayed an unwillingness to address numerous fiscal challenges, which are now again increasing in magnitude as a result."
The downgrade from A- to BBB+ impacts $26.8 billion in general obligation bonds, but the agency also lowered the rating from BBB+ to BBB for bonds related to the Illinois Sports Facilities Authority, which operates U.S. Cellular Field, as well as bonds for an expansion project at McCormick Place and the city's motor fuel tax revenue bonds.
Earlier Monday, Moody's Investors Services gave the state a "credit negative" outlook due to the problems making the pension payment.
Senate President John Cullerton, D-Chicago, once again called on Rauner to "hit the reset button" in his negotiation with lawmakers over a budget. They've been deadlocked over the governor's insistence for changes that would dramatically curb union rights.
"President Cullerton warned Governor Rauner of the inevitably of a downgrade back in July," spokeswoman Rikeesha Phelon said in a statement. "Now it is clear that we can no longer afford for Governor Rauner to prioritize his corporate class agenda over basic budget math and governing. This lowered credit rating is just one way that we can calculate the true cost of doing business the Rauner's way."
A Rauner spokeswoman countered that the rating decrease underlines the need for "structural reforms that will put the state on a path to fiscal health."
"It's time the legislature recognizes Illinois needs transformational change," Rauner spokeswoman Catherine Kelly said in a statement.
Kelly also noted earlier comments from Rauner in which he stated "I don't work for the credit rating agencies."
Speaker Michael Madigan, D-Chicago, countered that "nowhere in Fitch's statement does it suggest that the state needs to follow the governor's agenda by weakening collective bargaining rights, reducing workers' wages and hurting the middle class."
"The lack of a resolution on the state budget and today's downgrade are direct results of the governor's continued focus on issues other than solving our budget crisis," Madigan said in a statement.
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