It Looks Like Illinois' Credit Rating Is Only Getting Worse

By Stephen Gossett in News on Sep 1, 2016 6:24PM

Getty Images; Photo: Mark Wilson

Whenever Moody’s Investors Services peers under Illinois’ financial hood, the diagnosis is rarely reassuring. As expected, the most recent news is again gloomy: The credit agency reported on Wednesday that the stopgap budget has exacerbated the state’s money woes, and Illinois’ payment backlog could reach a whopping $14 billion this fiscal year.

Expenses rose 12 percent during the stopgap budget while lawmakers failed to generate new revenue, according to Moody’s. The agency singled out a failure to counterbalance lost income after 2011 tax levies were rolled back.

"Illinois' spending is rising, even without a full package of budgetary spending authorizations, and the state projects its revenues will remain flat without any mid-year actions to raise revenues," Ted Hampton, a senior credit officer, said in a statement. "As liquidity pressure increases on the state's operating funds, the backlog of unpaid bills will almost certainly rise."

The agency said in the release it does not anticipate Illinois will change its can-kicking ways, a familiar non-strategy that will only further hamper the state’s fiscal outlook.

“A reliance on payment deferrals to offset budget imbalance has undermined the state's fiscal position for many years," Hampton said. "With each year's revenue partly allocated to prior year expenses, achieving true budget balance is virtually impossible and operating fund liquidity is constrained."

Gov. Bruce Rauner said on Wednesday he knew the stopgap would not provide a permanent fiscal solution. “We came up with some way to keep essential services functioning through the general election,” he said, according to the Tribune. “That's all this is. It's not balanced.”

Moody’s downgraded Illinois’ credit rating in June amid the budget impasse. The state’s rating—which is currently the lowest in the country—is two levels above “junk” status.

Rauner said on Tuesday that the same “turnaround” agenda for which he pushed ahead of a full budget would remain his top priority this session.