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Fitch ratings agency gives Illinois poor rating, cites political environment

Illinois Watchdog.Org

Thursday, April 12, 2018  |  Article  |  By Greg Bishop

Budget--State (8) , Treasurer (92) Righter, Dale--State Senate, 55
The latest agency to ding Illinois’ coming bond issuance with a near-junk rating is more evidence the state’s finances are a mess, but one solution members of both parties agree with is a balanced budget.

Moody’s and S&P issued near-junk ratings of Illinois’ $500 million general obligation bonds last week. Fitch released its near-junk rating of BBB with a negative outlook on Monday.

“Despite actions taken to significantly increase tax revenues, Illinois remains poorly positioned to address a future economic downturn,” the agency said in a news release.

Illinois Treasurer Michael Frerichs, a Democrat, said there’s consequences for taxpayers when the government’s bonds receive such low ratings.

“This is going to mean we are going to pay more in interest payments and that’s less money that could be going to fix our roads, and our bridges and our schools,” he said.

Frerichs said a balanced state budget would help improve the state's bond rating in the future.

State Sen. Dale Righter, R-Mattoon, agreed.

“Balanced budget, that’s the answer,” Righter said. “If you don’t balance your budget, then you’ll continue to overspend."

Righter said the state’s poor finances were 15 years in the making and won’t be solved overnight. He said the state has no other option but to cut spending and balance the budget.

While Illinois’ massive debt was a concern for all three ratings agencies, Fitch also cited the state’s political environment as a negative.

“The Negative Outlook reflects uncertainties related to successful implementation of the current year budget and ongoing fiscal management and decision making, particularly given the contentious political environment in the state,” a news release from Fitch said.

“Some people may believe that chaos is good for their political agenda, but it’s not good for the state and it’s definitely not good for our credit rating,” Frerichs said.

Righter said it was Democrats who after the turn of the century drove the state’s finances downward. Illinois has had a Republican governor and Democratic-controlled legislature for the past three years. The prior 12 years was one-party rule, with Democratic governors (Rod Blagojevich and Pat Quinn) and Democrats controlling both legislative chambers.

“And, yes, the last two or three years we’ve had a bumpy road here. That’s because we’ve got a governor who’s said ‘this needs to stop,’ ” Righter said.

Illinois went the first two-and-a-half years under Gov. Bruce Rauner without a budget because of political gridlock at the statehouse. Lawmakers passed a $5 billion tax increase and budget over Rauner’s veto last summer, but that budget remains unbalanced.

“The rating will be lowered if the state returns to a pattern of deferring payments for near-term budget balancing and materially increases the accounts payable balance,” according to Fitch.

“Specific risks include spending above the level assumed in the budget, a significantly slower revenue growth environment, as well as the re-emergence of a political stalemate that negatively affects fiscal operations.”