Illinois' credit takes a hit

Brian Mackey reports on how the legislature and governor's failure to pass a budget resulted in immediate downgrades for IL government.

S&P downgrades the credit rating on Illinois' general obligation debt to BBB- from BBB. Also Thursday, Moody's Corp. dropped its rating to just one notch above junk.

Meanwhile, without an approved budget, some spending has been halted, leaving a mounting backlog of more than $14 billion in unpaid bills.

"Unrelenting political brinkmanship", Petek said, poses a threat to the timely payments for core state priorities, which include debt service on bonds.

IL hasn't had a budget for two years due to a standoff between the Republican governor and Democratic legislature.

IL state has been operating under court-ordered spending, stopgap budgets, and ongoing appropriations mandated by law.

Eleni Demertzis, spokeswoman for Governor Bruce Rauner, blamed House Speaker Michael Madigan and his fellow Democrats.

S&P went on to say that they believe that IL is at risk of entering a negative credit down spiral.

"There's only one reason that we're still even able to get any type of help financially, and that's because IL has not defaulted on its bond payments", Mendoza says.

The agency also warns of a "negative credit spiral", where downgraded ratings trigger contingent demands on state liquidity. "We now view these payment obligations as having speculative-grade characteristics", S&P said.

Moody's and Fitch Ratings have rated IL at two notches above junk.

Records from S&P, Moody's, and Fitch dating back about half a century or more show no states rated junk, Reuters reported.

  • Zachary Reyes