Jan
10

Illinois Finances Worst in America

January 10, 2012

Our state now owns the worst credit rating in the country.

Moody’s Investor Service has downgraded Illinois’ credit rating from A1 to A2; the lowest of any state in the nation.

The agency also revised our state’s outlook from stable to negative.

state of illinois with money behind it.Not the way you want to start the new year, especially since a lower rating means the state will have to pay more interest when selling bonds. That increase will affect Illinois taxpayers.

Moody’s cited our state’s ongoing financial issues, chronic delays in paying bills, pension systems that are out of money and “weak management practices” for the downgrade.

And while you might think another reason for the downgrade involves Illinois’ decision to increase the income-tax rate, which resulted in companies and residents fleeing Chicago real estate for other states, you’d be wrong. That move was actually praised by Moody’s.

“The downgrade of the state’s long-term debt follows a legislative session in which the state took no steps to implement lasting solutions to its severe pension under-funding or to its chronic bill payment delays,” Moody’s Investor Service said of Illinois. “Failure to address these challenges undermines near- to intermediate-term prospects for fiscal recovery.

“It remains to be seen whether the state has the political willingness to impose durable policies leading to fiscal strength, though in the recent past it has reached consensus on difficult decisions, such as temporary income tax increases enacted last year that stabilized state finances and reduced the state’s need for non-recurring budgetary measures. Illinois retains the sovereign revenue and spending powers common to all U.S. state governments. These powers, along with Illinois’ legal provisions giving G.O. debt service priority over other state spending, support the move to a stable outlook.”

Illinois owns $7 billion in unpaid bills, and our elected officials want to issue bonds to pay off that debt.

The other two major credit-rating agencies — Standard & Poor’s Ratings Services and Fitch Ratings — did not lower our state’s credit rating.

Will two-out-of-three stable credit ratings make a difference to Illinois taxpayers this week when Illinois sells $800 million in bonds? Guess we’ll soon see.

Categories: Economy

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