SAN FRANCISCO (S&P Global Ratings) March 2, 2017–In a recent commentary, “For
Illinois, Having A Plan Beats No Plan,” S&P Global Ratings said that Illinois
may look back on a failure to pass the so-called grand bargain as a missed
opportunity. In our view, legislation providing appropriations for the
remainder of fiscal 2017 and tax increases to generate additional revenue
would help stabilize the state’s fiscal trajectory. While negotiations in the
state senate over the legislative package appear to have broken down, we
understand they could be rekindled, though this may require a public
endorsement of the bills by the governor.
Throughout the nearly two-year budget impasse, Illinois’ debt service has been
paid on a priority basis and without interruption because of continuing
appropriations associated with its bonds. These features remain integral to
the state’s investment grade ratings (GO rating: BBB/Negative). The
prioritization of revenues to fund debt is accomplished by deferring payments
to many other stakeholders which we do not view as sustainable. Consequently,
we believe it’s important for the state’s credit quality that a budget plan be
enacted by the end of the fiscal year. Politically, approval of the bills will
become more difficult beginning June 1, when state law will require a
three-fifths majority vote of the legislature to approve a budget. U.S. states
benefit from a range of inherent advantages starting with constitutionally
protected sovereignty over their own fiscal structures. But for a state to
enter a third fiscal year without enacting a comprehensive budget could
indicate to us an erosion in political will that renders its credit quality
and fundamental fiscal conditions as inconsistent with the state’s current
rating.
Only a rating committee may determine a rating action and this report does not
constitute a rating action.
S&P Global Ratings, part of S&P Global Inc. (NYSE: SPGI), is the world’s
leading provider of independent credit risk research. We publish more than a
million credit ratings on debt issued by sovereign, municipal, corporate and
financial sector entities. With over 1,400 credit analysts in 26 countries,
and more than 150 years’ experience of assessing credit risk, we offer a
unique combination of global coverage and local insight. Our research and
opinions about relative credit risk provide market participants with
information that helps to support the growth of transparent, liquid debt
markets worldwide.
Primary Credit Analyst: Gabriel J Petek, CFA, San Francisco (1) 415-371-5042;
[email protected]
Secondary Contact: John A Sugden, New York (1) 212-438-1678;
[email protected]