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* Yvette Shields at the Bond Buyer…
Illinois moved another step back from the ratings brink Thursday afternoon, as Moody’s Investors Service revised the outlook to stable from negative on its Baa3 rating, which was affirmed.
The action gives Illinois a bit of space above speculative-grade status, though the rating itself remains at the lowest investment grade.
S&P Global Ratings on March 9 moved the outlook to stable on its BBB-minus rating; Fitch Ratings remains at BBB-minus with a negative outlook.
* From Moody’s…
Moody’s Investors Service has revised the outlook of the state of Illinois to stable from negative, while affirming the Baa3 rating on the state’s general obligation bonds. […]
Affirmation of the state’s rating and the revision of its outlook to stable reflect the state’s financial performance through the pandemic, in combination with increased levels of federal support that will moderate near-term fiscal and economic pressure. State and local government funds expected under the latest federal aid package may help the state repay deficit financing loans, support its financially pressured local governments and spur employment, income and tax revenue growth. While credit risks raised by the pandemic during the past year are receding, the longer-term challenges associated with the state’s very large unfunded post-employment liabilities remain. The state’s Baa3 rating is supported by a large, diverse economy with above-average wealth, and it benefits from powers over revenue and spending. […]
RATING OUTLOOK
The stable outlook indicates the state’s capacity to manage near-term fiscal pressures while carrying a heavy long-term liability burden.
FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATINGS
- Enactment of recurring financial measures that support sustainable budget balance
- Decisive actions to improve funding of the state’s main pension plans
- Progress in lowering a backlog of unpaid bills that does not rely on either long-term borrowing or a significant decrease in non-operating fund liquidity
FACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATINGS
- Fiscal measures that greatly add to the state’s near- or long-term liabilities, including reductions in pension contributions to provide fiscal relief
- Large or persistent structural imbalance that leads to significant increase in the state’s unpaid bills or other liabilities
- Substantial assumption of debt or pension liabilities accrued by local governments
So, if the state can really tackle that bill backlog, a ratings increase may be in the cards. Never would’ve figured that could happen when this pandemic started.
*** UPDATE *** Comptroller Mendoza…
Moody’s Investors Service has changed its outlook on Illinois bonds from “negative” to “stable.” That’s a signal to investors that Illinois’ financial stability is moving in a better direction.
It follows S&P Global Ratings’ announcement March 9 that the rating agency was changing its outlook on Illinois bonds from “negative” to “stable.”
Moody’s cited “the state’s financial performance through the pandemic, in combination with increased levels of federal support that will moderate near-term fiscal and economic pressure.”
“Illinois still has a long way to go, but these two changes in outlook signal to investors that Illinois is heading in a better direction,” Illinois State Comptroller Susana A. Mendoza said. “The ratings agencies make clear that Illinois using its funds from the American Rescue Plan to pay down debt is the most responsible path forward for the state’s finances and the best way for the state to achieve an upgrade in its ratings.”
posted by Rich Miller
Friday, Mar 26, 21 @ 2:34 am
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So good news
It seems likely the bill backlog, with the help of federal aid, should actually be more or less back to where you’d ‘normally’ expect it to be.
And there’s no way the state is assuming local government pension liabilities.
So at least we should remain stable.
Comment by Nick Friday, Mar 26, 21 @ 3:04 am
It’s troubling to me that this governor has dropped all efforts to increase revenue. Plan B, after the progressive tax failure has to be unveiled soon……or not.
Comment by Blue Dog Friday, Mar 26, 21 @ 6:30 am
Blue Dog, that’s coming from the GA at least as much as it’s coming from the Governor. They think their constituents won’t stand for a general tax hike, so they’re going to play games for a few more years, at least, kicking the can down the road even farther, before they try to actually fix the problem again. They care more about getting reelected than about actually helping the State, you see.
Comment by Perrid Friday, Mar 26, 21 @ 7:59 am
The constitution hasn’t changed one word, and yet not factoring in how bonds are paid.
The “racket” is feeling hopeful about things.
Cool.
Comment by Oswego Willy Friday, Mar 26, 21 @ 8:22 am
This can’t possibly be accurate.
Illinois hasn’t implemented “pension reform” or made the state “less toxic to business”.
Comment by Flyin' Elvis'-Utah Chapter Friday, Mar 26, 21 @ 8:30 am
Moodys jumped the shark long ago. I’m not sure why anyone is still listening to them.
It was only about two weeks ago when they put out what was basically an op-ed trashing Illinois. It wasn’t a ratings outlook, it wasn’t a pre-statement, it wasn’t even a research report.
With the contradiction between that, and their ‘official’ ratings, it gives the appearance there are multiple factions within Moodys that are fighting to get their groups specific message out.
I wonder if they understand the damage they’ve just done to their reputation.
Comment by TheInvisibleMan Friday, Mar 26, 21 @ 8:44 am
== - Blue Dog - Friday, Mar 26, 21 @ 6:30 am:
It’s troubling to me that this governor has dropped all efforts to increase revenue. Plan B, after the progressive tax failure has to be unveiled soon……or not. ==
Blue Dog, the steps this governor has taken behind the scenes have led to this increase, not to mention trying to hold down costs during a pandemic without sacrificing people. Say what you will about revenue and Fair Tax, but it’s time to recognize this Governor and his financial advisors saved the state additional headaches with their actions.
Comment by good luck Friday, Mar 26, 21 @ 9:02 am
If they take the 7.5B from the American Rescue Plan, payoff the 3B from the Fed that Mendoza wanted use the ARP to payoff & put the remaining 4.5B toward the bill backlog that should be enough for the bill backlog portion of Moody’s factors.
Comment by Blake Friday, Mar 26, 21 @ 9:10 am
It’s like on Arrested Development went from a “triple sell” to “don’t buy.” I’m teasing but wanted to get in an AD reference.
RIP, Jessica Walter
Comment by Paddyrollingstone Friday, Mar 26, 21 @ 9:26 am
This is good news for the state but bad news for the “fiscal conservative” crowd who wants us to go belly-up so that pensions and union contracts can be broken. They would have loved to financially starve even the red parts of the state. Thankfully the “elitists” helped greatly by passing the federal stimulus.
Comment by Grandson of Man Friday, Mar 26, 21 @ 9:29 am
McConchie apparantly believes in open democracy, while trying to keep his fine kettle of fish from boiling over. He has a tough row to hoe.
At least his chamber doesn’t occasionally feel like fisticuffs are ready to break out.
Comment by walker Friday, Mar 26, 21 @ 9:38 am
Thanks, Ossoff and Warnock.
Comment by Arsenal Friday, Mar 26, 21 @ 9:39 am
These “credit rating” firms should have been put under when they labeled investments based off of subprime mortgages as AAA rated.
If I ever hold public office, regardless of how appropriate it is, every one of these meritless assessments of Illinois’ ability to pay it’s general obligation bonds is going to result in a scathing press release to the point where Rich will have to come up with a witty title for posts about the coverage.
It will only be awkward if the government I represent issues bonds and pays a credit entity to rate it.
Comment by Candy Dogood Friday, Mar 26, 21 @ 9:42 am
The sound you hear is Jim Durkin pouting
Comment by Precinct Captain Friday, Mar 26, 21 @ 9:43 am
Sorry wrong thread
Comment by walker Friday, Mar 26, 21 @ 9:44 am
===It’s troubling to me that this governor has dropped all efforts to increase revenue. ===
I have consistently been outspoken about the need to increase our income tax and to aggressively address our unfunded liability by restructuring the pension ramp instead of laying the bulk of the cost on the not retired taxpayers a couple of decades from now, and I’ve even supported ending the federally taxed retirement subtraction in order to ask well to do retirees to help pay for the services they received without paying for decades ago so plainly put, I am a fan of taxes.
I really want to agree with you here, but then I consider all of the “serious” complaints about the taxes that have already increased during Governor Pritzker’s term and I realize that’s not really a fair criticism.
Pritzker also put a sum of money into the effort to pass the progressive tax amendment that is the level of support that would make a Koch brother spray their mid morning cocktail across the room.
Ask some of your Facebook savvy right leaning friends, Blue Dog, and I am certain they will incoherently tell you of all of the destruction wrecked by $150 license plate fees and changes to revenue policy you’ve forgotten about.
Comment by Candy Dogood Friday, Mar 26, 21 @ 9:55 am
@Candy Dogood- I am right there with you. Recently I had to participate in a ratings call with S&P, and although it made no difference, I took the opportunity to review a little of THEIR history (a big part of the public bonding process is a financial history) and ended my mini-rant stating that our bonds should be rated AAA.
=and it’s Moody’s that’s jumped the shark.=
Yes, round about 2008.
Comment by JS Mill Friday, Mar 26, 21 @ 10:33 am
This is great news…who would have thought it?
Comment by Loop Lady Friday, Mar 26, 21 @ 10:36 am
This was the reason republicans were against state assisstance.
Comment by Morty Friday, Mar 26, 21 @ 10:42 am
Where’s Ty Fahner when the grifters need him?
Comment by Morty Friday, Mar 26, 21 @ 10:49 am
=These “credit rating” firms should have been put under when they labeled investments based off of subprime mortgages as AAA rated.=
Amen, sister.
And because these junk bonds were labeled AAA, Pension Funds were able to hold them.
“… pension funds were restricted in their bylaws to holding only the safest securities—i.e. securities the rating agencies designated “triple-A”
Comment by TinyDancer(FKASue) Friday, Mar 26, 21 @ 10:51 am
“The sound you hear is Jim Durkin pouting ”
Also the sound of the Establishment Hacks who continue to insist that Illinois tax pension income
Comment by Julian Perez Friday, Mar 26, 21 @ 11:07 am
===who continue to insist that Illinois tax pension income===
Huh?
Besides IPI and Mike Frerichs, for who the Frerichs Tax gets its name, besides them, can you name these other folks pushing?
I’ll wait.
Comment by Oswego Willy Friday, Mar 26, 21 @ 11:11 am
Look up the recommendations of any “blue ribbon” civic committee. Restore Illinois is but one.
Comment by Julian Perez Friday, Mar 26, 21 @ 11:18 am
It’s entertaining and so predictable to follow along on this site, when someone references “Pensions” either as the problem, or as a solution the electric reaction by what has to be the participants.
Comment by Mad Hatter Friday, Mar 26, 21 @ 11:33 am
Great news! I agree with some of the comments above about the scam that is the credit rating agencies - but you also can’t just ignore them like the last governor did. What will the GOP do without Madigan to beat up on and the Dem governor having done all the work to put the state in a stable financial situation?
Comment by DuPage Dem Friday, Mar 26, 21 @ 12:03 pm
=when someone references “Pensions” either as the problem, or as a solution the electric reaction by what has to be the participants.=
You don’t have to be a participant to understand the court rulings and debt. I’m certainly not. What the reaction suggests here by and large is that readers are know there’s only one solution to our legacy debt. Pay the bill. Refusing to acknowledge and address the obvious only makes the problem worse.
Comment by Pundent Friday, Mar 26, 21 @ 12:38 pm
Use the Stimulus money to pay off back bills first and foremost and we will be a lot better off.
Watching to see what the State does with this money.
Comment by Unconventionalwisdom Friday, Mar 26, 21 @ 3:27 pm