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* I told subscribers to expect this earlier today. Press release…
Governor JB Pritzker hailed the state’s improved bond rating from S&P Global Ratings on Thursday, the second such rating upgrade in recent days. The announcement follows Moody’s credit upgrade and Fitch’s upgraded credit outlook for the state—a trifecta of good news from the three major credit rating agencies.
Since taking office, Gov. Pritzker has tirelessly focused on strong and responsible fiscal management, working with the General Assembly to hold the line on spending while making key investments in programs working families rely on while continuing to strengthen Illinois’ fiscal outlook.
“A well-known proverb states, a journey of a thousand miles begins with a single step. Throughout my administration we’ve remained steadfast in our goal to return Illinois to fiscal stability. That has meant making responsible decisions step by step, day by day, working closely with our partners in state government,” said Governor JB Pritzker. “These responsible decisions are paying dividends, as evidenced by today’s upgrade from S&P, last week’s upgrade from Moody’s and our outlook rise to positive by Fitch. My administration has worked diligently to make real progress, the rating agencies are acknowledging our progress and we remain committed to further strengthening Illinois’ fiscal standing.”
S&P last upgraded the state’s bonds in July 1997 and today’s upgrade analysis credited “improved liquidity,” “demonstrated operational controls during the COVID-19 pandemic” and an “improving economic condition” in making the rating change.
“Throughout the pandemic, the state has been able to deliver needed services and programs, both traditional governmental and pandemic-response-related without meaningfully changing the debt profile,” S&P stated.
The Governor noted all the positive reports from the top rating agencies are the result of many leaders working cooperatively in the best interest of Illinois’ taxpayers, especially thanking Speaker Welch, President Harmon, Leader Greg Harris, Senator Sims, Comptroller Mendoza and Treasurer Frerichs for their continued partnership.
S&P upgraded Illinois’ rating on its General Obligation bonds from BBB- to BBB with a stable outlook also upgraded the Metropolitan Pier and Exposition Authority ratings to BBB+ from BBB based on the state’s support. Build Illinois bonds were upgraded to BBB+ from BBB.
Last week Moody’s upgraded Illinois’ rating on its General Obligation bonds from Baa3 with a stable outlook to Baa2 with a stable outlook, and also upgraded the Metropolitan Pier and Exposition Authority ratings to Baa3 from Ba1 based on the state’s support. Build Illinois bonds were upgraded to Baa2 from Baa3.
In an updated credit analysis issued by Moody’s released Wednesday, the rating agency noted last week’s credit upgrade was supported by a material improvement in the state’s finances, demonstrated by the ability to repay emergency Federal Reserve borrowings promptly and keep unpaid bills in check at a low level.
“One of the most striking developments in recent months was the state’s reduction of a “backlog” of unpaid bills, underscoring the improvement in the state’s finances,” Moody’s wrote.
The rating of a state’s bonds is a measure of their credit quality. A higher bond rating generally means the state can borrow at a lower interest rate, saving taxpayers millions of dollars.
…Adding… Speaker Chris Welch…
For the first time in decades, Illinois has received not one, but two bond rating upgrades. I am incredibly proud of our state’s responsible financial choices that continue to improve our fiscal standing, as well as put hardworking Illinoisans and their families first. These are the types of positive changes you see when government leadership is truly working for the people they represent.
…Adding… Comptroller Mendoza…
“S&P’s upgrade of the state’s credit rating is further evidence that Illinois is moving in the right direction. Upgrades are good news because they mean lower costs for taxpayers on the bonds that we use to build roads, bridges, schools and other projects. A top priority of mine as comptroller has been paying down the state’s bill backlog, knowing that credit rating agencies would recognize our hard work. From a high of $16.7 billion during the prior administration’s budget impasse, that backlog is down to $2.9 billion today.
“As the state comptroller, my priority continues to be managing the state’s bill backlog and providing evidence to the credit rating agencies that Illinois is an excellent investment and is on a path to financial stability and certainty.”
…Adding… Senate President Harmon…
This is further proof we are on the right track in balancing our fiscal realities with the real-world needs of working men and women. We are moving Illinois forward by paying our debts while at the same time investing in education, health care, child care and other key programs people need to get ahead.
*** UPDATE *** From the S&P report…
The adopted fiscal 2022 $44.3 billion general funds budget is similarly sized to the fiscal 2021 spending and is designed to generate an $88 million surplus. In addition, the fiscal 2022 budget anticipates using $2.8 billion in federal American Rescue Plan (ARP) funding for pandemic-related purposes, $1.8 billion for economic recovery and other pandemic needs, and $1 billion for capital. The capital money will be split approximately $575 million for project types specifically authorized in the ARP guidelines (broadband, water, and sewer) and the remaining $425 million on other projects once the reimbursement rules are finalized. That leaves $5.3 billion for additional uses to be determined through the ARP spending deadline of Dec. 31, 2024. The plan for spending the ARP money is ongoing but looks to be aimed at pandemic expenses, supporting economic development, and aiding small businesses affected by the pandemic.
Although Illinois’ fiscal 2022 general fund budget is flat compared with the previous year’s spend, and balanced in terms of current-year obligations, we do not view it as structurally balanced due to the treatment of pension obligations. Pension contributions of $9.4 billion are budgeted to fully meet increasing statutorily set amounts but are still less than actuarially determined amounts. We view the difference between the statutorily set contribution amounts and our defined minimum funding progress as a structural gap.
Illinois’ bill backlog remains, but according to the state comptroller at the end of fiscal 2021 was approximately $2.6 billion, the lowest level in more than a decade. As of July 7, the bill backlog was $2.9 billion, but such variation is expected. Continued reduction in these liabilities could give the state needed budgetary flexibility and help it avoid unnecessary interest charges. We expect the state’s focus will remain on paying the past-due obligations (although most are now less than 45 days’ delinquent), before shifting to establishing a reserve for future recessions.
The remaining $5.3 billion in ARP funds come with some use limitations, such as a prohibition on using this money to resolve pension-funding deficiencies, depositing into rainy day reserves, and paying back the MLF; the federal funds could be used to replace lost revenue, repay part of the $4.2 billion borrowed from the federal government for unemployment payments, or further reduce the bill backlog.
Credit weaknesses supporting the ‘BBB-’ rating include:
• An almost empty budget stabilization fund that would further limit budgetary flexibility;
• The remaining bill backlog;
• Pension funding practices where the statutory pension funding is designed to attain a 90% funded status in 2045, which is one of the least conservative funding methodologies in the nation among peers; and
• A recurring practice of relatively late audit reports. The audit for the fiscal year ended June 2019 was not released until April 2020 and the fiscal 2020 audit is still not published. Although not required for us to consider an upgrade, a return to a more abbreviated audit release period would be in line with that of higher-rated peers.Credit strengths include:
• On the revenue side of the budget, various tax revenues have held up stronger than forecast during the depths of the economic trough, and the receipt of unbudgeted federal stimulus to help bridge the gap to a fully functioning economy;
• On the expenditure side of the budget, whereas in the recent past the state has hesitated to make expenditure cuts during times of fiscal stress, the administration made more than $700 million in budget cuts and freezes in fiscal 2021 during the budget year. Not all cuts and freezes were general fund-related, but the recurring actions indicate a potential change in practice;
• Overall, the budget, aside from the inherent pension gap between the statutory funding and actuarial recommendations, during this current period of favorable and improving economic conditions is seeing improved structural balance; and
• The political gridlock that stymied governance a few fiscal years ago has dissipated.The stable outlook reflects the expected strength of the liquidity position, continued economic recovery, and regular revenue and expenditure reporting and budgetary control usage.
posted by Rich Miller
Thursday, Jul 8, 21 @ 1:39 pm
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Crickets from the IPI?
Comment by Skeptic Thursday, Jul 8, 21 @ 1:47 pm
I’m sure IPI in their new parasite political party training will see this as “bad news” and the state moving in the wrong direction… up.
To the post,
=== “Throughout the pandemic, the state has been able to deliver needed services and programs, both traditional governmental and pandemic-response-related without meaningfully changing the debt profile,” S&P stated.===
Does the debt profile include the constitutional provisions in relation to debt?
The racket is pleased by what is being done, and there’s no doubt that the outlook should be an upward one, and these upgrades reflect that, the first S&P… this century… I’m still snarky to the “floating criteria” that ignores the realities too.
This is splendid news, congratulations… so much more needs to be done, so much further Illinois needs to go, but the direction is onward and it’s upward, and both are good indeed.
Comment by Oswego Willy Thursday, Jul 8, 21 @ 1:47 pm
Maybe Bruce Rauner will move back
Comment by Anon E Moose Thursday, Jul 8, 21 @ 1:49 pm
Not exactly what I expected after over a year in a pandemic, but I’ll take it.
Comment by Montrose Thursday, Jul 8, 21 @ 1:52 pm
===Not exactly what I expected after over a year in a pandemic, but I’ll take it.===
The Illinois economy doesn’t turn on a dime. This can be traced back to the bipartisan override of Rauner’s vetoes of the budget and tax hike bills in 2017.
Comment by Nick Name Thursday, Jul 8, 21 @ 1:56 pm
=== This can be traced back to the bipartisan override of Rauner’s vetoes of the budget and tax hike bills in 2017.===
This too is a a solid take. Can’t be ignored, also should be celebrated.
The “Brave 15” and “Perfect 10” knew… it has made a difference.
“And”… Governors own… they always do… and Pritzker owns this too.
Comment by Oswego Willy Thursday, Jul 8, 21 @ 2:07 pm
Let the good times roll
Comment by Shield Thursday, Jul 8, 21 @ 2:09 pm
Someone may want to check on Greg Bishop.
Swing by Ted Dabrowski’s place too.
Comment by Flying Elvis'-Utah Chapter Thursday, Jul 8, 21 @ 2:10 pm
“The Illinois economy doesn’t turn on a dime. This can be traced back to the bipartisan override of Rauner’s vetoes of the budget and tax hike bills in 2017.”
Great point.
Comment by Montrose Thursday, Jul 8, 21 @ 2:16 pm
Great news. So I guess that gigantic tax increase
won’t be necessary after all, eh? Well I for one, am relieved. Keep up the good work, governor.
Comment by Captain Obvious Thursday, Jul 8, 21 @ 2:18 pm
=== This can be traced back to the bipartisan override of Rauner’s vetoes of the budget and tax hike bills in 2017.===
Let’s not forget; those NOT the “Brave 15” or “Perfect 10”, those who voted to override were ridiculed and some “run out” of the Raunerite Party because of it… and to this *day*… the Raunerites see those who voted for those overrides as “traitors”
Governors own… Pritzker deserves the credit, started by those overrides, (or not) with those voting still seen in a bad light by the “party”
Comment by Oswego Willy Thursday, Jul 8, 21 @ 2:18 pm
===won’t be necessary after all, eh?===
The structural deficit has been reduced by the corporate tax loophole closures, but not eliminated.
Don’t argue like a child.
Comment by Rich Miller Thursday, Jul 8, 21 @ 2:20 pm
=This can be traced back to the bipartisan override of Rauner’s vetoes of the budget and tax hike bills in 2017.=
Yep, this was a starting point for slowing the decline and rauner damage. Pritzker being an adult was what took us into the positive.
=So I guess that gigantic tax increase=
What “gigantic” tax increase are you talking about?
The fair tax was an attempt to bring balance to our tax structure and make us more like Indiana, Iowa, and Missouri and have a progressive tax rate.
It was a GIGANTIC tax DECREASE for many in Illinois that needed it. I mean if we are going to use silly hyperbole.
We have an antiquated tax structure that does not support the services people want or reflect the economy we have.
Comment by JS Mill Thursday, Jul 8, 21 @ 2:29 pm
This is more welcome and good news.
Imagine if the ILGOP tried to build itself around its budget-saving role in 2017 and passing the capital bill in 2019, both very helpful to the state. But instead, we get culture wars and the same tired talking points.
Also, the GOP all over America is getting federal stimulus help it didn’t vote for—a great deal with no political risks in red states and districts.
Comment by Grandson of Man Thursday, Jul 8, 21 @ 2:44 pm
Good to see. Illinois still has a lot of work to do and I’m still waiting to see politicians make hard decisions in this state.
Comment by Chicagonk Thursday, Jul 8, 21 @ 2:55 pm
Chicagonk What hard decisions are you suggesting. I have some ideas but curious about yours.
Comment by very old soil Thursday, Jul 8, 21 @ 3:03 pm
Just going to put this here …
===A recurring practice of relatively late audit reports. The audit for the fiscal year ended June 2019 was not released until April 2020 and the fiscal 2020 audit is still not published.===
Comment by Anyone Remember Thursday, Jul 8, 21 @ 3:19 pm
Press statement from John Tillman: “This downgrade is another example of how Illinois’ finances have been driven into a ditch. What’s that? This is an upgrade?
(Channeling Emily Litella): Never mind.”
Comment by Colin O'Scopy Thursday, Jul 8, 21 @ 3:23 pm
Rauner needs to fix this ASAP.
Bruce, where are ya? What’s happening here?
Say it ain’t so, Bruce!
Comment by Mr K Thursday, Jul 8, 21 @ 3:36 pm
“The people of Illinois sent me to Springfield to end the era of unbalanced budgets and runaway debt.”
–Bruce Rauner
Mission accomplished. Lol.
Comment by 47th Ward Thursday, Jul 8, 21 @ 3:48 pm
===This too is a a solid take. Can’t be ignored, also should be celebrated.===
Thanks. It was on July 4, wasn’t it? Something else to celebrate on that day every year.
Comment by Nick Name Thursday, Jul 8, 21 @ 3:52 pm
Well, I guess when you are at the bottom there’s no place to go but up. First step in a marathon. If we could place a bet in one of Illinois’ casinos what odds do you think we could get that they will never fix this in its entirety?
Comment by Out of Illinois Thursday, Jul 8, 21 @ 6:38 pm
=== Well, I guess when you are at the bottom there’s no place to go but up. First step in a marathon.===
- they mouth breathe, begrudgingly.
If one is “out of Illinois” how can good news still being such angst and ill tidings?
Comment by Oswego Willy Thursday, Jul 8, 21 @ 7:28 pm
===…tax relief for most Illinois residents.===
97% would not pay more in taxes.
Unless you’re in the 3%, being against that fact is being against your own best interests.
Comment by Oswego Willy Thursday, Jul 8, 21 @ 9:08 pm