CHICAGO - Wall Street credit rating agency Fitch Ratings upgraded its Illinois bond rating two notches on Thursday, the fifth upgrade credit agencies have given the state in less than a year.
Fitch upgraded the state’s rating on its general obligation bonds to BBB+ from BBB- and its sales tax bonds to A from BBB+. The upgrade comes as Gov. J.B. Pritzker, who is running for reelection, hopes to prove to voters that the state is in better fiscal shape under his leadership.
"The upgrade to ‘BBB+’ reflects fundamental improvements in Illinois’ fiscal resilience including full unwinding of pandemic-era and certain pre-pandemic non-recurring fiscal measures, meaningful contributions to reserves and sustained evidence of more normal fiscal decision-making," Fitch said in its rating upgrade, noting the state’s economy is slowly growing "but still provides a strong fundamental context for its credit profile."
"Balanced budgets four years in a row, paying the state’s bills on time, early repayment of pandemic-related borrowing, clearing out debts left by previous administrations, making higher-than-required pension payments, setting aside $1 billion in savings for a rainy day — this is what responsible fiscal management looks like," Pritzker said in a statement on Thursday.
Pritzker said, along with the General Assembly, the state has been turned "from a deadbeat state into a fiscally responsible state that is attracting business from around the globe."
Fitch, which hadn’t upgraded its rating on the state since June 2000, noted the state’s economic recovery is picking up but still trails the national rate. Through March 2022, data showed the state had recovered 82% of the jobs lost at the start of the pandemic versus the national rate of 93%. But the state has gained jobs faster than the national rate within the past six months, up more than 18 percentage points versus 16 percentage points nationally.
The state’s official March monthly unemployment rate of 4.7% was higher than the national 3.8% rate that month. Illinois’ Fitch-adjusted unemployment rate, which adds back the declines in the labor force since February 2020, was higher at 6%, indicating the state has seen material weakening of its labor markets over the course of the pandemic, which could be a factor in Illinois’ slower employment recovery.
Fitch also noted that the state is taking just 18 days to pay its bills to general vendors, compared to its worst level during the budget impasse under Republican Gov. Bruce Rauner — 210 days in November 2017.
A state’s bond rating is a way to measure its credit quality — a higher bond rating generally means the state can borrow at a lower interest rate. Before an upgrade from Moody’s Investors Services in June 2021, Illinois’ rating had hovered at an investment grade level just above "junk bond" status.
Last month, just two days after Pritzker signed his fourth budget, Moody’s upgraded the state to Baa1 from Baa2 on its outstanding general obligation bonds. Standard & Poor’s also upgraded the state’s rating to BBB in July 2021 and gave the state a positive outlook.
Republicans have couched the upgrades and said they’re only happening because this year’s budget includes $16 billion in federal money, stemming from the pandemic. Pritzker, however, has said his signed budget has already accounted for that by using lower revenue estimates.