Moody's downgrades rating on $26.8B in Illinois bonds

TUBS / Wikipedia

CHICAGO (AP) — The Moody's credit rating agency downgraded $26.8 billion in Illinois' general obligation bonds on Thursday, prompting another round of finger pointing over the condition of the state's finances.

In lowering the bond rating to Baa1 from A3, Moody's Investors Service pointed to what it called the Illinois' weakening financial position as the year progress.

"The downgrades reflect weakening of the state's financial position during 2015 and our expectation that an ongoing budget stalemate will lead to further deterioration," Moody's said in a statement.

Fitch Ratings on Monday downgraded its rating on the state's outstanding bonds for the same reasons. The result of such action means it will be more difficult and more expensive for the state to borrow money.

In a statement released by spokeswoman Rikeesha Phelon, Democratic Senate President John Cullerton contended that under Republican Gov. Bruce Rauner, the state's revenue has declined, services have been cut and job growth has slowed.

"President Cullerton joins the chorus of Republican leaders and rating agencies in asking the Governor to set aside his personal agenda in favor of a budget plan that reverses the damage and dysfunction of the last year," Cullerton said in the statement.

In response, a Rauner statement issued by spokeswoman Catherine Kelly, said Moody's action is confirmation that years of unbalanced budgets, deficit spending and mismanagement have damaged Illinois' fiscal health and major, structural reforms are needed to restore it.

"This is more proof that instead of blocking all reforms and passing a broken budget that was $4 billion in the hole, the Super Majority in charge of the legislature should partner with the governor to enact real reforms that will grow jobs and free up more resources to balance the budget," Rauner said.

House Speaker Michael Madigan noted in a statement that everyone wants economic growth, more business investment and more good-paying jobs in every part of Illinois. That is not in question.

"These priorities can be achieved through a state budget that takes a balanced approach with some spending cuts and some new revenue, not by slashing services and programs that families count on," Madigan said.

In addition to the general-obligation bonds, the downgrade also applies to Build Illinois debt and borrowings on behalf of Chicago's Metropolitan Pier & Exposition Authority, which runs Chicago's McCormick Place.

Moody's said Illinois' structural budget imbalance, accounts payable, and other obligations "are back-tracking, despite a favorable economic climate, leaving the state more vulnerable to the next economic downturn," barring swift corrective actions.

Illinois is about to enter its fifth month without a budget. Rauner, a multimillionaire elected last year with promises to make Illinois more business-friendly, has refused to agree to raise taxes to close a roughly $5 billion budget hole until Democrats give in to some of his demands — including a push to weaken labor unions. Democrats have refused, with Madigan calling support for labor a core, and non-negotiable, principle of the party he leads.

Because of court orders and state law, some bills are being paid. But local governments aren't getting their portions of gas taxes or gambling receipts paid to the state and typically distributed to cities, counties and other taxing bodies.