* 11:18 am - Right on cue…
Moody’s Investors Service put the state of Illinois’s general-obligation bond ratings on review for possible downgrade, saying the state has long-term budgetary challenges.
The firm said the state has a long history of general-fund operating deficits, and liquidity in the fund has been increasingly strained, which it said was evidenced by growing use of short-term debt and delaying payments to Medicaid providers and vendors… Moody’s said some of the proposed measures would help in the short term but be at the expense of future budget years. […]
Moody’s said increasing evidence of strained liquidity, growing structural imbalance, further deterioration of fund balances and other factors could cause a downgrade on the ratings.
The review will focus on consideration of the state’s prospects for restoring structurally balanced financial operations while addressing sizable funding requirements for pensions and retiree health benefits, as well as the state’s liquidity position and growing debt burden.
A focus of the review will be the budget legislation for the current fiscal year.
Our “growing debt burden” is beyond obvious, as is our pension nightmare. If the “focus” of the review is the goofy budget which just passed, then the state could be cruisin’ for a bruisin’.
By the way, this is a very broad review…
This action also applies to ratings that are linked to the state’s general obligation rating, including Build Illinois Bonds (rated A1), Metropolitan Pier and Exposition Authority’s Expansion Project (A2) and Dedicated Tax bonds (A2). In addition, it affects the state’s Aa2 general obligation rating on the global scale.
…Adding… Speaking of our “growing debt burden”…
With unemployment still rising, Illinois has had to borrow federal money to meet its obligations for jobless benefits.
The state has drawn about $9 million from a federal credit line to help replenish its unemployment insurance fund and pay out close to $100 million in unemployment claims. The fund had dwindled to about $81.8 million as of July 5 from $1.45 billion at the start of 2009.
*** 11:36 am *** Uh-oh…
“We are concerned about how the state will move from here to return to balanced financial operations,” said Ted Hampton, the Moody’s analyst who wrote the report on Illinois. “The state has essentially kicked the can down the road in terms of making decisions.”
Hard to argue with either of those points.
*** 4:33 pm *** From Crain’s…
Moody’s action drew an immediate reaction from one of the Republicans running for governor, state Sen. Kirk Dillard, who voted against the new state budget.
The action “is not a surprise. Wouldn’t you do this?” Mr. Dillard said in a phone conversation. “It’s time for the state of Illinois to tear up its credit card. We are pushing our obligations out further and are exacerbating our operaqting deficits.”
Gov. Pat Quinn’s office had no immediate response.