image
SUBSCRIBE to Capitol Fax      Advertise Here      Mobile Version     Exclusive Subscriber Content     Updated Posts    Contact
CapitolFax.com
To subscribe to Capitol Fax, click here.
S&P revises Illinois outlook to “negative”

Wednesday, Jul 23, 2014

* Considering the budget and the Supreme Court ruling on retiree health insurance, this news could’ve been much, much worse.

I have no idea whether Bruce Rauner’s openness to raising taxes contributed to only an outlook change rather than a ratings change, but the raters have to be breathing a sigh of relief now that both candidates for governor want new revenues after the income tax partially expires on January 1st…

Standard & Poor’s Ratings Services has revised its outlook on Illinois’ general obligation (GO) bonds outstanding to negative from developing and affirmed the ‘A-’ rating on the state’s GO bonds.

“The outlook revision follows the enactment of Illinois’ fiscal 2015 budget, which in our view is not structurally balanced and will contribute to growing deficits and payables that will likely pressure the state’s liquidity,” said Standard & Poor’s credit analyst Robin Prunty. “The outlook also reflects the implementation risk associated with recent reforms related to post retirement benefits,” Ms. Prunty added.

While legislation to reform pensions and other post employment benefits (OPEB) is considered positive, if the reforms do not move forward as planned we believe the significant fixed cost pressure associated with post retirement benefits will escalate. This risk is highlighted by the recent Illinois Supreme Court decision to reverse the trial court’s dismissal of the suit relating to statutory changes to the state’s health insurance premium subsidies, which was remanded back to the lower courts. It is uncertain what the lower court will ultimately decide but the Illinois Supreme Court was clear in its opinion that the health insurance subsidies paid by the state for retiree health care are a benefit derived from membership in a state pension plan and therefore subject to the Illinois Constitution.

Key factors supporting the ‘A-’ rating include what we view as Illinois’:

    · Deep and diverse economy, which is anchored by the Chicago metropolitan statistical area;
    · Above-average income levels;
    · Substantial flexibility to adjust revenues, expenditures, and disbursements;
    · Well-established and tested statutory priority of payment for debt service;
    · Ability to adjust disbursements to stabilize cash flow and to access substantial amounts of cash reserves on deposit in other funds for debt service, if needed, and for operations if authorized by statute; and
    · Improved alignment of revenues and expenditures for fiscal years 2013 and 2014 with some steady reduction in payables. We expect this situation to reverse in fiscal 2015 absent budget adjustments.

Offsetting these generally positive credit factors are what we consider:

    · Sizable and chronic accumulated budget-based deficits despite revenue-enhancement measures implemented in 2011and improved economic trends. While the deficit is reduced significantly, it remains significant relative to the size of the budget;
    · A historically large generally accepted accounting principle general fund balance deficit;
    · A large and growing unfunded actuarial accrued liability; and
    · A moderately high and growing debt burden due to debt issuance for current pension contributions in fiscal years 2010 and 2011 and the approved long-term capital program.

We consider Illinois’ economy to be broad and diverse, and the state’s income levels are well above average.

A negative outlook indicates that we could lower the rating during the two-year outlook horizon. The change reflects the enacted fiscal 2015 budget, which is not structurally aligned and we believe will contribute to growing deficits and weakened liquidity. Also factored into the negative outlook is the implementation risk associated with pension and OPEB reform measures. If the pension reform is declared unconstitutional or invalid, or implementation is delayed and there is a continued lack of consensus and action among policymakers on the structural budget gaps and payables outstanding, we believe there could be a profound and negative effect on Illinois’ budgetary performance and liquidity over the next two years and that this could lead to a downgrade. If pension reform moves forward, and the state takes credible action to achieve structural budget balance over the next two years, we could revise the outlook to stable.

* Budget office react…

Governor Quinn was clear with legislators this year that bond rating agencies would look with disfavor on a budget that did not contain enough revenue to cover a full year of the state’s needs on education, public safety and human services. The legislature passed an incomplete budget and this is the predictable result.

Standard & Poor’s Wednesday maintained its A-minus rating on Illinois bonds but changed its outlook on Illinois from “developing” to “negative.”

Among S&P’s comments:

“Per capita personal income in 2013 was $46,780, or 105% of the U.S. average, ranking Illinois 15th nationally and first among the Great Lakes states.

“Structural budget alignment improved in fiscal years 2013 and 2014 due to economic and revenue recovery, revenue enhancement, and spending restraint and reform. A surplus was generated in fiscal 2013 that lowered the general fund deficit and payables outstanding on a budgetary basis.

“…additional expenditure reductions could be difficult to achieve after several years of cost cutting…”

While expressing concerns about implementing the state’s pension reform law given comments in a recent Supreme Court of Illinois case, S&P reaffirmed its favorable view of the state’s pension reform law: “We view the pension reform as a significant accomplishment that could lead to improved pension funding levels, greater pension plan sustainability, and improved prospects for budget stability.”

When Governor Quinn introduced his budget this Spring, S & P – like the other rating agencies – issued comments looking favorably on the governor’s proposed budget. Governor Quinn shared those comments with the legislature:

“The recommended budget could contribute to enhanced structural alignment due to less severe spending reductions needed to achieve balance…”

- Posted by Rich Miller        


8 Comments
  1. - Roadiepig - Wednesday, Jul 23, 14 @ 3:54 pm:

    Good to see Quinn still whistling past the graveyard on the whole pension “reform” aspect of the budget and the ratings agencies. Sure hope the gov and the GA have that constitutional plan B ready to release once their plan A is tossed .


  2. - facts are stubborn things - Wednesday, Jul 23, 14 @ 4:05 pm:

    We all know where this whole thing ends up — the state must uphold the constitution and it’s contractual obligations to it’s retirees. Every thing else is the noise of political posturing.


  3. - facts are stubborn things - Wednesday, Jul 23, 14 @ 4:07 pm:

    The wheels of justice turn slowly, but they do turn. Facts are indeed stubborn things and the truth does not change no matter how it is spun.


  4. - wordslinger - Wednesday, Jul 23, 14 @ 4:14 pm:

    Do any of the “UHaul types” ever read the positive factors in the ratings? I double-dog dare them.


  5. - A guy... - Wednesday, Jul 23, 14 @ 4:15 pm:

    ===S&P revises Illinois outlook to “negative”….
    …..this news could’ve been much, much worse.===

    Just think, if you didn’t work here, you’d never get to write a sentence like this. lol. but not funny.


  6. - Fed up - Wednesday, Jul 23, 14 @ 4:51 pm:

    “Other than that and the damn Sun times NRI story it was an up day.” Pat Quinn.


  7. - Judgment Day (on the road) - Wednesday, Jul 23, 14 @ 5:45 pm:

    Well, it’s better than a kick in the teeth. As far as we’ve gone.

    Pay serious attention to this:

    “While legislation to reform pensions and other post employment benefits (OPEB) is considered positive, if the reforms do not move forward as planned we believe the significant fixed cost pressure associated with post retirement benefits will escalate. This risk is highlighted by the recent Illinois Supreme Court decision to reverse the trial court’s dismissal of the suit relating to statutory changes to the state’s health insurance premium subsidies, which was remanded back to the lower courts. It is uncertain what the lower court will ultimately decide but the Illinois Supreme Court was clear in its opinion that the health insurance subsidies paid by the state for retiree health care are a benefit derived from membership in a state pension plan and therefore subject to the Illinois Constitution.”

    That’s not the ‘noise of political posturing’. That’s the equivalent of the green eyeshade types saying “Whoa - What’s This?”. And probably not in a good way.


  8. - VanillaMan - Wednesday, Jul 23, 14 @ 8:44 pm:

    Unsurprising.
    I just can’t figure out how Quinn could spin this positively, however. The fact that he looks like a loser in November shouldn’t be a reason to see a silver lining, but it is what it is, isn’t it?


Sorry, comments for this post are now closed.


* Pot, meet kettle
* Your feel-good story of the day
* Economists Agree: Preserving Nuclear Plants is Good for Consumers, Good for Economy
* Jacob’s Story: Delayed Treatment Changes the Future and a Family
* *** UPDATED x1 *** Today's must-watch video
* The Credit Union Difference
* Question of the day
* *** UPDATED x1 - Dan Brady takes himself out *** Uh-oh
* *** UPDATED x1 *** Rauner goes after some Missouri jobs, but no word yet on Indy
* *** UPDATED x3 *** Oswego will discuss Rauner "right to work" proposal tonight
* Krishnamoorthi, Noland make moves toward Duckworth seat
* Good morning!
* Yesterday's blog posts

Support CapitolFax.com
Visit our advertisers...

...............

...............

...............

...............

...............

...............

...............

...............


Search This Blog...

Search the 98th General Assembly By Bill Number
(example: HB0001)

Search the 98th General Assembly By Keyword

          
        * Last chance to enter the Samsung Galaxy Tab S 8.4 Giveaway
        * Possible Sony Xperia Z4 specs leak via GFXBench
        * Apple Watch Buyer's Guide: Which One Is Right for You?
        * Decode the quotes with Next Quote for Android
        * Tidal needs lots of improvements to justify its lofty price tag
        * Start lockscreen updated with interactive live wallpapers
        * All My Gods is a city building game with a Roman twist

        * Chromebit Dongle Will Turn Any HDMI Display Into A Chrome PC
        * Groupon Quietly Launches Groupon Stores, a Marketplace for Its $2 Billion Goods Business
        * Build Your Own Automated Emergency Lighting System for Power Outages 
        * Facebook Introduces A Scrapbook For Your Child’s Pictures
        * 5 metrics that affect the success of your website redesign
        * Inaugural West Coast Diversity Brunch Honors Tech Titans of Color
        * Re-Read Old Notes to Spark New Ideas

        * 'Athletic' Sale makes progress during simulated game
        * 'Athletic' Sale makes progress during simulated game
        * Crain not going to rush process of getting shoulder healthy
        * FanGraphs bearish on White Sox position players
        * Final roster alignment a question of flexibility
        * Noesi recovers from quick stumble; Sox fall
        * Petricka headed to disabled list

        ...............


        Main Menu
        Home
        Illinois
        YouTube
        Pundit rankings
        Obama
        Subscriber Content
        Durbin
        Burris
        Blagojevich Trial
        Advertising
        Updated Posts
        Polls

        Archives
        March 2015
        February 2015
        January 2015
        December 2014
        November 2014
        October 2014
        September 2014
        August 2014
        July 2014
        June 2014
        May 2014
        April 2014
        March 2014
        February 2014
        January 2014
        December 2013
        November 2013
        October 2013
        September 2013
        August 2013
        July 2013
        June 2013
        May 2013
        April 2013
        March 2013
        February 2013
        January 2013
        December 2012
        November 2012
        October 2012
        September 2012
        August 2012
        July 2012
        June 2012
        May 2012
        April 2012
        March 2012
        February 2012
        January 2012
        December 2011
        November 2011
        October 2011
        September 2011
        August 2011
        July 2011
        June 2011
        May 2011
        April 2011
        March 2011
        February 2011
        January 2011
        December 2010
        November 2010
        October 2010
        September 2010
        August 2010
        July 2010
        June 2010
        May 2010
        April 2010
        March 2010
        February 2010
        January 2010
        December 2009
        November 2009
        October 2009
        September 2009
        August 2009
        July 2009
        June 2009
        May 2009
        April 2009
        March 2009
        February 2009
        January 2009
        December 2008
        November 2008
        October 2008
        September 2008
        August 2008
        July 2008
        June 2008
        May 2008
        April 2008
        March 2008
        February 2008
        January 2008
        December 2007
        November 2007
        October 2007
        September 2007
        August 2007
        July 2007
        June 2007
        May 2007
        April 2007
        March 2007
        February 2007
        January 2007
        December 2006
        November 2006
        October 2006
        September 2006
        August 2006
        July 2006
        June 2006
        May 2006
        April 2006
        March 2006
        February 2006
        January 2006
        December 2005
        April 2005
        March 2005
        February 2005
        January 2005
        December 2004
        November 2004
        October 2004

        Blog*Spot Archives
        November 2005
        October 2005
        September 2005
        August 2005
        July 2005
        June 2005
        May 2005

        Syndication

        RSS Feed 2.0
        Comments RSS 2.0
        WordPress

        Loading


        * Effort spearheaded to consolidate McHenry Count.....
        * Jobless rates fall in all Illinois metro areas..
        * Changing the law won't fix Indiana's reputation..
        * Q&A: What happens now that Aaron Schock is out .....
        * Oak Brook Park District's $400,000 grant still .....
        * Your feel-good story of the day..
        * “We’ve got to become a growth state”: Rauner ta.....
        * Excerpts from recent editorials in Illinois new.....
        * The Illinois Supreme Court’s Dissent Rate (Part I)..
        * Q&A: What's happens now that Aaron Schock is ou.....


        * Cubs will track noise so Wrigley rehab doesn't disturb fans
        * Madigan announces Illinois anti-sexual assault effort
        * Chicago Cubs plan opening night Ernie Banks tribute
        * Poll: Chicago Mayor Emanuel opens big lead over Garcia
        * Duckworth: Clinton must testify before Benghazi committee
        * Violence wanes in Chicago, but fear looms over mayor's race
        * Newspaper poll: Mayor Emanuel opens big lead over Garcia
        * Ameren to clean century-old contamination at Belleville site
        * Indonesian prosecutors seek up to 18-year term for US couple
        * Krishnamoorthi says he'll run for Duckworth's US House seat

        * Duckworth says Clinton must testify on Benghazi, criticizes Kirk for Iran letter
        * Q&A: What happens now that Aaron Schock is out of office?
        * State's school districts adapt to new cyberbullying law
        * Duckworth: Clinton must testify before Benghazi committee
        * Ex-deputy treasurer to fun for Duckworth's seat
        * Ex-deputy treasurer to run for Duckworth's seat
        * LIHEAP utility assistance fund for Sangamon County is empty
        * LaHood talks transportation issues as he kicks off congressional campaign
        * Duckworth to challenge Kirk for U.S. Senate seat
        * Rauner to push for federal spy agency relocation

        * Meet the money behind Scott Walker's political rise
        * Indiana's trouble with religious-objections law? It's a 'perception problem,' says Pence
        * Conservatives push back against #BoycottIndiana crowd—but is it enough?
        * Pitching pot as a career path for women
        * Can a bank double its business without deals?


          * Garcia hits Emanuel on 'pay-to-play' politics
          * Sheriff's eviction unit finds man's body in Skokie home
          * Duckworth goes after Kirk on Iran letter
          * Ernie Banks' will confirmed by judge
          * Waukegan man accused of shooting up Gojo's Cafe set for April trial
          * Abandoned lot in West Rogers Park may soon get renovations
          * Statewide task force wants to improve response to sex assault
          * Man, woman found fatally stabbed in Avondale home
          * Cubs say Wrigley Field will be ready for Sunday's opener
          * Rauner ally tries to tie Preckwinkle's hands on property taxes


          * Indiana Gov. Pence signs religious objections bill
          * How organizations brace for Illinois budget cuts
          * Unions and Garcia push for $15-an-hour minimum wage
          * The Chicago rabbit: The unofficial face of wildlife is right under your nose
          * Obamacare tax rules trip some immigrants
          * Former Rep. Aaron Schock's staff to face tough prosecutor
          * Behind CPS graduation rates, a system of musical chairs
          * Health care tax rules trip up some immigrants
          * More than 21K early votes cast in Chicago runoff election
          * Duckworth makes video announcement for 2016 Senate bid


          * Duckworth says Clinton must testify on Benghazi, criticizes Kirk for Iran letter
          * Q&A: What happens now that Aaron Schock is out of office?
          * State's school districts adapt to new cyberbullying law
          * Ex-deputy treasurer to fun for Duckworth's seat
          * Our Opinion: Redpath, Senor, McFarland for Springfield's wards 1, 2 and 4
          * Kathleen Parker: A leap of faith — into thin air
          * LIHEAP utility assistance fund for Sangamon County is empty
          * LaHood talks transportation issues as he kicks off congressional campaign
          * Duckworth to challenge Kirk for U.S. Senate seat
          * Rauner to push for federal spy agency relocation


          * IDOT plans I-64 lane restrictions for new Reider Road interchange construction
          * ESL Mayor Parks predicts medical cannabis farm will get underway soon
          * Constituents invited to meet with Bost on Wednesday in Belleville
          * Dozens of girls get hands-on practice in science, technology, engineering
          * Dan Brady not running for Schock seat
          * Man on parole for aggravated robbery charged with burglary
          * B.o.B, Timeflies to perform at April UI concert
          * Emergency drill underway at ISU; traffic not affected
          * Hopping along: Murphysboro Key Club to sponsor 27th annual egg hunt
          * O’Fallon Alderman Ward 3 candidate: Kevin Hagarty


          * Cubs insist Wrigley Field will be ready for opener
          * Thursday last day to apply for mail-in ballot
          * Krishnamoorthi plans, Noland considering bids for Congress
          * Three groups merge to create mega local hospice organization
          * Authorities: Sugar Grove man had $26,000 in cocaine

          * US Rep. Randy Hultgren joins bipartisan gr...
          * As Illinois' Common Core Testing Begins, H...
          * 6 reasons American voters prefer governors...
          * Letter: Smarter than fifth-grader? - North...
          * Antolik receives Service Academy appointment
          * The 17 Republicans who voted against the G...
          * Tammy Duckworth to Run for Senate Bid in 2016
          * Duckworth to challenge Kirk for Senate seat
          * The Mushroom Cloud and the X-Ray Machine -...
          * Three Illinois congressmen speak out after...

          * Why Harry Reid’s likely successor Chuck Sc......
          * Should Supreme Court proceedings be televi......
          * Harry Reid on Jeb Bush's 2016 Chances: 'I ......

          * With or Without Iran Deal, Obama Faces Fig......
          * Duckworth: Clinton must testify before Ben......
          * Rep. Duckworth, Top Dem Recruit, Demands H......
          * Duckworth makes announcement for ’16 Senat......
          * Sanctions Iran could face if nuclear talks......

          * Gary Police Department Starts Body Camera Pilot Project
          * Chicago's Fight For 15 Campaign To Expand Beyond Fast Food Workers (VIDEO)
          * Baskin Robbins Celebrates Today With $1.31 Pricing
          * More Loop Lane Closures To Start Friday Morning
          * Fioretti Endorses Emanuel
          * MoveOn Launches 7-Day #DumpRahm Ad Campaign
          * City Taking Steps To Collect Unpaid Ticket Debt, Officials Say
          * My dinner with Rahm.
          * No-union zone in Oswego?
          * U.S. Reps. Schakowsky, Becerra At Social Security Press Conference


          * IDHS Prescription Monitoring program helps control prescription drugs abuse in Illinois - Program has more than 26,000 registered users
          * Illinois Mayors to Celebrate National Service - April 7, 2015 Designated as “Mayors Day of Recognition”
          * Governor Rauner Takes Bill Action
          * Governor Announces Appointments B.R. Lane to lead Illinois Lottery; John Holden to continue leading Dept. of Aging
          * USDA Awards Grant to Illinois' JTED-SNAP Employment & Training Grant - Program helps participants find jobs and promotes business growth




              Hosted by MCS SUBSCRIBE to Capitol Fax Advertise Here Mobile Version Contact Rich Miller