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.


* Reader comments closed until Monday
* TrackBill update
* Caption contest!
* It's worse than we thought
* Question of the day
* Long-term debt is not short-term debt
* Today's quotable
* 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

          
        * Nexus 6 Stand Folio Case now available on Google Play
        * Chainfire updates SuperSU, CF-Auto-Root, How-to SU
        * 10 excellent movies to stream on Netflix over Thanksgiving weekend
        * Opera Mini for Android gets updated
        * YubiKeys by Yubico provide two-factor authentication by USB
        * Windows Phone 8.1 Finally Breaks The 50% Market Share Threshold
        * Germany’s Linshof i8 boasts 80 GB of storage

        * Quirky's Black Friday Sale is Full of Great Gift Ideas
        * This Video Explains What Happens to Your Body When You Eat Too Much
        * Who Said It First Tracks Down the First Tweet on Any Topic
        * Give Babies and Young Kids Less Frequent Baths to Reduce Eczema Issues
        * ReWalk Exoskeleton Helps Marine Walk Again
        * Apple and (RED) Team Up to Help Raise Funds to Fight AIDS
        * Kotex Creates Best Site of All Time, Period

        * Catching up with Tadahito Iguchi
        * White Sox ACE program helps send players to college
        * Additional 2005 fan-favorite players added to '15 SoxFest
        * White Sox introduce Adam LaRoche and their plans for him
        * White Sox plan for contention a work in progress
        * White Sox officially announce LaRoche deal
        * Red Sox seize offseason driver's seat with signings

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


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

        Archives
        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


        * Hot meals provided to homeless across Chicago area..
        * Rauners serve Thanksgiving meals at West Side s.....
        * Will Rauner want the mansion?..


        * Against odds, Chicago school aims for championship
        * Woman's body found near Whiteside county jail
        * Against odds, Chicago school aims for championship
        * Liver transplant recipient marks 25th anniversary
        * Woman's body found near Whiteside county jail
        * VSU chief financial officer to leave for new job
        * Collinsville man guilty of murder in fatal wreck
        * 3 arrested in Chicago during Ferguson protest
        * Clemency for man wrongfully jailed for 1991 murder
        * Illinois doctor fined over medical marijuana slip

        * Illinois attorney general files notice of appeal in pension case
        * Quinn grants clemency to 126 ahead of holiday
        * Illinois gives $4.5M food banks for modernization
        * State begins accepting fracking applications
        * Debt rating agencies weigh in on state pension ruling
        * Lisa Madigan to ask Illinois Supreme Court to consider pensions
        * Rauner tackles transition agenda
        * Attorney general warns of immigration scams
        * State pension changes ruled unconstitutional; appeal to Illinois Supreme Court next
        * State to refund $60 million in retiree health care money

        * Most BP oil spill claims handled correctly, McGladrey says
        * Illinois AG Madigan files notice of appeal in pension case
        * Congressmen sound alarm over anti-Asian Carp move
        * Motorola Mobility loses bid to extend antitrust law reach
        * Chicago business activity is growing—but at a slower pace


        * ||| Jack Higgins’ perspective
        * How Illinois can charge  ahead on education
        * Thanksgiving parade draws thousands to State Street
        * Former alderman, North Lawndale activist Jesse Miller dies at 72
        * Rauners don hairnets, serve Thanksgiving to homeless
        * Norman Schoer, viola player with Grant Park Orchestra and Lyric Opera, dies at 103
        * Cupich: Work needed to ‘repair our broken immigration system’
        * Would-be marijuana farmers pledge half of earnings to education
        * Obama 2014 Thanksgiving menu: Turkey, Ham, six kinds of pies
        * Obama guidance, press schedule Nov 27-30, 2014 Thanksgiving break


        * Crash-and-grab burglary in Austin
        * Boat service provider negligent in fatal accident, lawsuit alleges
        * Cupich celebrates Thanksgiving Mass, prays with the poor
        * Archbishop Cupich emphasizes spiritual blessings at Lake Forest Thanksgiving mass
        * 1 shot on South Side
        * Judge reassigned after failing to follow contempt rules, officials say
        * Pre-Thanksgiving revelers in Naperville unfazed by new alcohol rules
        * Woman shot dead in apparent domestic-related shooting in Gary
        * Ferguson protester in Chicago charged with felony
        * Thanksgiving Day Parade kicks off at Congress and State


        * LLCC Offers Variety Of Community Education Classes
        * Incoming U of I President Speaks To Springfield Audience
        * Another Year Of "Messiah" For Springfield Choral Society
        * New Exhibit On Lincoln's "Undying Words"
        * Locals Organize For Vigil In Response To Ferguson
        * Illinois Hunters Kill 52,000 Deer Over The Weekend
        * Pension Ruling "Credit Negative," But No Ratings Change
        * Tim Landis: Foreclosure Sales, CIPS Icehouse and Heritage River Trail
        * Part Timers & Manufacturing in Illinois Feeling a Slow Economic Recovery
        * Notes From Ferguson: A QA With St. Louis Public Radio's Rachel Lippmann


        * Our Opinion: Help combat hunger this holiday season
        * Eugene Robinson: On replacement, caution urged
        * George Will: Thanks, or something
        * Quote of the Day: Nov. 27, 2014
        * Illinois attorney general files notice of appeal in pension case
        * Quinn grants clemency to 126 ahead of holiday
        * Illinois gives $4.5M food banks for modernization
        * Michael Gerson: The big ‘but’ on immigration
        * Quote of the Day: Nov. 26, 2014
        * State begins accepting fracking applications


        * SIU to hold holiday sale
        * Collinsville man guilty of murder in fatal wreck
        * Plays of the Game - Indiana State
        * Indiana State Postgame 11-27-14
        * Today in History, 1128
        * Experts examining letter to see if accused wrote to witness
        * Woman's body found near Whiteside county jail
        * Upcoming Services (November 28, 2014)
        * Thanksgiving shopper gobble up bargains
        * Efficiency Stats - Indiana State


        * Eagles romp over Cowboys
        * Illini improve to 5-0
        * Obama's action fuels worry about immigration scams
        * Bears' play-calling inexplicably puzzling again
        * N. Korean leader's sister named as senior official

        * Congressmen sound alarm over anti-Asian ca...
        * Reps. Lipinski and Roskam Lead Effort to S...
        * Is it Too Late to Stop Iran? - Arutz Sheva
        * US Congreesman: We Must Redouble Out Commi...
        * Congressional, local reaction to immigrati...
        * PRESS RELEASE: Reps. Deutch and Roskam Int...
        * Veteran guest speaker shares brain injury ...
        * Images: Tammy Duckworth's 2006 6th Congres...
        * Peter Roskam Defeats Michael Mason In Illi...
        * US House race, Illinois 6th District: Pete...

        * Durbin Celebrates Obama’s Announcement at ......

        * Iran's Supreme Leader supports extending t......
        * Chicago Tribuen: Squeeze a stalling Iran t......

        * "Nigerian Kitchen" Closes On Wilson
        * #HappyThanksgiving from The Sixth Ward blog!
        * In Chicago the race is on. It’s easy as ABC.
        * Lisa Madigan files her appeal.
        * The Better Government Association continues to spread the lie about public employee pensions.
        * Happy Thanksgiving. “My idea,” says Rahm.
        * Chicago parents demand answers from Emanuel after sex ed lessons revealed
        * Happy Thanksgiving
        * We're Grateful To Live In Uptown, And For You
        * Will Thanksgiving meal someday come at shopping mall food court?


        * Governor Quinn Announces Investment to Help Regional Food Banks Better Serve Those in Need - Governor’s Investment Will Ensure Lower Cost and Higher Efficiency for Services Reaching Nearly 2 Million Illinois Residents
        * Governor Pat Quinn Takes Clemency Action
        * Governor Quinn Statement on Abner Mikva Receiving Nation’s Highest Civilian Honor
        * Department of Insurance Announces Multi-State Settlement with Symetra Life Insurance and Symetra National Life Insurance Company - Illinois will share part of a $1.2 million penalty against Symetra Life regarding Life Insurance policies
        * Avoid Foodborne Illness This Holiday Season




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