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.


* Question of the day
* *** UPDATED x1 - COGFA stands by projection *** Rauner issues his own stopgap deficit projection
* More horrible pension news
* Dealing with the "Rauner question"
* Caption contest!
* *** UPDATED x1 - Ad already on the air *** Oppo dump!
* GOP chairman says Rauner criticism "drives me crazy"
* The power of the cyber
* Edgar, Kennedy take turns whacking Rauner, Trump
* New AFSCME TV ad: "Rauner is so far disconnected from how real people live"
* SUBSCRIBERS ONLY - Supplement to today’s edition
* SUBSCRIBERS ONLY - Today's edition of Capitol Fax (use all CAPS in password)
* 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

  
* Are Apple’s Lightning Earpods an example of fragmentation?
* T-Mobile extends its free high-speed roaming in South America and Europe until 2017
* Meetup redesigns its mobile apps to focus on your personal interests
* iMessage logs the numbers you contact, Apple may send them to police
* Twitter's 'Moments' Feature Now Available for Everyone
* [Video] Google Pixel Phone: Rumor Roundup!
* Samsung replaces replacement Galaxy Note 7 over overheating concerns

* Sale accomplishes mission in possible last start
* Anderson flirts with cycle as Sale wins 17th
* Gonzalez looks to get back on track vs. Rays
* Eaton thinks White Sox can rebound in 2017
* Turner says Fernandez was 'rare combination'
* Morneau's 3 RBIs back Shields in 1st W since July
* Sale looks to improve Cy Young hopes vs. Rays

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


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

Archives
September 2016
August 2016
July 2016
June 2016
May 2016
April 2016
March 2016
February 2016
January 2016
December 2015
November 2015
October 2015
September 2015
August 2015
July 2015
June 2015
May 2015
April 2015
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


* AFSCME Launches New Ad Amid Stalled Contract Ta.....
* GOP chairman says Rauner criticism “drives me c.....
* Federal prison officials won’t discuss changes .....
* KIRK attacks DUCKWORTH, AFSCME targets RAUNER —.....
* Voice of The Southern: Having a meaningful conv.....
* Sweet: Trump opines on Chicago crime; skips cit.....
* Morning Spin: Former Gov. Edgar says Rauner mig.....
* Morning Spin: Former Gov. Edgar says Rauner mig.....


* Federal judge OKs improvement plan for Illinois child agency
* Diagnosed concussions among Illinois youth up 83 percent
* The Latest: Drink spill led to fight before fatal shooting
* Tribune Media completes sale of Tribune Tower, other assets
* Famed Tal's Hill to be removed from Minute Maid Park
* Correction: Illinois Shootings-Vigil story
* Tribune Media completes sale of Tribune Tower, other assets
* CPS hiring review follows arrest of teacher with past record
* Judge rules convicted killer can't get more than 60 years
* EXCHANGE: Church youth sowing the seeds of service

* Audit: College of DuPage severance outpaces similar deals
* Diagnosed concussions among Illinois youth up 83 percent
* Doctor subpoenaed in Illinois medical marijuana investigation
* IMA says workers' comp reform, broader sales tax base will help manufacturing jobs
* Former Gov. Edgar, Chris Kennedy both oppose a Trump presidency
* Edgar, Kennedy both oppose a Trump presidency
* Data shows just 86 freshmen enrolled at Chicago State
* Data show just 86 freshmen enrolled at Chicago State
* First Gold Star Families Day observed at Capitol
* Chicago teachers vote to authorize strike in contract talks

* The best gender-neutral restroom signs we've seen
* Sears, Claire’s at high risk in Fitch study of retail failures
* Senate passes bill for stopgap spending, Zika
* Chicago loses major trade show
* Senators vote to override Obama's veto of Sept. 11 bill


* Three West Nile virus deaths reported in Cook County
* Opinion: Every day, some official snoops where he should not
* Letters: Bustling O’Hare is a different place late at night
* Man with a knife robs Northwest Side, Norridge businesses
* Congress overrides Obama’s veto of Sept. 11 bill
* Ventura will return to White Sox if he wants to stay: report
* Man tried to sexually assault jogger on South Shore lake path
* Police: Woman with FOID card bought and sold guns for profit
* Bears QB Jay Cutler returns to practice
* Air rage incidents reported by airlines on the rise


* Windsor school 'tasting menu' a big hit with students
* 2 students, 1 teacher wounded in S.C. elementary school shooting
* Congress hands Obama first veto defeat, overrides him on 9/11 bill
* Audit details lax leadership at College of DuPage, offers 19 recommendations
* Hackers have attempted more intrusions into voter databases, FBI director says
* White Sox will retain Robin Ventura if he wants to return: report
* Chicago Heights agrees to $15 million settlement for man in prison for 20 years
* Michelle Obama implores young people to vote in Philly campaign stop
* Arrest warrant issued for suspect, 18, in deadly shooting near U. of I.
* Air rage incidents reported by airlines on the rise


The widget AQL4JYGHIY powered by Feed Informer does not exist.


* Audit: College of DuPage severance outpaces similar deals
* Diagnosed concussions among Illinois youth up 83 percent
* Doctor subpoenaed in Illinois medical marijuana investigation
* IMA says workers' comp reform, broader sales tax base will help manufacturing jobs
* Former Gov. Edgar, Chris Kennedy both oppose a Trump presidency
* Michael Gerson: Out of his depth, Donald Trump clings to deception
* E.J. Dionne Jr.: Clinton shifts the election in her direction
* Catherine Rampell: Another year of Congress, another string of broken promises
* Edgar, Kennedy both oppose a Trump presidency
* Data shows just 86 freshmen enrolled at Chicago State


* UPDATED: Prussing throws hat in ring
* The Health Reporter Is In: Sept. 28, 2016
* Wildlife meeting OKs ban on trade in pangolins
* Farms harvesting in a hurry to beat flood
* MVC announces extensive TV schedule with ESPN networks
* Press Conference: Campustown shooting
* Bettendorf turns on traffic signals at 53rd and Falcon avenues
* 09-28-16 Listener reaction to Champaign Police press conference on shooting and death on Green Street
* 09-28-16 Penny for Your Thoughts
* Noon update: Jeopardy!, crime map, the Cubs


* Official: Three wounded in South Carolina school shooting
* Report: Chicago White Sox want to Robin Ventura back
* Demonstrators protest as Trump visits Bolingbrook
* Jantel Lavender of Sparks wins WNBA sixth woman award
* He does it all: Justise Winslow looking for more with Heat

* House lawmakers overcome hurdle on key tra...
* Rodney Davis talks funding with Bloomingto...
* The agency that fought Illiana gets a new ...
* Rep. Dold takes educational cruise down Ch...
* Lawmakers decry high turnover rate of VA h...
* CBD Oil, and politics
* Simon considering state Senate bid
* Killer Congressman Tom MacArthur trying to...
* Shutdown? State may not notice
* Rep. Bob Dold

* $1.7 million in grants to Illinois organiz......
* Peoria Police receive grant for laser scan......

* Mark Kirk Doubles Down on Tammy Duckworth'......
* Mark Kirk Doubles Down on Tammy Duckworth'......
* Duckworth stretches Super PAC claim agains......

* Thorner: America's national security urgent, says two former ambassadors
* Cruz endorses Trump for President
* Could Ed Secretary's home schooling remarks hint of more government oversight?
* The passive voice.
* Where's Weyermuller? Tracking Trump's Chicago visit
* Trump translator.
* Wall Street CEO Pay Graphic
* Man Wins $15 Million Wrongful Conviction Settlement In Chicago Heights
* AFSCME Launches New Ad Amid Stalled Contract Talks With Rauner Administration (VIDEO)
* Foster Hosts 'Science Of Addiction' Discussion In Naperville


* First 2016 Human West Nile Virus Deaths in Illinois
* Schools Encouraged to Participate in International Walk to School Day on Oct. 5
* Governor Rauner Cuts Ribbon for Grand Opening of Obed and Isaac's Peoria
* Governor Rauner Encourages Illinoisans to Serve Those Who Served
* Governor Rauner Proclaims First Gold Star Family Day in Illinois




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