* From Fitch Ratings…
FITCH: ILLINOIS VETO JEOPARDIZES SCHOOL FUNDING AND RATINGS
Fitch Ratings-New York-02 August 2017: Illinois Governor Rauner’s veto of Senate Bill 1 (SB1) creates uncertainty as to whether or not Illinois school districts will receive state aid prior to opening for the new school year. Should there be an extended impasse, ratings for the Chicago Board of Education (Issuer Default Rating ‘B+’/Negative Outlook) and other Illinois school districts with limited financial flexibility could be at risk, according to Fitch Ratings. The state budget for fiscal 2018, which was enacted through override of the governor’s veto, made school funding contingent upon legislative passage of a new evidence-based formula for distributing school aid. SB1, which meets that requirement, will now return to the legislature for further consideration. Among other adjustments, the governor’s changes limit the increase in funding to Chicago Public Schools (CPS) by removing from the formula a $250 million block grant that the district has historically received and also cutting CPS pension considerations. The governor’s action would include putting monies required to fund CPS’s normal pension cost in statute instead. Any other aid would require additional legislation, perhaps making it vulnerable to separate budget appropriation this year and in the future.
Although the dispute between the legislature and governor is focused on funding to CPS, the veto threatens the timeliness of the first distribution of general state aid to all K-12 school districts, which is set in statute for Aug. 10. Following a veto, the bill must be read again into the record in the state senate the next time it is in session. The legislature then has 15 days during which it faces three options. First, the house and senate can both agree to the governor’s changes; this seems unlikely given the rancour of the debate. Second, the legislature can override the governor’s veto with a super-majority vote. This also seems unlikely despite the override of the governor’s veto of the fiscal 2018 budget. The budget crisis brought bipartisan agreement to a solution in a way that the school funding formula may not. The third option is to allow the bill to lapse and begin again, likely extending past the first distribution date on Aug. 10.
Resistance among key stakeholders and an absence of consensus create a political environment that remains a negative consideration for the state. A return to political gridlock specifically related to school funding puts at risk the ability of school districts to open all of their schools with a full complement of services. This is a notable difference from the state’s fiscal behaviour during its extended budget impasse, during which it consistently appropriated funds for schools and prioritized those payments in its cash flow management. Nevertheless, delayed distribution of school funds would not have a near-term negative effect on the state’s ‘BBB’ Issuer Default Rating. The current Negative Outlook is unrelated to school funding and instead reflects uncertainties related to achieving the revenue and spending assumptions in the fiscal 2018 budget. Delayed distribution may, however, have a negative impact on school district ratings. Some districts should be able to weather a state aid delay by relying on reserves or by short-term borrowing, but others, notably CPS, have much more limited flexibility. Fitch will closely monitor the potential impact an extended impasse may have on Illinois school district credit quality and will take action on a case by case basis as necessary.
Emphasis added.
- A guy - Wednesday, Aug 2, 17 @ 3:45 pm:
At this point…
A tree just fell in the forest and no one was there to hear it…
- Liberty - Wednesday, Aug 2, 17 @ 3:47 pm:
Bankruptcy Bruce on the move again…
- Anon221 - Wednesday, Aug 2, 17 @ 3:52 pm:
Two of Fitch’s scenarios listed for SB1 will likely result in downgrades. An override most likely won’t. For goodness sakes, SB1 can be worked on after it’s overridden. Get the votes together and get it done. Rauner and his posse of deputies that are led by Barickman will just keep stalling and stalling on any possible compromise. And, can a compromise even be done right now? To do the major changes Rauner AVed would take an entirely new bill. We do not have time for that, and we do not need to be planning a funeral for SB1. If the override does fail, and fails only in the House, House Republicans had better be prepared for the fallout because it will all be on them and it will be nuclear.
- Blue Bayou - Wednesday, Aug 2, 17 @ 3:53 pm:
The hits just keep on coming.
The only thing Rauner could do to make things worse is run for reelection.
- Lynn S. - Wednesday, Aug 2, 17 @ 3:54 pm:
Another “oops” by The Best Team In America?
Does the new staff think they should be competing against Trump’s in the race for “most idiotic amateurs in charge of hurting the largest number of people”, or do they have orders to make the former SuperStars look good?
- Ducky LaMoore - Wednesday, Aug 2, 17 @ 3:57 pm:
This is exactly what happens when you find it “outrageous” to meet with the Senate President about a Senate bill about to be sent to you.
He doesn’t know what he is doing. And he doesn’t care to learn.
- No Longer A Lurker - Wednesday, Aug 2, 17 @ 3:59 pm:
Makes me wonder if Bruce truly understood the consequences of his veto. I guessing probably not.
- Christopher - Wednesday, Aug 2, 17 @ 4:03 pm:
Wow! I wonder if Fitch’s remarks will convince any Republicans to override Rauner’s veto.
- Sue - Wednesday, Aug 2, 17 @ 4:04 pm:
But the rating agencies don’t care that the budget is 2.3 B out of whack unrelated to SB 1?
- Sue - Wednesday, Aug 2, 17 @ 4:05 pm:
Lynn S- second best. First best is at the WH.
- Christopher - Wednesday, Aug 2, 17 @ 4:08 pm:
I wonder if Fitch’s warning will convince any Republicans to vote to override Rauner’s AV.
- Me Again - Wednesday, Aug 2, 17 @ 4:09 pm:
Heck-of-a-job, Raunie (big exclamation mark).
- Who put us here - Wednesday, Aug 2, 17 @ 4:12 pm:
Let’s remember who put us here Madigan, Cullerton and Jones. Not to mention all the folks on both sides of the aisle that voted to bond out pension funds years ago
- Who cares - Wednesday, Aug 2, 17 @ 4:15 pm:
Hit on a nerve? These ratings folks were big contributors to the meltdown of 08 and 09. Make Chicago pay their share of property taxes. Didn’t Rahm just give $55 Million in TIF funds to a McPier project - taking the money out of the schools.
- Rich Miller - Wednesday, Aug 2, 17 @ 4:16 pm:
===These ratings folks were big contributors to the meltdown of 08 and 09===
You sound just like the Quinnsters in 2013-14. Remember what happened to them?
- Curl of the Burl - Wednesday, Aug 2, 17 @ 4:24 pm:
This could have been dealt with two months ago. TWO WHOLE MONTHS. Instead we wait until the last minute. Crisis creation indeed.
- Rod - Wednesday, Aug 2, 17 @ 4:29 pm:
Where Fitch writes: “The governor’s action would include putting monies required to fund CPS’s normal pension cost in statute instead.” They should have added, under the Illinois Constitution only the legislature can do that and they are not inclined to do so right now.
- pretty please - Wednesday, Aug 2, 17 @ 4:36 pm:
HI Rich!! Loyal fan here. I would like to make a humble request - can you pretty pleeeeeease make it so that when we click a link on your site it goes into a separate tab? I know this is dumb but I think it would be for the greater good. I keep forgetting to command-click and accidentally leaving for other articles.
many thanks for running a super awesome site that we all spend lots of hours on every day
- RetHAnalyst - Wednesday, Aug 2, 17 @ 4:39 pm:
How is the AV Constitutional? It goes way beyond technicality and rewrites the bill.
- Chicago 20 - Wednesday, Aug 2, 17 @ 4:43 pm:
Rauner is compelled to create crises to stage media events blame Mike Madigan for anything Rauner and the IPI can dream up.
This is not governing, it’s a non-functional government where ideology rules.
- Anon221 - Wednesday, Aug 2, 17 @ 4:47 pm:
RetAnalyst- Even if it is unconstitutional, and I tend to think it is, do we really have time to go to the courts? That could drag on for months.
- Arock - Wednesday, Aug 2, 17 @ 4:53 pm:
Maybe it should have been sent to the Governor after it passed the GA and all of this would be over already.
- Austin Blvd - Wednesday, Aug 2, 17 @ 4:56 pm:
Running the state like a bidness — but like only the worst kind of bidnessman can run it.
- Norseman - Wednesday, Aug 2, 17 @ 5:02 pm:
=== How is the AV Constitutional? ===
Don’t lose any sleep worrying about it. Acceptance is not happening.
To the post, once again Rauner acts threaten our rating.
- RNUG - Wednesday, Aug 2, 17 @ 5:06 pm:
== make it so that when we click a link on your site it goes into a separate tab? ==
A lot of web browsers have that as an option buried somewhere in the settings.
- Anonymous - Wednesday, Aug 2, 17 @ 5:10 pm:
I’m with Curl of the Burl on this onw. The guv should’ve started negotiating months ago, when he and everybody else knew the final language of SB1. There was no need to wait for the bill to be sent to him, except to create a crisis by vetoing SB1.
- PragmaticR - Wednesday, Aug 2, 17 @ 5:32 pm:
Would have really preferred $3 billion tax increase and $5 billion spending cut to current budget. That was the time to use the item veto and the reduction veto. Halting payments to all K-12 school in an attempt to reallocate less than 5% of state education budget is just childish.
- Mama - Wednesday, Aug 2, 17 @ 5:54 pm:
Rauner knows what he is doing. He wants to destroy public schools and enrich the private schools via tax credits and school vouchers.
The problem is poor families are to poor to use the tax credit because they don’t pay taxes.
- Born in the USA - Wednesday, Aug 2, 17 @ 7:36 pm:
Outside of ensuring that Illinois never moves forward and adding now school districts to the long list of people held hostage….why would anyone re-elect this governor or anyone who sides with him.
- Anonymous - Wednesday, Aug 2, 17 @ 7:58 pm:
To pretty please: we know it’s you Governor. Please get some help.
- VanillaMan - Thursday, Aug 3, 17 @ 9:09 am:
The fifth largest US state has a paralyzed governor too cowardly to lead. Instead Rauner keeps telling us that he didn’t cause it.
Rauner wasn’t elected to destroy Illinois in order to get his policies accepted.
- Small town taxpayer - Thursday, Aug 3, 17 @ 9:12 am:
As I see it, CPS needs another large property tax increase. CPS has under taxed for years relative to what it has promised its employees in salary and benefits. The bill is coming due and Chicago tax payers need to understand that it is time for them to make good on their promises.