* Press release…
Governor JB Pritzker today applauded S&P Global Ratings’ upgrade of Illinois bonds. This latest action means that Illinois has now received two-notch bond rating upgrades from the three major credit rating agencies in the last year – a total of six upgrades in less than a year. This fiscal progress was attained due to strong fiscal leadership by Gov. Pritzker and Democrats in the General Assembly, despite a global pandemic and the economic challenges left by previous administrations.
S&P Global Ratings announced on Friday its second upgrade of Illinois’ bonds since July 2021. Fitch Ratings upgraded Illinois’ bonds by two notches this week, the first Fitch upgrade for Illinois’ General Obligation bonds since June 2000. Illinois received an upgrade from Moody’s Investor Service last month, the second such upgrade by Moody’s in 10 months.
“These achievements bear repeating: balanced budgets four years in a row, paying the state’s bills on time, early repayment of pandemic-related borrowing, clearing out debts left by previous administrations, making higher-than-required pension payments, setting aside $1 billion in savings for a rainy day. After more than 20 years without receiving a credit upgrade, the rating agencies are taking notice of our tremendous progress,” said Governor Pritzker. “Along with our partners in the General Assembly and my fellow constitutional officers, we will continue to build on our success and lead this state in a fiscally responsible manner.”
“The upgrade reflects what we view as improvement in the state’s financial flexibility and monthly revenue reporting transparency, continued timely budget adoption and elimination of the bill backlog, as well as recent surplus revenues being used to promote what we view as longer-term financial stability, although credit pressures remain,” S&P Global stated.
S&P last upgraded the state’s bonds in July 2021, and today’s analysis credited stronger-than-forecast tax revenues and transparent reporting both from the Comptroller and the Governor’s Office of Management and Budget aiding in addressing longstanding credit weaknesses.
The Governor thanked House Speaker Chris Welch, Senate President Don Harmon, Leader Greg Harris, Senator Elgie Sims, Comptroller Susana Mendoza and Treasurer Michael Frerichs for their ongoing commitment to Illinois’ fiscal well-being.
The upgrades follow the enactment of the state’s fourth balanced budget in a row, while providing $1.8 billion in tax relief to the working families of Illinois and marked Illinois’ first contribution to a Rainy-Day Fund in 18 years, as well as a $500 million extra payment toward the state’s pensions. The historic budget places Illinois it its strongest financial position in a generation while funding key investments for education, human services, law enforcement and violence prevention.
S&P Global upgraded Illinois’ rating on its General Obligation bonds to BBB+ (stable outlook) from BBB (positive outlook), and also upgraded Build Illinois sales tax bonds to A- (stable outlook) from BBB+ (positive outlook).
Fitch upgraded Illinois’ rating on its General Obligation bonds to BBB+ (stable outlook) from BBB- (positive outlook), and also upgraded Build Illinois sales tax bonds to A (stable outlook) from BBB+ (positive outlook).
Moody’s upgraded Illinois’ rating on its General Obligation bonds to Baa1 (stable outlook) from Baa2 (stable outlook), and also upgraded Build Illinois sales tax bonds to Baa1 from Baa2 while maintaining their stable outlook.
The rating of a state’s bonds is a measure of their credit quality. A higher bond rating generally means the state can borrow at a lower interest rate, saving taxpayers millions of dollars.
Between 2015 and 2017, the State of Illinois suffered eight credit rating downgrades and sat at the top of many analysts’ lists of the worst managed states in the nation. At its worst, Illinois’ bill backlog hit nearly $17 billion.
Key Actions – Responsible Fiscal Management
Fiscally responsible choices over the last three years have resulted in historic progress toward financial stability in Illinois.
Illinois’ FY2023 budget:
· Deposits $1 billion to the Budget Stabilization Fund (BSF) across FY2022 and FY2023 - the first deposits in 18 years. Also creates ongoing, permanent funding for BSF for the first time.
· Contributes an additional $500 million directly towards state unfunded pension liabilities, reducing long-term liabilities by an estimated $1.8 billion.
· Pays down $4 billion in debts across FY2022 and FY2023, including eliminating the payment delays in the employee and retiree health insurance program through $898 million in FY2022 supplemental appropriations.
· Keeps pace with payment of the state’s bills, with estimated bill payment delays at the lowest levels since before the Great Recession, saving taxpayers hundreds of millions in unnecessary interest costs.
...Adding… Speaker Chris Welch…
“Another day, another credit upgrade. The consensus is clear— Illinois is getting its fiscal house back in order. Instead of the typical defer and delay we grew accustomed to under previous administrations, Democrats are facing our financial challenges head on and it’s paying off.”
…Adding… From S&P…
The upgrade reflects what we view as improvement in the state’s financial flexibility and monthly revenue reporting transparency, continued timely budget adoption and elimination of the bill backlog, as well as recent surplus revenues being used to promote what we view as longer-term financial stability, although credit pressures remain. […]
The upgrade reflects our view that Illinois’ enacted $46 billion fiscal 2023 budget, along with the state’s plans for using fiscal 2022 surplus revenues and deploying federal aid, will likely support its trend of financial stability. […]
Although Illinois’ fiscal 2023 general fund budget is balanced in terms of current-year obligations, we do not view it as structurally balanced due to the treatment of pension obligations. Overall, the budget is 3.9% larger than the fiscal 2022 initially adopted budget, but 5.0% smaller than estimated general fund final spend in fiscal 2022. […]
If the state continues to improve pension, OPEB, and BSF funding levels, while shrinking the statutorily created structural deficit without experiencing meaningful deterioration in other credit factors, we could raise the rating. Although not required for us to consider an upgrade, a return to a more abbreviated audit-release period would be in line with that of higher-rated peers.
We could lower the rating if a structural deficit were to increase, derived from economic uncertainties; worsening revenue collection; or increases in pension, OPEB, or other fixed-cost obligations.
…Adding… Comptroller Mendoza…
A 6th upgrade in less than a year proves Illinois is on the right path toward fixing its finances.
S&P Global Ratings praised Illinois’ responsible budget as it raised the state’s rating Friday – the second time in less than a year it has upgraded the state’s rating. All three major ratings agencies have now raised the state’s ratings two notches in less than a year. This comes after 20 years of downgrades – the bulk of them – eight – under the previous administration.
“These upgrades are good news for Illinois taxpayers because they lower the costs for public works projects like roads and bridges that taxpayers pay for,” Comptroller Susana Mendoza said.
In her six years in office, Comptroller Mendoza has paid down bills and shortened the time state vendors wait to be paid.
“I’ve paid the backlog down from $16.7 billion to an accounts payable of $2.5 billion today,” Comptroller Susana Mendoza said. “The oldest bill in my office is 14 working days old, down from 210 business days when I took office. In all their upgrades, the rating agencies have noted that progress.”
Comptroller Mendoza also championed a series of transparency reforms that passed the General Assembly by unanimous or near-unanimous margins, opening the state’s books for taxpayers, legislators and the rating agencies to see.
“Stronger-than-forecast tax revenues and transparent reporting both from the comptroller and the governor’s office of management and budget aiding in addressing longstanding credit weaknesses,” S&P said in its announcement Friday.
S&P, like Fitch ratings on Thursday, praised the responsibility of this budget passed by the General Assembly and signed by Governor Pritzker that included savings championed by Comptroller Mendoza. It included $1 billion for the state’s Rainy Day Fund and $500 million in additional payments to the pension fund, lowering that fund’s shortfall by $1.8 billion.
Comptroller Mendoza supported an effort to require regular ongoing payments into both funds. The budget includes $45 million a year for the Rainy Day Fund, but Comptroller Mendoza will continue seeking to raise that number.
“Six upgrades in less than a year make it clear that Illinois is continuing on the right path that the Comptroller’s Office, working together with the Governor’s Office and the legislative leaders, began when I took office to make strategic and fiscally responsible cash management decisions,” Comptroller Mendoza said. “I’ve been laser-focused on transparency of fiscal information, paying down the state’s debts, and prioritized saving for a rainy day. Let’s keep it going.”