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* Moody’s and S&P may be closed today, but Fitch just put out a press release…
Over the weekend the State of Illinois made concrete progress on reaching an agreement to break the two-year long budget impasse, according to Fitch Ratings. The state House of Representatives passed both spending and revenue measures with some bipartisan support in special session on Sunday. The tax increase legislation, an amendment to Senate Bill 9, would permanently raise the personal income tax rate to 4.95% and make other revenue enhancements. There is also apparent accord on significant budget reductions to align spending with expected revenues. The bills now return to the state Senate for concurrence, where a super-majority vote is required to raise taxes. The governor has threatened to veto the revenue increase although there appear to be sufficient votes to override the veto
Fitch downgraded Illinois’ rating to ‘BBB’ on Feb. 1, 2017 and maintained the rating on Rating Watch Negative. At that time, Fitch indicated that the Rating Watch would be resolved within six months based on an assessment of the state’s fiscal trajectory as it starts fiscal 2018 and that failure to enact a balanced budget for fiscal 2018 would result in a further downgrade.
Fitch will continue to monitor the developments in Illinois. Enacting a budget that sets the state on a path toward budgetary balance and provides a means to address the state’s accumulated budgetary liabilities would stabilize Illinois’ Issuer Default Rating and related ratings. Temporary or partial measures, or a failure to enact a budget within the context of this session, would result in a downgrade. The continuation of spending without sufficient revenues, particularly in light of the ongoing legal challenge to the state’s prioritization of other payments ahead of Medicaid payments, will increase liquidity pressure. The state risks losing full control of its budgetary decisions, which would be inconsistent with the current rating.
posted by Rich Miller
Monday, Jul 3, 17 @ 9:22 am
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===The state risks losing full control of its budgetary decisions, which would be inconsistent with the current rating.===
That pretty much says it all right there.
Comment by Gruntled University Employee Monday, Jul 3, 17 @ 9:26 am
It appears that our state may yet pull back from the brink of disaster. I am hoping for the best.
Comment by DuPage Dave Monday, Jul 3, 17 @ 9:28 am
Capiche, Governor?
Comment by Keyrock Monday, Jul 3, 17 @ 9:28 am
I normally would not care about the bond houses opinions but after the most recent CPS borrowing rate and with the need to borrow to pay down the $15 billion albatross then we need to get this !@#$ in order.
Comment by Curl of the Burl Monday, Jul 3, 17 @ 9:34 am
Did I miss Fitch championing the turnaround agenda? Didn’t they get that letter from goldberg
Comment by Rabid Monday, Jul 3, 17 @ 9:38 am
This is the position the action yesterday should have prompted. They bought a week. I suspect the other rating agencies will take a similar view.
Comment by A guy Monday, Jul 3, 17 @ 9:44 am
Yet, Rauner persists in his path to keep state finances in a destabilized position.
Comment by Norseman Monday, Jul 3, 17 @ 9:48 am
===Enacting a budget that sets the state on a path toward budgetary balance and provides a means to address the state’s accumulated budgetary liabilities would stabilize Illinois’ Issuer Default Rating and related ratings.===
It’s not about term limits, property freezes, or any “other” things… but a budget.
A veto of a possible budgetary solution is not following the advice.
Comment by Oswego Willy Monday, Jul 3, 17 @ 9:51 am
Fitch is only interested in whether or not debt holders get paid, which has nothing to do with Illinois’ sustainability. I wish Illinois media covered this issue in a way voters could understand.
Comment by Mockingjay Monday, Jul 3, 17 @ 9:53 am
Having to listen to these lectures from the rating agencies should be far more irritating to our political masters than it apparently is. Talk about waiting for Superman. He’s here, and our political masters don’t seem to get how feckless that makes them look.
Comment by Cassandra Monday, Jul 3, 17 @ 10:09 am
If the Governor vetoes the package, and we get downgraded to Junk, it will all fall on him. He’ll wish he had Chris Christie-level numbers.
Comment by Can Monday, Jul 3, 17 @ 10:10 am
@Mockingjay
I have been to a hundred plus public meetings over the last several years. Trust me when I say, what gets printed in the paper is rarely the reality of the situation. It is not just the state. It is everything everywhere.
Comment by Ducky LaMoore Monday, Jul 3, 17 @ 10:11 am
=Fitch is only interested in whether or not debt holders get paid, which has nothing to do with Illinois’ sustainability.=
What a tortured comment. As the likelihood of default on debt increases the cost of borrowing does as well. An ever increasing debt service have everything to do with Illinois’ sustainability.
Comment by Pundent Monday, Jul 3, 17 @ 10:12 am
Gov. Junk can read, Dartmouth and all. We’ll see if he droppin’ his “g” whilst explainin’ to workin’ folks why their kids aren’t in school, the road work stops and their grandparents are sleepin’ on the couch in their basement.
“Temporary or partial measures, or a failure to enact a budget within the context of this session, would result in a downgrade.”
In case someone missed it: “Would” not “could” result in a downgrade; and “within the context of THIS session.”
Gov. Junk owns. There will be no veto override vote.
Comment by Alternative Logic Monday, Jul 3, 17 @ 10:15 am
Hopefully, the only thing going over the cliff this weekend can retire to his Montana ranch so that he can keep Smokey the Bear busy starting less damaging fires.
Comment by VanillaMan Monday, Jul 3, 17 @ 10:16 am
Translation:
Final warning. Get a budget in place this week
Comment by RNUG Monday, Jul 3, 17 @ 10:22 am
Very surprised anyone at Fitch paying attention over the long holiday weekend. Figured they’d tune in on Wednesday.Guess they know where they rate in the corporate hierarchy.
Comment by wordslinger Monday, Jul 3, 17 @ 10:25 am
So let’s jus raise taxes 32% with no necessary changes and everything will be just fine? Gotcha. That position doesn’t mean you have blinders on, it means you are blind folded. If anybody wonders why term limits on leadership are absolutely necessary, this action is Exhibit A
Comment by Piece of Work Monday, Jul 3, 17 @ 10:26 am
=If anybody wonders why term limits on leadership are absolutely necessary, this action is Exhibit A=
Except nowhere in the Fitch statement are the words “reform” or “term limits” mentioned. And if the Governor feels that his policies would have averted this crisis or a future crisis it’s up to him to make the argument not the rating agencies.
Comment by Pundent Monday, Jul 3, 17 @ 10:40 am
Governor Rauner will Veto. The Koch brothers are his sponsor and man behind the curtain. The erratic behaviour and decisions that he makes are not his and his alone.
Comment by DeseDem dose Monday, Jul 3, 17 @ 10:41 am
The rating agencies bear major responsibility in causing the Great Recession. But it’s not Illinois job (or in its capability) to reform them. Today Rauner and/or the state GOP can pitch to voters that they restrained the tax increases, kept them from being retroactive, and tout what “reforms” they did achieve. Most of the harm of the crisis has been off the radar, not hitting the middle class. Post-veto, he/they will indeed own it all. Bruce, Kenny Rogers has some advice for you.
Comment by lake county democrat Monday, Jul 3, 17 @ 10:41 am
@Ducky LaMoore thank you
Fitch, Moody’s etc. are ratings used for bond holders. Bond holders need to know if they will be paid in the short run. They need to know if there is cash flow. This has nothing to do with unsustainable pension costs, or anything long term.
Comment by Mockingjay Monday, Jul 3, 17 @ 10:52 am
==erratic behavior and decisions that he makes are not his and his alone==
I beg to differentiate. (And this is what the recent onslaught of IPI trolls fail to conceptualize.): Rauner wants a tax increase.
But he also wants to be reelected. So whilst he wants, and knows the state budget requires a tax increase, he doesn’t want to wear the jacket for the tax increase.
That’s what this has all been about. Gov Junk gettin’ reelected. Gov Junk gettin’ national accolades. Gov. Junk will do anything for an ego stoke, no matter where the cannoli lands.
That’s why there won’t be a veto override.
Comment by Alternative Logic Monday, Jul 3, 17 @ 10:53 am
===But he also wants to be reelected. So whilst he wants, and knows the state budget requires a tax increase, he doesn’t want to wear the jacket for the tax increase. ===
^^^ This
Comment by Rich Miller Monday, Jul 3, 17 @ 10:58 am
==But he also wants to be reelected. So whilst he wants, and knows the state budget requires a tax increase, he doesn’t want to wear the jacket for the tax increase.==
This is where we’ve been since Day 1. Rauner and Madigan trying to maneuver each other to accept the bullet on the tax hike. Right now, Madigan got 15 Republicans to duck behind and holds the final card. We’ll see how he plays it.
Comment by Arsenal Monday, Jul 3, 17 @ 11:14 am
===he doesn’t want to wear the jacket for the tax increase.===
I remember when he promised to take the arrows that come with leadership. I guess he is really just another cowardly politician.
Comment by 47th Ward Monday, Jul 3, 17 @ 11:23 am
THIS ^^^^ is exactly right and has been from the get go. He wants the goodies AND the ability to blame Madigan and the Ds for giving him the goodies. It’s craven but exactly the prism through which all his decisions must be viewed.
Comment by Chicago Cynic Monday, Jul 3, 17 @ 11:26 am
Gov. “Happy” Junk must be clkearly behoodled..His high yield muni pals are w* themselves to get more product, but the budget gives him millions to hand to pals with the new procure loopholes. Then there will be the winner of the “bid for the JRTC land all zoned up without kissin’ a signal aldermanic/mayoral ring. Some many choices.
BTW GovJunk sent the wrong hate mail in the Mussman district tee hee
Comment by Annonin' Monday, Jul 3, 17 @ 11:40 am
If the tax increase veto is overridden, Rauner will run for re-election bashing the increased taxes while taking credit for the relative fiscal stability they provide.
You can book it. The one thing transparent about the man is his lack of scruples.
Comment by wordslinger Monday, Jul 3, 17 @ 12:14 pm
===You can book it===
Yep. They might even help put votes on the override. /s
Comment by Rich Miller Monday, Jul 3, 17 @ 12:15 pm