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Illinois credit rating upgraded for the ninth time in two years

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Fitch Ratings has assigned an ‘A-’ rating to the following State of Illinois’ GO bonds:

–$175 million taxable series of December 2023A;

–$350 million tax-exempt series of December 2023B;

–$350 million tax-exempt series of December 2023C.

Additionally, Fitch has upgraded the following state of Illinois ratings:

–Issuer Default Rating (IDR) to ‘A-’ from ‘BBB+’;

–GO bonds to ‘A-’ from ‘BBB+’;

–Build Illinois senior and junior obligation sales tax revenue bonds, which are linked to the state’s IDR based on state-dedicated tax analysis, to ‘A+’ from ‘A’.

The Rating Outlook is Stable.

* Press release…

Governor Pritzker today celebrated the state’s ninth credit rating upgrade in just over two years as Fitch Ratings elevated Illinois’ rating for general obligation bonds. This fiscal progress comes as the result of five balanced budgets and years of responsible financial management and discipline under Governor Pritzker and Democrats in the General Assembly.

“We are continuing to right the past fiscal wrongs in our state with disciplined fiscal leadership, and credit rating agencies and businesses alike are taking notice of Illinois’ remarkable progress,” said Governor JB Pritzker. “Another credit rating upgrade means millions saved for Illinois taxpayers in interest—money back in the pockets of our state where it can better serve our residents.”

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 under the previous administration. At its worst, Illinois’ bill backlog hit nearly $17 billion.

“In addition to building up reserves, the state has also actively reduced various long-term and budgetary liabilities, most prominently its unpaid bills, and laid a more sustainable fiscal foundation,” said Fitch’s report on the upgrade. “Illinois reduced its accounts payable balance by approximately $1 billion over the course of fiscal 2023 to less than $500 million, a level the state has not seen in more than two decades and continuing a pattern of using unappropriated surpluses to pay down bills.”

Across major credit rating agencies S&P Global Ratings, Fitch Ratings, and Moody’s Investors Service, the state has received nine upgrades since June of 2021. Illinois is now back in the “A” category for all three agencies. Prior to those upgrades, the state had not received an upgrade since June of 2000, over two decades. Agencies have cited the state’s actions in paying down bill backlogs, repaying debts, increased fiscal transparency, building financial reserves, and balancing the state budget as factors in the upgraded ratings.

* Back to Fitch…

The upgrade of Illinois’ IDR to ‘A-’ from ‘BBB+’ reflects the state’s ability to execute on significant planned reserve contributions and maintain improvements in budget management including normalized accounts payable, thereby improving the state’s overall operating profile.

Illinois’ ‘A-’ IDR reflects solid operating performance that remains below most other states, with a long record of structural imbalance primarily related to pension underfunding offset by continued progress towards more sustainable budgeting practices. The ‘A-’ IDR also reflects the state’s elevated long-term liability position and resulting spending pressure. Illinois’ deep and diverse economy is only slowly growing, but still provides a strong fundamental context for its credit profile. […]

Long-Term Liability Burden: ‘a’

Long-term liabilities are an elevated but still moderate burden on Illinois’ significant resource base. Constitutional limitations suggest Illinois has very limited flexibility to modify existing pension obligations. Other post-employment benefit (OPEB) obligations also have constitutional protections, but the state’s recent progress in materially reducing OPEB liabilities highlights both the state’s ability to manage within those protections and the inherent variability in OPEB calculations.

Operating Performance: ‘a’

Reserves have improved to historically high levels for the state and provide an important fiscal cushion, but levels remain relatively modest versus other states. Management has eliminated many outstanding budgetary liabilities and established a sustainable pattern of smoother fiscal decision-making. Sizable gaps in pension contributions relative to actuarially determined levels persist, with recent supplemental contributions helpful, but insufficient to address this structural budget gap.

…Adding… House Speaker Chris Welch…

“In May I proudly told members of the House that we’d crafted a budget that would improve our fiscal house and our credit. Today, it’s clear that Democrats are continuing to deliver on that promise as we have reached ‘A’ status with every rating agency.

“We heard a lot of partisan, misleading spin about our budget from Republicans, but financial experts and watchdogs agree that our budgetary decisions continue to move Illinois down a path of progress and prosperity. While we hope our Republican colleagues join us in this effort, Democrats will continue to budget responsibly and make smart investments for a stronger future for all.”

* Comptroller Mendoza…

In giving Illinois our 9th credit upgrade in the past two years, Fitch Ratings noted our progress in reducing our backlog of bills to what is now a “normalized” accounts payable that stands at $1.86 billion today – down from a high of $16.7 billion during the budget impasse. Fitch credited the state for boosting its Rainy Day fund to nearly $2 billion. That fund was down to $48,000 during the impasse.

Fitch encourages Illinois to bring that fund up to a level most other states have and to make greater progress paying down our pension liabilities. That is exactly what my Rainy Day and Pension Stabilization Bill, HB2515, proposes to do and I look forward to seeing it reintroduced in the next legislative session.

This upgrade is a tribute to the responsible debt management my office has undertaken in recent years working with the General Assembly and Governor. These upgrades lower the state’s costs for projects like building roads and bridges, saving taxpayers money.

All the hard work my staff and I have done to stabilize the state’s finances has been to get Illinois ready for its growth spurt. Illinois is open for business and we’re looking forward to future credit upgrades on the horizon.

posted by Isabel Miller
Tuesday, Nov 7, 23 @ 12:12 pm

Comments

We were at junk bond status under Republican leadership (Rauner and his veto proof minority in the House led by Rep. Hammond’s “present” vote).

Six years later under Democrat Pritzker, we have recovered to an “A-” rating.

Fiscal responsibility used to be a Republican argument, at least until they began arguing over it. Thank you, Governor Pritzker and your staff.

Comment by H-W Tuesday, Nov 7, 23 @ 12:22 pm
I used to pray for times like this, to get credit scores like this
So I had to vote out Rauner like that to shine like this
In a matter of time I spent on some JB’s wishlist
At the bottom of the Fitch Ratings, Rauner debt locked on wrists
Seen my dreams unfold, nightmares come true.
It was time to vote for J.B. again and I said, “Yeah, I do.”

Comment by Blago's Hairline Tuesday, Nov 7, 23 @ 12:22 pm
===The upgrade of Illinois’ IDR to ‘A-’ from ‘BBB+’ reflects the state’s ability to execute on significant planned reserve contributions and maintain improvements in budget management including normalized accounts payable, thereby improving the state’s overall operating profile.

Illinois’ ‘A-’ IDR reflects solid operating performance that remains below most other states, with a long record of structural imbalance primarily related to pension underfunding offset by continued progress towards more sustainable budgeting practices.===

Utter gibberish… because if you read what I read, at no point does Fitch look at the legal obligation(s) Illinois has to “bonds/debt”.

So, yeah, I’m pleased, I’m pleased because hard work, budgetary normal-ness, actual governing is being rewarded, I’m pleased. Truly.

The honesty to the obligation in regards to a measure of credit? It’s still a racket. The losers here are the spelunkers… and those who’ve made millions on a phony measure of Illinois obligations and the credit worthiness… excluding the applicable requirements to that debt.

Comment by Oswego Willy Tuesday, Nov 7, 23 @ 12:23 pm
Pretty great month for the state business-wise between this and the Belvidere plant news.

Comment by Drury's Missing Clock Tuesday, Nov 7, 23 @ 12:28 pm
Something tells me this will not be highlighted by the IPI.

Comment by Retired SURS Employee Tuesday, Nov 7, 23 @ 12:33 pm
So Fitch no longer has us as the worst state in the nation!
We’re tied with NJ for last place instead. Moody and S&P have us just below NJ still.

I’m only half kidding around, this is good news.

Comment by Perrid Tuesday, Nov 7, 23 @ 12:34 pm
Interestingly, the positive turn in the State’s finances goes largely unnoticed/unmentioned by the average citizen… much like our national economy under Biden. People line up to complain… those complaints linger… despite facts telling a far different story. Maybe we are only interested if it’s something we can complain about.

Comment by Lincoln Lad Tuesday, Nov 7, 23 @ 12:42 pm
I’m a fiscal conservative. That used to mean I was a Republican but in Illinois, they are by far the more fiscally irresponsible. Well done to Pritzker and his team. I’m surprised how fast and how well we have overcome Rauner.

Comment by Lurker Tuesday, Nov 7, 23 @ 12:48 pm
I’m glad the Manhattan Oracles found the omens to be in our favor, but we really should find a way to liberate state governments from this arbitrary and extractive system.

Ratings measure credit *risk* (not “quality,” as the Governor’s press release said) and Illinois bonds are effectively zero risk. The last state government default was during the Great Depression. Before that, it hadn’t happened since the Civil War. States just don’t default anymore.

So the ratings agencies are just playing games within the infinitesimal margin between “zero risk” and “basically zero risk.” The ratings provide an artificial floor to the bond market, nothing more.

Comment by vern Tuesday, Nov 7, 23 @ 12:51 pm
===I’m surprised how fast and how well we have overcome Rauner.===

Taking ZERO away from Pritzker and Crew. Not one thing.

For me, it’s “this”;

Bruce and Diana Rauner wanted to ruin Illinois for an agenda that never could get 60/30. Both RaunerS could care less about Illinois. Start there. “Why”? Here’s that “this”….

… you can’t ruin the economic engine of the Midwest, the 3rd largest city in America, a giant in both business and agriculture, an education Mecca, private and public institutions… for all the purposeful hurt, that’s the “thing”, hurting what is naturally GREAT about Illinois, and now showcasing Illinois, selling Illinois, actually governing with her in the best interests of Illinois, great things happen.

Wisconsin, Indiana, Minnesota, Missouri… Iowa… none can hold a candle to Illinois… unless you want to purposely ruin Illinois for an agenda not her best interests… so you ruin her anyway by denying her governance.

These 5 years, it’s fast, but also so long. So much more to do, but make no mistake… it’s not the surprise that Illinois is bouncing back, it’s that the actors like Bruce and Diana Rauner aren’t around to keep Illinois down.

Comment by Oswego Willy Tuesday, Nov 7, 23 @ 1:10 pm
===Ratings measure credit *risk* (not “quality,” as the Governor’s press release said) and Illinois bonds are effectively zero risk. The last state government default was during the Great Depression. Before that, it hadn’t happened since the Civil War. States just don’t default anymore.

So the ratings agencies are just playing games within the infinitesimal margin between “zero risk” and “basically zero risk.” The ratings provide an artificial floor to the bond market, nothing more.===

Ball game.

Once one comes to realize the racket, you enjoy the good because arbitrarily, it’s an opinion with a want to seem factual.

Good stuff.

Comment by Oswego Willy Tuesday, Nov 7, 23 @ 1:13 pm
=== Good stuff ===

The rare OW praise - I’m kvelling

Comment by vern Tuesday, Nov 7, 23 @ 1:24 pm
@OW, you have done well I like your take on Illinois and Rauner it is completely the case. I have to admit I don’t generally hold some of you views but you got it correct. We need to do a lot more but thankfully we are away from that low point. I have issues with Pritzker on many things, but he has done so well in this regard.

Comment by clec dcn Tuesday, Nov 7, 23 @ 1:31 pm
- clec dcn -,

Agreed facts make disagreement on policy (later or otherwise) better for all. Appreciate you. Hopefully things continue so we can “disagree” on policy and robustly with facts too. Be well.

- vern -

Too kind, but realize that a great many souls would rather I not praise them, lol. You be well too.

Comment by Oswego Willy Tuesday, Nov 7, 23 @ 1:35 pm
Short term pain long term gain comes true

Comment by Rabid Tuesday, Nov 7, 23 @ 2:07 pm
I somewhat agree with you OW. I guess my point of disagreement is when I was appointed by Rauner and then saw just how bad it was fiscally, I thought the long-term damage was so great that it could not be done this fast. Oddly, it might be due to the pandemic and federal relief that helped us too. Anyway, you make good points about Illinois and our diverse economy.

Comment by Lurker Tuesday, Nov 7, 23 @ 2:41 pm
===Oddly, it might be due to the pandemic and federal relief that helped us too===

Yeah. No. No.

Rauner systematically tried to ruin this state.

Pritzker is doing the exact opposite.

Ask Fitch, they’ll tell you about it.

They won’t tell you about how Illinois is obligated to pay debt, but… lol

Yeah. It’s better because if governance. Full stop.

The rest is part of the leadership actually wanting to govern.

With respect.

Comment by Oswego Willy Tuesday, Nov 7, 23 @ 2:57 pm
- Lurker -

Make no mistake, I hear you.

My point to the “extra monies” aspect is leadership to that is what made a difference, state by state.

So much of the fiscal “outlook” is about leadership, while Bruce and Diana Rauner wanted the state to implode or get their wants. Pritzker isn’t imploding anything.

Again, with much respect.

Comment by Oswego Willy Tuesday, Nov 7, 23 @ 3:03 pm
Congrats and thanks to the governor and legislators who are helping steer the ship right. The future is brighter with this kind of improvement and management. It is a great signal to businesses thinking of relocating here.

Comment by Grandson of Man Tuesday, Nov 7, 23 @ 3:52 pm