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S&P releases statement about “meaningful step” toward budget

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Illinois

* S&P Global Ratings…

The increased likelihood that Illinois (BBB-/Watch Neg) will soon have a budget in place is a development with significant credit implications, in S&P Global Ratings’ view. Passage of tax and spending legislation by Illinois’ House of Representatives on July 2 represents a meaningful step toward the enactment of a comprehensive budget for fiscal 2018.

We had previously indicated that, in our view, because of the state’s structural deficit and the magnitude of its unpaid bills, its fiscal trajectory was unsustainable. More immediately, a recent federal court ruling (and the potential for others) compelling the state to fund more of its obligations each month threatens to provoke a liquidity crisis. The protracted failure of Illinois’ lawmakers to assert governing control over the state’s finances has, in effect, begun to directly undermine the state’s discretion over the allocation of its resources.

Enactment of a comprehensive budget with revenue and expenditure alignment could help put a halt to this erosion of the state’s sovereignty over its fiscal affairs. In this way, the legislation passed by the House could represent the first step in a stabilization of Illinois’ fiscal outlook and may lead to an easing of pressure on the state’s credit quality.

Even with a budget, however, it’s likely that Illinois’ finances would remain strained and vulnerable to unanticipated economic stress. In addition to having accumulated record amounts of payables, the state’s university system has been deprived of state funding since January 2017. If a budget is enacted, the degree to which it closes the state’s structural deficit, provides a pathway for addressing the backlog of unpaid bills, and its impact on cash flows, will be important factors in our review of its effect on Illinois’ credit quality.

Conversely, in the event progress toward a budget falters, the weakened condition of Illinois’ finances and liquidity provide it with minimal margin at its current rating level, as detailed in our June 1 CreditWatch placement statement.

As we already discussed, Fitch released a similar statement earlier today.

posted by Rich Miller
Monday, Jul 3, 17 @ 1:14 pm

Comments

How can any rational person now say that voting no on revenue was the right thing to do.

Comment by leb Monday, Jul 3, 17 @ 1:17 pm
That means that even if Governor Junk amendatorily vetoes the bill, it won’t be good for ratings. Don’t halt progress Governor.

Comment by 360 Degree TurnAround Monday, Jul 3, 17 @ 1:19 pm
OK… so:
1. Senate concurs and passes SB6, SB9, and SB42;
2. Gov to likely veto all three;
3. Chambers override, thus ending impasse.

If the above do not happen, then we go to junk thanks to two (2) people only.

Comment by Tomacci Monday, Jul 3, 17 @ 1:20 pm
Speaker Madigan & President Cullerton - if Rauner vetos, please override the next day. Don’t sink to his level just to try to pin him with Governor Junk. The Dem candidates for Gov have enough to work with to beat the guy next year. We need a budget now, lives are at stake.

Comment by Fax Machine Monday, Jul 3, 17 @ 1:20 pm
Many coulds, ifs, and howevers in this real release . With are the folderol in Springfield, it must drive MJM nuts that he can’t control the Debt markets that way he can politics.

Comment by Texas Red Monday, Jul 3, 17 @ 1:21 pm
Hard to say if Gov. ‘Happy” Junk is that incompetent. Losing the junk status takes time…time GovJunk does not have. Hopefully one of his $uper$tars will call their broker for some learnin’

Comment by Annonin' Monday, Jul 3, 17 @ 1:26 pm
@Texas Red, as someone who wrote financial services statements about future events those are just the tools of the trade.

The number of times I wrote “it may not be unreasonable to expect” sickens every English teacher I meet.

Cautious language about future events is par for the course for the business world. Only in our bizarre politics have we allowed impossible-to-follow-through guarantees to actually boost our impression of people.

Comment by EVanstonian Monday, Jul 3, 17 @ 1:31 pm
Or call their broker to let them know to be ready to buy asap…

Comment by Fixer Monday, Jul 3, 17 @ 1:31 pm
The sleight of hand agreements to claim savings on pensions and health care costs that will not be realized this next fiscal year, if at all, will continue to cause problems. The balanced budget still contains a structural deficit.

The phrase “hung for a lamb, hung for a ram” comes to mind. Wish they had fixed the structural deficit problem with a larger tax hike. Still glad for what was done, and more may not have been doable.

Comment by Last Bull Moose Monday, Jul 3, 17 @ 1:38 pm
===Speaker Madigan & President Cullerton - if Rauner vetos, please override the next day. Don’t sink to his level just to try to pin him with Governor Junk.===

I don’t know how long you’ve been following this but I’m fairly certain ole Tax Hike Mike is gonna want to extract his pound of flesh.

Comment by Gruntled University Employee Monday, Jul 3, 17 @ 1:42 pm
Same general comments as I made for Fitch.

Add that this is a bit more forward looking and says: good start, but more to do.

Comment by RNUG Monday, Jul 3, 17 @ 1:50 pm
“threatens to provoke a liquidity crisis”

Apparently just what the governor wants. Definitely what some of his supporters want. Now it will unfortunately be #BustOutBruce, when he vetoes the tax hike.

Something had to be done very quickly. Rauner is not to be trusted to follow through on a budget deal, as was seen in the Grand Bargain failure. Three years without a budget. That’s enough.

Comment by Grandson of Man Monday, Jul 3, 17 @ 2:04 pm
To all you ignorant people who are referring to our governor as “junk,” be reminded that it was your Speaker Junk that got us into this mess in the first place.

Comment by Jimmy Monday, Jul 3, 17 @ 2:46 pm
That’s strange no mention of the turnaround agenda’s needed reforms

Comment by Rabid Monday, Jul 3, 17 @ 3:02 pm
- Jimmy - Monday, Jul 3, 17 @ 2:46 pm:

To all you ignorant people who are referring to our governor as “junk,” be reminded that it was your Speaker Junk that got us into this mess in the first place.

Really? Bruce told us it was Pat Quinn because ‘Governors Own’. Don’t you remember? You Rauner supporters have an amazingly short memory. Seems you forget a lot of what Governor Junk says when it suits your needs. Besides almost 3 years with no budget couldn’t be his fault could it? Get a clue this is all about the rich vs the poor……….

Comment by Old and In the Way Monday, Jul 3, 17 @ 3:11 pm
==To all you ignorant people who are referring to our governor as “junk,” be reminded that it was your Speaker Junk that got us into this mess in the first place.==

Heh, this is getting under your skin, huh?

You’re never gonna make it by being the second one to a nickname.

Comment by Arsenal Monday, Jul 3, 17 @ 3:26 pm