Fitch: Illinois will be challenged to maintain a prime credit rating | Illinois

(The Center Square) – Illinois will be challenged to maintain its investment grade credit rating, according to Fitch Ratings.

According to Fitch Ratings, about $ 850 million of bonds issued by Illinois this month have near-speculative credit ratings. The state’s overall rating was confirmed, but with a still negative outlook.

The credit rating agency assigned several Illinois bonds issued this month a rating of BBB-, which is a notch above BB, a rating the agency considers speculative. Others say it’s junk bond status.

“Illinois” ‘BBB-‘ [issuer default rating] and the GO ratings reflect Fitch’s anticipation of a fundamental weakening of the state’s financial resilience given its already precarious position at the onset of the current severe recession, ”the agency said on Wednesday. “The state’s lack of significant reserves and the limited nature of the other tax management tools available to it mean Illinois will be challenged to maintain its investment grade IDR.”

The Illinois Sports Facilities Authority bonds were rated BB +, as were the Metropolitan Pier Expansion Project and Exhibition Authority bonds.

When a government agency has a low credit rating, it costs taxpayers more due to higher interest rates for the government to sell bonds, which are loans that must be repaid.

“We pay more interest than any other state in the country and we have the worst credit,” said state representative Joe Sosnowski, R-Rockford. “We are in a very difficult situation and we still have a lot of problems to face in the future.”

The state also has an “ongoing pattern of poor operational performance and unresolved fiscal decision-making which has produced a credit position well below the level that the state’s broad economic base and substantial independent legal capacity to control its state.” budget would support otherwise, ”the agency mentioned.

“The negative outlook reflects the risk that the depth and duration of the economic downturn will lead Illinois to implement non-structural fiscal management measures that the state struggles to unwind quickly once an economic recovery finally begins. to settle down, ”Fitch said.

For the state’s operational performance, it obtained a “bb” from Fitch.

“Illinois’ operating performance, both during the Great Recession of 2008 and the economic expansion that followed, had been very poor,” said Fitch. “The current downturn will place more emphasis on the state’s limited financial resilience, as Fitch anticipates an increased structural fiscal gap and at least short-term growth in the large accounts payable arrears.”

Other long-term issues that Fitch sees are retirement costs.

“Fitch estimates the state’s total long-term liabilities at around $ 200 billion, with pensions accounting for around 80% of the total,” the agency said. “It is important to note that in the absence of a constitutional change, Illinois does not appear to have the ability to unilaterally change the benefits of retirees, including the OPEB, for current employees and retirees.”

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