CHICAGO, June 1 S&P Global Ratings dropped
Illinois' credit rating by one notch to BBB-minus on Thursday
and warned the state could sink into junk unless it passes a
budget that addresses a gaping structural deficit.
The rating action came the day after the Illinois
Legislature ended its spring session without an agreement on a
spending plan for the fiscal year that begins on July 1.
Illinois, already the lowest-rated U.S. state, is limping
toward the June 30 end of its second-straight fiscal year
without a complete budget due to an impasse between its
Republican governor and Democrats who control the legislature.
The state has been operating under court-ordered spending,
stopgap budgets, and ongoing appropriations mandated by law.
As a result, the state's pile of unpaid bills, a barometer of
its structural deficit, has topped $14 billion.
"The rating actions largely reflect the severe deterioration
of Illinois' fiscal condition, a byproduct of its stalemated
budget negotiations, now approaching the start of a third fiscal
year," S&P analyst Gabriel Petek said in a statement.
He also said "unrelenting political brinkmanship" poses a
threat to the timely payments for core state priorities.
S&P said the nation's fifth-largest state risks "entering a
negative credit spiral" in which further credit downgrades could
sap its weak liquidity.
Eleni Demertzis, spokeswoman for Governor Bruce Rauner,
blamed House Speaker Michael Madigan and his fellow Democrats.
"Madigan’s majority owns this downgrade because they didn’t
even attempt to pass a balanced budget, get our pension
liability under control, and other changes that would put
Illinois on better financial footing," she said.
This latest rating downgrade marks the seventh for Illinois
since January 2015 by major credit rating agencies.
S&P also downgraded the AAA rating on Build Illinois sales
tax revenue bonds to AA-minus and pushed the rating on the
state's appropriation debt issued by the Illinois Sports
Facility Authority and the Chicago-based Metropolitan Pier &
Exposition Authority from BBB-minus to the junk level of
"In our view, the ongoing budget impasse has increased the
nonpayment risk associated with Illinois' obligations that
require a budget appropriation before they can be funded. We now
view these payment obligations as having speculative-grade
characteristics," S&P said.
Illinois is rated Baa2 by Moody's Investors Service and BBB
by Fitch Ratings, both with negative outlooks.
Records from S&P, Moody's, and Fitch dating back about half a
century or more show no states rated junk.
(Reporting by Karen Pierog and Dave McKinney; Editing by