Big Trouble In Little Chi-Town: Illinois Downgraded From AA- To A+ By S&P On Liquidity Issues
The rating agencies have decided to once again remind the world of their pathetic, and decades behind the curve existence. The most recent act: downgrading Illinois From AA- to A+ with a negative outlook. From the report: "The downgrade reflects what we view as the state's deteriorating
liquidity and financial position," said Standard & Poor's credit analyst Robin
Prunty. "Illinois failed to address its fiscal 2009 deficit, which was carried
into fiscal 2010. Similar to many other states, revenues are performing below
originally forecast levels."
In addition, the fiscal 2010 budget was balanced with various spending
reductions and a plan for debt restructuring to provide budget savings; the
savings from both are uncertain at this time. The state has made limited
progress in our view in addressing the current year budget gap, which has
weakened liquidity. Standard & Poor's believes this budgetary gap and the high
reliance on nonrecurring measures to balance the budget make the return to
structural budget balance unlikely for many years.
The negative outlook reflects Standard & Poor's view that, although we
think Illinois has the capacity to restore budget balance due to the absence
of tax limitations or stringent constitutional or legal requirements related
to spending that we see in other states, its willingness to implement
difficult and politically unpopular measures to restore budget balance is
questionable in our view. We believe the state's high reliance on nonrecurring
revenues and the accumulated budget deficit will make the return to structural
budget balance unlikely for many years and will likely continue to pressure
liquidity. The absence of recurring solutions in the next year to deal with
the current budget challenges and begin to stabilize liquidity will likely
result in a further downgrade of Illinois.