State Gets Bond Rating Upgrade, Democrats Celebrate and Republicans Criticize
The Illinois State Capitol in Springfield.
Illinois received its first credit rating upgrade since the Ryan administration Tuesday, drawing cheers from governing Democrats and criticism from Republicans.
From Dan Petrella of the Chicago Tribune:
In upgrading Illinois’ credit by one step — to two notches above junk bond status instead of one — Wall Street ratings agency Moody’s Investors Service noted that the $42 billion spending plan for the year starting July 1 “increases pension contributions, repays emergency Federal Reserve borrowings and keeps a backlog of bills in check with only constrained use of federal aid” from President Joe Biden’s coronavirus relief plan.
Even after the upgrade, Illinois remains the lowest-rated state on Moody’s scale, two notches below the next-lowest: New Jersey. Generally, states with higher credit ratings are able to borrow money at lower interest rates, ultimately saving taxpayers money.
Moody’s last upgraded Illinois in 1998, while Fitch Ratings last upgraded the state in June 2000, when Republican George Ryan was in the governor’s office.
Democratic Gov. J.B. Pritzker lauded the state’s progress in the mind of Wall Street, which comes after voters in November resoundingly rejected the cornerstone of his plan for stabilizing the state’s finances: replacing the flat-rate income tax with a graduated tax that would have allowed higher levies on higher incomes.
Democrats, of course, cheered the news:
“I promised to restore fiscal stability to Illinois, and Moody’s ratings upgrade demonstrates that Illinois’ finances are heading in the right direction for the first time in two decades. A ratings upgrade pays momentous dividends for taxpayers, and the people of Illinois deserve credit for their incredible resilience and determination,” said Governor JB Pritzker.
“Stability and responsibility produce results. You don’t need to ruin people’s lives to have sound fiscal policies and positive outcomes,” said Senate President Don Harmon.
"Thanks to responsible and balanced budgets, as well as sound economic policy decisions, we continue to move our state toward financial stability. This is yet another example that we can support all Illinois families, invest in our communities, provide high-quality state services to those in need, all while improving our fiscal health," said House Speaker Chris Welch.
But Republicans don’t think majority Democrats have done enough to fix the state’s fiscal problems.
“The change is encouraging but claiming victory with federal money is misleading the people of our state,” said Senate Republican Leader Dan McConchie (R-Hawthorn Woods). “Like someone trying to hide a hole in the wall by covering it with wallpaper, the governor and Democratic majorities are trying to ‘paper over’ the state’s ongoing systemic budgetary and economic issues. For example, we still have over $140 billion in unfunded liabilities for the five state retirement systems. Meanwhile, state pension payments continue to consume a quarter of Illinois’ operating budget, which is billions of dollars that can’t be used to fund schools, increase public safety, or improve our transportation systems. Illinoisans deserve systemic, structural changes to our long-standing issues - not lies about our financial status. The truth is, that without the influx of federal aid, our state would very likely be looking at yet another credit downgrade.
“When the federal money dries up, as it will, the governor and his party will no longer be able to pretend that there’s no hole in the wall. Today is a positive step, but there will come a day when the governor and his party run out of other people’s money. Unfortunately for the people of Illinois, that day is coming sooner, rather than later.”
Freshman Rep. Marty McLaughlin (R-Barrington Hills), who has been vocal about the failure of lawmakers to enact meaningful pension reform, told The Illinoize politicians shouldn’t be cheering.
“Illinois politicians claiming our credit rating trend is a sign we are being fiscally responsible is sad and pathetic,” McLaughlin said. ”The federal bailout of Illinois enhanced our ability to to temporarily pay obligations with our own money sent to Washington, borrowed from the Chinese, and charged on a credit card to our children and grandchildren. Without structural changes to our spending habits and addressing of our long term unsustainable liabilities, we will be right back where were were, hanging by our fingernails just above insolvency for our once great state.”