Moody's

A pair of credit rating agencies on Tuesday issued warnings on the finances of both the state of Illinois and its largest city.

BRIAN MACKEY / NPR ILLINOIS

A major credit rating agency says Illinois won't see its rating lowered to "junk" but warns the state still faces serious financial challenges and long-term risks.

On Thursday, Moody's Investors Service affirmed the current Illinois rating with a negative outlook, saying a downgrade remains possible in the next two years.

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A major bond-rating agency says the state's fiscal challenges linger despite approval of the first state budget in two years.

Moody's Investors Service issued a report Friday. It notes that an income tax increase approved this month will generate nearly $5 billion more a year.

It says the new revenue will ease the Prairie State's cash crunch. The political squabbling since 2015 between Republican Gov. Bruce Rauner and Democrats who control the General Assembly has contributed to a backlog of bills of nearly $15 billion.

Moody's Downgrades Rockford Bond Rating

Jul 11, 2017
Moody's

Moody’s Investor Service downgraded Rockford’s debt rating from A1 to A2.

The group says the downgrade reflects the city’s high pension burden, as well as greater operating costs and a limited ability to raise revenue. The Rockford Register Star reports city officials say the lack of home rule authority limits the ability to raise such revenue. The lower rating likely will increase overall borrowing costs.

Susan Stephens

Northern Illinois University wasn't alone in the bond-rating downgrades announced Friday afternoon by Moody's Investors Service. The ratings agency also downgraded the University of Illinois, Illinois State, Northeastern, and Southern Illinois University.

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One day after the Illinois General Assembly ended its spring session without passing a budget, two bond-rating agencies have downgraded the state’s credit. The actions by S&P Global Ratings and Moody's Investors Service leave state government debt just one step above “junk” status.

S&P says Illinois is at risk of a negative credit spiral because of what it calls "unrelenting political brinkmanship." This means the agencies think there’s a real possibility state government could run out of cash and default on its debt.

Moody's Investors Service has placed six Illinois public universities on review for downgrade, impacting a total of approximately $2.2 billion of public university debt. According to a release issued by the company, the review is prompted by  "failure of the State of Illinois to enact a budget providing full operating funding to the universities for the current fiscal year 2017 and resulting operational and liquidity strains on the universities."

Illinois’ population losses are frequently cited in debates over the state’s tax rates and business laws.
Last year, Census figures show it was tied for the greatest rate of people leaving the state.

But Sarah Crane, with Moody’s Analytics, says a federal immigration crackdown could make it even worse.

"Any policies that severely curtail immigration will hurt the state's population growth even more than expected, in addition to labor force growth.”

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Moody’s Analytics says Illinois is among the Midwest’s “weakest links.”  That’s according to a report prepared for the Illinois Commission on Government Forecasting and Accountability (the legislature's nonpartisan research group). 

State economist Ed Boss acknowledges that an economic downturn could undo any progress toward a balanced budget. 

“I think even though the forecast that Moody’s gives is for some improvement next year, it’s not much," he said. "It’s still a pretty dismal picture."

Moody's Investors Service downgraded the debt of Chicago Public Schools on the same day district teachers threatened to strike.

The group downgraded CPS's debt from B2 to B3, and called the district's financial condition "precarious" and "acute."  Monday from B2 to B3, Moody's called CPS' financial condition "precarious" and "acute." The new rating is one level above C, which Moody's describes as "speculative (and) of poor standing, and are subject to very high credit risk."

  The University of Illinois has received a relatively glowing financial report from Moody's Investor Service, but it comes with some caveats.  

The firm credits U of I leaders for having bolstered the school's balance sheet. The report says the school's brand and diverse revenue base -- for example, high demand from international students -- add credit stability that's helped to cushion state funding blows.  This includes the current budget impasse, which has resulted in public universities going nearly a year without funding.  

The decision to downgrade DeKalb's bond rating from Aa2 to Aa3 is based in part on the city’s pension liabilities.

According to a news release, this liability is due in part to the city using the lower funding level allowable by the State of Illinois, as well as a change to the Government Accounting Standards Board liability reporting requirement.

Moody’s also cited DeKalb’s declining tax base from 2009 to 2015 as a contribution to the rating but noted a tax-base increase in 2016 of 1.6 percent.

Susan Stephens

Moody’s Investor Service is out with a warning that the just-passed stopgap spending plan is not enough for Illinois’ public universities.

On Thursday, lawmakers were extolling the measure’s support for higher education. 

Republican state Sen. Chapin Rose of Mahomet highlighted funding of Monetary Award Program – or MAP – grants, for low-income students.

“Pay out the remaining MAP grants from ’16," he said. "It will help our community colleges and also, very importantly, it will invest in adult education to put people back to work in this state.”

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A second major credit rating agency has downgraded Illinois' rating, citing financial "mismanagement" by state leaders amid a yearlong budget impasse.

S&P Global Ratings lowered the rating Thursday from BBB+ to BBB. The agency says the lack of a budget for the current fiscal year has "left Illinois with unmanaged spending" that could go on for another year.

Illinois had the worst credit rating of any state even before the current impasse between Republican Gov. Bruce Rauner and majority Democrats.

Susan Stephens

Moody' Investors Service downgraded Northern Illinois University's ratings to Baa2 from Baa1 on its Auxiliary Facility System (about $199 million outstanding) and Certificates of Participation (about $12 million outstanding). The outlook is negative.

According to a news release, the downgrade reflects expected weakening of operating cash flow and liquidity due to lack of FY 2016 state appropriations resulting from the failure of the State of Illinois (Baa1 negative) to enact a budget eight months into the fiscal year.

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The Moody's credit rating agency has downgraded $26.8 billion in Illinois's general obligation bonds, saying the move was due to the state's weakening financial position during the year.

In lowering the bond rating to Baa1 from A3 on Thursday, Moody's Investors Service said its expectation is that the ongoing stalemate on the budget due July 1 will lead to further deterioration of the state's finances.

Fitch Ratings on Monday downgraded its rating on the state's outstanding bonds for the same reason.

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A credit analyst with Moody's Investor Service says Illinois's bond rating will remain unchanged, despite the state entering its third month without a budget. But the chances of a downgrade increase the longer a gridlock continues.

Illinois has the nations' lowest credit rating -- a grade that symbolizes its fiscal troubles, and adds to them. A lower score makes it costlier to borrow.

But the rating won't drop any further just yet.

Rating Agency Criticizes Illinois Budget

Jun 4, 2014
Brian Mackey

The credit rating agency Moody's says Illinois is at risk of undermining progress toward better finances. It says the failure to extend current income tax rates could lead to a worsening deficit. 

Moody's says because lawmakers failed to stop an automatic tax cut scheduled for the end of the year, Illinois could have to increase its backlog of unpaid bills. The state already has the lowest credit rating in the nation.

Republicans say this shows Illinois needs to further reduce costs, but Democratic Senate President John Cullerton says there isn't that much left to cut.

A second major rating agency is downgrading Illinois' credit worthiness.  Moody's Investors Service lowered the state's $27 billion in outstanding bond debt to A3 from A2. The new rating's three levels above junk status. 

NIU Official Reacts To Credit Downgrade

Mar 29, 2013
Susan Stephens

Officials at Northern Illinois University are responding to recent action taken by Moody’s. The investors’ service downgraded the credit rating for four Illinois universities, including NIU.

Moody's

Moody's Investors Service is taking a pessimistic view of American colleges and universities. The agency says repeated increases in tuition are partly to blame.