Illinois delays bond issue following credit downgrade
By Scott Reeder | Special to Watchdog.org
SPRINGFIELD, Il. — Illinois slammed the brakes on a $500 million bond issue Wednesday after receiving a rating downgrade from S&P Rating Services on Friday.
“This is absolutely crazy. Why is a state in such bad shape trying to borrow more money?” said Bob Williams, president of State Budget Solutions, a nonpartisan group dealing with fiscal accountability. “Illinois’ pension system is in horrible shape.”
Gov. Pat Quinn’s office attempted to downplay its decision to hold off on the bond issue, which was intended for capital projects primarily for schools and transportation. In a prepared statement, Quinn’s office said:
“The state of Illinois has delayed Wednesday’s scheduled bond sale. Our conversations with potential bidders lead us to believe the market is unsettled because of recent actions and comments by the bond rating agencies. We plan to schedule a new bond sale after the markets have had time to digest the news.”
S&P Rating Services has given the Land of Lincoln an A- rating along with a negative outlook. That’s the worst credit rating of any state in the nation.
“Frankly, I think rating agencies have too been generous with Illinois, Williams said. “It should have junk-bond status now. But they haven’t quite grasped the depth of Illinois’ economic problems.”
State Sen. Mike Jacobs, D-East Moline, said Illinois is at a breaking point.
“Every governor – Edgar, Thompson, Ryan – has struggled with Illinois’ finances,” he said. “In fact, every governor since Ogilvie has struggled with this issue. Illinois wants to spend more than it takes in. We have to decide whether to cut spending or seek an infusion of cash.”
But Williams contends seeking a tax increase would have dire consequences for the state.
“What happens when you raise taxes is that businesses just leave,” he said. “Illinois already has a less favorable business climate than its neighbors like Indiana, Michigan and Iowa, which are Right-to-Work states.”
Since Quinn entered office in 2009, the state has experienced 11 credit downgrades.
“It’s a bit unfair to blame Pat Quinn for all of this,” Jacobs said. “Those rating agencies did next to nothing before he came into office. It looks to me like now they are covering their backsides. A lot of legislators are responsible for the financial situation the state is in, too.”
And Illinois’ financial situation is bleak.
Illinois pays its bills as much as five months late. Last year it spent $738 million more than it took in. And under new accounting rules, the state’s unfunded pension liabilities exceed $200 billion.
It’s time for Illinois’ leaders to get serious about getting the state’s fiscal house in order. Without real pension and spending reform, rating agencies will continue to downgrade Illinois’ credit and the state’s debt will continue to swell.
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