Major financial ratings firm downgrades Illinois

From press release

Dec. 8, Moody’s Investors Service downgraded Illinois’ general obligation debt from A1 to A2, the ninth downgrade or downward outlook from a credit rating agency since May 2003.

Illinois now has the dubious distinction of being known as the second-worst-rated state behind California, as determined by all three credit rating agencies, which include Moody’s, Standard & Poor and Fitch Ratings. This reflects negatively on the state of Illinois’ creditworthiness, and is an independent comment about the abysmal condition of the state’s finances.

The downgrade, according to Moody’s, was influenced by Illinois’ budget imbalance, which Moody’s put at a $11.6 billion budget deficit, and state government’s failure to take action to fix Illinois’ budget gap in time to reverse the trend of financial decline.

The financial ratings firm noted that some of the state’s major challenges, aside from the “high structural imbalance,” include “revenue shortfalls and spending pressures” that lead to “narrow operating fund liquidity”; payment delays and a “reliance on inter-year borrowing”; and the state’s overwhelming pension debt and its obligation to pay retiree health care benefits.

Though Illinois Gov. Pat Quinn (D) blamed the downgrade on the national recession and struggling economy, as well as the policies advanced by the Blagojevich administration, Moody’s said the state’s financial descent was exacerbated by political infighting that “prevented timely budget adoption and led to other negative outcomes.”