S&P drops Illinois rating to BBB-plus, cites mismanagement
Standard & Poor’s downgraded Illinois’ credit rating by one notch to BBB-plus with a negative outlook on Thursday, citing the state’s weakened finances due to “mismanagement.”
“The downgrade reflects the state’s weakened financial management and fiscal position and our view that Illinois’ continued delay in developing a long-term plan to address its liabilities is placing increased pressure on the rating,” S&P credit analyst John Sugden said in a statement.
He added the “duration of this mismanagement” has impeded the state’s ability to address its long-term liabilities, which include a $111 billion unfunded pension liability and a projected $5 billion operating budget deficit.
An impasse between its Republican governor and Democrats who control the legislature has left Illinois as the only U.S. state without a complete budget 11 months into fiscal 2016. Court-ordered spending and ongoing and stopgap appropriations have allowed Illinois to keep operating.
S&P’s action follows a downgrade of Illinois’ rating to Baa2, just two steps above “junk,” by Moody’s Investors Service on Wednesday.
Illinois has the lowest credit ratings among the 50 states and has had to pay a big interest rate penalty to sell its bonds. The state is planning to sell $550 million of general obligation bonds on June 16.