State credit issues impact at home
By Jim Hagerty
ROCKFORD – As new Mayor Tom McNamara and six new alderman begin their first week, economic hardships in Springfield continue to rear their heads locally.
Illinois was reminded Tuesday just how bleak its finances are as S&P Global rated the state a BBB, leaving some experts to speculate that the state could be downgraded to junk status if lawmakers fail to pass a budget. The news comes as the Senate and House trudge through their so-called “Grand Bargain” that could see Rockford part of a gambling expansion bill.
The S&P announcement follows a Fitch Ratings downgrade to BBB in February. The state has been operating without budget since July 1, 2015. The temporary $356 million spending passed last June expired Jan. 1. An $817 million stopgap budget is pending after being passed by the House last month.
The S&P and Fitch ratings reflect the state’s inability to reconcile the mess with its five municipal pension systems that now come with more than $130 billion in unfunded debt.
One of the state’s options to stop pension bleeding is to revamp an option for employees who seek a 401(k)-style option, especially for those in the State University Retirement System.
Downgrades have also reached Illinois public universities, several of which are digging deeply into reserves.
Last month, S&P Global knocked the University of Illinois system down to an A grade. The agency warned that further dips would come without an end to the GOP/Democratic standoff.
Southern Illinois University dropped to a BBB; Eastern Illinois and Northeastern Illinois are now at BB. The agency also socked Governors State and Western Illinois universities with BB- grades.
In April, Moody’s Investors Service placed seven universities, including Northern Illinois, on review in light of their collective debt of $2.2 billion.
Rock Valley College faculty is still reeling after 28 instructors were told in February they were being let to in attempts to balance the school’s budget after it lost nearly $7 million in funding. The layoffs were the most since 2015, when 44 position were eliminated. Rock Valley is facing a $1.6 million deficit for the upcoming fiscal year. Current layoffs go into effect this coming fall.
The Illinois House approved the stopgap bill just before its April break. Although it is a bill Gov. Bruce Rauner is expected to veto, it would allot $559 million in MAP grants for colleges and universities, an amount which could get them through the summer.
The emergency plan would also provide more than $200 million for social services from two accounts that collect a portion of Illinois’ state income tax revenue. The accounts are reserved for social services and education.
“I am concerned with how many nonprofits in our community have been impacted and how this is negatively affecting those individuals with the greatest needs,” McNamara said. “I would also be concerned if the state changes the methods to which they return our own tax dollars to local municipalities.”
If lawmakers do not pass a budget by the end of the month, Illinois is set to become the nation’s first junk-rated state.