The Standard & Poor Global Ratings have issued a warning to Illinois that the latter's credit rating will be downgraded to the lowest denominator if its feuding lawmakers cannot agree on the budget to be adopted by the state. The 'junk' status will deepen Illinois's multibillion dollar deficit. Taxpayers will have to pay the price for many years to the future. Such a bottom status will force the state to pay more money when it has to borrow for essential public activities like refinancing the existing debt or laying roads and maintaining them.
Crippling debts and no political consensus
Ratings agencies have downgraded the credit rating of Illinois for years. There were concerns about the state's gargantuan pension debt. There is also the matter of unpaid bills amounting to a massive $15 billion still to be paid. To make matters worse, revenues dropped as lawmakers permitted an increase in temporary income tax to expire in 2015. As per S&P, the political infighting pose a threat to timely payment of core priority payments for the state. It has already dropped the state's rating to a single level just above junk. This happened after Illinois lawmakers adjourned the regular session sans any deal on May 31. Moody's- another ratings agency- did the same. It reported that with elapse of regular legislative session, the political barriers against progress seemingly hardened. This indicated the severity of challenges Illinois continued to face. It also showed political difficulty of advocating solutions.
The outlook for Illinois continues to be bad on June 24, with the state's lawmakers joining a Springfield meeting for special legislative session. The participants continue to remain deadlocked. The new fiscal year-July 1- is almost here. According to Brian Battle of Performance Trust Partners, such a development is an extremely alarming one. The director of the Chicago headquartered investment firm said that this is not simply a political show. Every Illinois resident has stake in what is happening at the present. There will be a time when the crushing burden of taxes could be too much for a person the street. The sorry state of affairs have already negatively impacted a number of universities and local governments.
Illinois's condition is not new. The state's ratings have been getting lower for many years now. The process has only accelerated as the stalemate between Democrats and GOP Governor Bruce Rauner has increased. Democrats control the state's General Assembly.