Illinois' woes are certainly not at an end even after the lawmakers finally managed to get together for a budget-related discussion last week that seemed like it would work, at least for the time being. Moody's the rating agency has issued an official statement saying that the state's credit rating could still take a nose- dive to junk status.
End to impasse still in doubt
While the progress is very welcome indeed given that long-standing financial crisis that the state has been facing, there is really no clarity whether it will actually be adequate to tide Illinois over the storm. The fact is that the tug- of- war of sorts between the Democrats controlled House and the Governor, who is Republican, continues to cast doubt on whether any practicable outcomes will be achieved.
A proposal has been put forth last week to get the budgetary ball moving, so to speak, and to unlock the necessary resources that the state needs to keep the machinery running by means of increasing taxes and specific measures related to state spending. However, these measures have been vetoed by the Republican Governor, Bruce Rauner. Now, it is up to the House to work around the vetoes and get the budget impasse broken.
Moody places Baa3 rating on review
Meanwhile, rating agency Moody's has stated that the State of Illinois' rating of Baa3 is now officially on review. Baa3 is just one step above junk rating, and this is exactly why the situation is rather alarming for the Illinois lawmakers. There is no question that the review is to determine if the rating needs to be downgraded further. Given the current economic situation prevailing in the state, there is no possibility of any upgrades happening unless a dramatic favorable change occurs with respect to the budget.
It is also necessary to factor in that the budget passed over Independence-day weekend still falls short of what Illinois really needs to regain its economic bearings. The proposed budget was a $36 billion affair which also included provision for a $5 billion tax hike and yet there is no way that the budget, even if cleared in its present form will serve to meet the state's needs fully. Illinois has a whopping $15 billion in dues stacked up against it and its pension liability is unfunded, which is a huge concern as well.