Overall, Moody’s upgraded its view on $33 billion of debt, citing a “material improvement” in state finances.
“The enacted fiscal 2022 budget for the state increases pension contributions, repays emergency Federal Reserve borrowings and keeps a backlog of bills in check with only constrained use of federal aid from the American Rescue Plan Act,” the New York-based firm said. “Illinois still faces longer-term challenges from unusually large unfunded pension liabilities, which are routinely shortchanged under the state’s funding statute. These liabilities could exert growing pressure as the impact of federal support dissipates, barring significant revenue increases or other fiscal changes.”
The ratings upgrade was immediately hailed by Gov. J.B Pritzker, who surely will find it of use in his anticipated upcoming run for re-election.The state’s credit rating has been declining for many years, but particularly dropped off amid a budget standoff during the tenure of the man Pritzker unseated as governor, Bruce Rauner.
“I promised to restore fiscal stability to Illinois, and Moody’s ratings upgrade demonstrates that Illinois’ finances are heading in the right direction for the first time in two decades,” he said in a statement. “A ratings upgrade pays momentous dividends for taxpayers, and the people of Illinois deserve credit for their incredible resilience and determination.”
Moody’s itself had not upgraded Illinois debt since June of 1998, nearly a quarter of a century ago. Other major ratings agencies in recent weeks have changed their outlook on Illinois debt to positive, but stopped short of an actual upgrade.
Pritzker has scheduled a press conference for later today to underline the point. Look for lots more reaction to come.
UPDATE—Senate President Don Harmon, House Speaker Emanuel “Chris” Welch and Comptroller Susana Mendoza—like Pritzker, all Democrats—all are out with statements pretty much saying that Illinois is back, thanks to strong leadership. Top Republicans so far are silent.