Moody’s Investors Service issued a warning to Illinois policy makers this week, as the budgetary stalemate enters its third month. In a recent report, the credit rating agency said that while the budget impasse currently “has had limited effects on our view of the state’s credit position,” that would change if a resolution can’t be negotiated in the coming weeks.
The report said that while the budget stalemate has “not yet strained the state’s finances…that will change if an accord is not reached soon.” In fact, Moody’s suggested that the state needs to have a budget in place by the end of September or the potential for a further credit downgrade will “greatly increase.”
The agency also underscored that they’ll be paying close attention to the “nature of the eventual agreement.” Of particularly interest to Moody’s is how the state will address its pension funding pressures and the state’s deficit, which has been estimated at a $5 billion shortfall for the current fiscal year.
Illinois’ low credit rating has massive trickle-down effects, which make road building more expensive, local government borrowing more difficult and even add to individual student loan debts.
Illinois already has the lowest credit rating of all 50 states, and the state’s finances are further stressed by the City of Chicago’s financial instability. Earlier this summer, the Chicago Public Schools and McPier’s bond ratings took a massive hit as payments were nearly missed.