Illinois on Track to Become First The state of Illinois’ financial condition is just one month shy of being designated “junk” by the nation’s credit agencies. The agencies have warned that if Illinois doesn’t resolve its budget issues by May 31 – the end of the state legislative session – it may be punished with more downgrades. It’s quite possible the agencies could downgrade Illinois bonds to junk status. Ted Dabrowski Vice President of Policy Illinois Policy Institute A junk rating of Illinois’ bonds isn’t just some wonky financial designation that only affects politicians. It has real consequences for the people of Illinois, from the most vulnerable to the wealthiest. Illinois’ political class is to blame for the state’s financial collapse. Lawmakers have been unwilling to enact the spending reforms to stop the bleed and the economic reforms to grow the state’s tax base. Falling to ‘junk’ Illinois, which already has the lowest credit rating of any state, will become the nation’s first junk-rated state if the rating agencies follow through on their downgrade warnings. The only remotely similar companion in this disgrace will be Puerto Rico, the junk-rated American territory that’s suffering a deep crisis of its own. A junk rating would be another blow to Illinois’ already low reputation, further discouraging investment, job creators and the in-migration of new residents. It would also hurt Illinois financially and push up borrowing costs, taking even more funds away from core government programs and social service providers. The state’s fall to junk credit status has been a long time coming. For decades, Illinois politicians have ignored important issues, passed fake reforms and papered over Illinois’ structural problems with tax hikes. Lawmakers haven’t passed a real balanced budget since 2001. A lack of real pension reform has driven Illinois’ pension debt to $130 billion, up nearly $100 billion from a decade ago. And inadequate property tax reform and tax hikes have shrunk Illinois’ tax base, both in people and dollars. As a result, Illinois has been downgraded 19 times by the three major rating agencies since 2009 alone, according to the Commission on Government Forecasting and Accountability. Illinois’ drop to junk status would be its 20th downgrade, assuming a double-notch downgrade by just one agency. 16
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