Credit houses send Illi­nois pos­i­tive fi­nan­cial sig­nals

Kuwait Times - - BUSINESS -

Two of the na­tion’s top credit-rat­ings agen­cies sig­naled Mon­day that it would be a good idea for Gov. Bruce Rauner to ac­cept the re­sults of cli­mac­tic week­end ac­tion to re­solve the na­tion’s long­est bud­get stale­mate since the Great De­pres­sion, but with Democrats trum­pet­ing progress, there was only si­lence from mi­nor­ity Repub­li­cans who fear their gov­er­nor’s agenda will be steam­rolled.

Fitch Rat­ings and S&P Global Rat­ings, hav­ing ear­lier threat­ened to toss Illi­nois’ cred­it­wor­thi­ness into “junk” sta­tus with­out swift ac­tion to ap­prove a bud­get, smiled fa­vor­ably Mon­day on the fi­nan­cial out­look. Fitch de­scribed as “con­crete progress” Sun­day’s 72-45 vote in the House of Rep­re­sen­ta­tives for a 32 per­cent in­crease in the in­come tax rate to bump up state rev­enue by $5 bil­lion a year, along with a $36 bil­lion spend­ing out­line.

Min­utes af­ter Sun­day’s House vote, Rauner promised a veto. On Mon­day, Chicago Demo­cratic House Speaker Michael Madi­gan pledged an over­ride. The fire­works could be­gin soon. Se­nate Pres­i­dent John Culler­ton of Chicago sched­uled Tues­day morn­ing votes on whether to ac­cept House changes to the bud­get leg­is­la­tion, con­cur­rence ac­tion nec­es­sary to send them to Rauner’s desk.

Illi­nois has en­tered its third con­sec­u­tive fis­cal year with­out a bud­get plan be­cause Rauner has re­sisted ink­ing a deal with­out busi­ness- and po­lit­i­cal-cli­mate changes to boost com­merce, re­store po­lit­i­cal faith and re­lieve lo­cal prop­erty-tax own­ers.

Rat­ings agen­cies, hav­ing had par­tic­u­lar in­ter­est in Illi­nois even prior to the cur­rent mess, are mon­i­tor­ing the po­ten­tially dis­as­trous side ef­fects: A $6.2 bil­lion an­nual deficit, $14.7 bil­lion in past-due bills, and the parcel­ing out of pay­ments to ser­vice providers that prompted a fed­eral judge on Fri­day to or­der the state to pay nearly $300 mil­lion more per month owed to man­aged­care Med­i­caid providers.

Fitch and S&P put Illi­nois’ bond rat­ing at “BBB-mi­nus,” or one step above “junk,” a des­ig­na­tion that would sig­nal to in­vestors that buy­ing Illi­nois debt is a spec­u­la­tive ven­ture. Moody’s In­vestors Ser­vice was closed Mon­day for the hol­i­day.

The fa­vor­able an­nounce­ments pro­vided a mo­men­tary respite from the brinks­man­ship.

Madi­gan said he was pleased with the credit-rat­ing news. But the agen­cies ex­pressed cau­tion.

“If a bud­get is en­acted, the de­gree to which it closes the state’s struc­tural deficit, pro­vides a path­way for ad­dress­ing the back­log of un­paid bills, and its im­pact on cash flows, will be im­por­tant fac­tors in our re­view of its ef­fect on Illi­nois’ credit qual­ity,” the S&P anal­y­sis read.

Fitch wants to see a full-year spend­ing plan, not a stop-gap mea­sure like the one that fi­nanced Illi­nois gov­ern­ment for just the last six months of 2016. “Tem­po­rary or par­tial mea­sures, or a fail­ure to en­act a bud­get within the con­text of this ses­sion, would re­sult in a down­grade,” it said.

But Repub­li­cans were miss­ing from view in the Capi­tol Mon­day af­ter ac­cus­ing the Democrats of shov­ing the tax in­crease down their throats with­out any ac­tion on Rauner’s struc­tural changes such as cost-cut­ting to the com­pen­sa­tion pro­gram for in­jured work­ers and a statewide prop­erty tax freeze.

In what’s been a 13-day spe­cial ses­sion that be­gan in late June, Democrats and Repub­li­cans have ne­go­ti­ated those is­sues, but the GOP claims talks broke down over the week­end in ad­vance of Madi­gan call­ing the bud­get votes. Madi­gan said Mon­day they’re on­go­ing.

“We worked with Repub­li­cans to­day on those is­sues; we’ll con­tinue to work with the Repub­li­cans on those is­sue un­til they’re re­solved,” Madi­gan said. Repub­li­cans ap­pear un­con­vinced. Rauner spokes­woman Cather­ine Kelly said the speaker is “clearly try­ing to dis­tract from his 32 per­cent per­ma­nent tax hike.” Spokeswomen for Se­nate Mi­nor­ity

Leader Bill Brady and House Mi­nor­ity Leader Jim Durkin would not say why the two men didn’t at­tend to­day’s meet­ing, but Durkin’s of­fice said he would not at­tend yes­ter­day. Brady’s spokes­woman in­di­cated with­out all lead­ers at­tend­ing, Brady won’t ei­ther.

The ab­sences raised ques­tions in Culler­ton’s mind about where ne­go­ti­a­tions, par­tic­u­larly on the tan­gen­tial Rauner de­mands, stand.

“We have to do some­thing,” Culler­ton said. “The House has acted but we’d pre­fer to do it in agree­ment with Repub­li­cans.” —AP

SPRING­FIELD: Illi­nois House Speaker Michael Madi­gan, D-Chicago, speaks with re­porters af­ter a lead­ers meet­ing at the Capi­tol. —AP

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