Credit houses send Illinois positive financial signals after tax increase approval
SPRINGFIELD, Ill. (AP) — 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 commence, 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 managed-care 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 Tuesday. 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."