Moody's Eyes Illinois' Impasse

Aug 31, 2015

Credit Amanda Vinicky / WUIS / Illinois Issues

A credit analyst with Moody's says Illinois' bond rating will remain unchanged, despite the state entering its third month without a budget. But the chances of a downgrade increase the longer gridlock continues.

Illinois has the nations' lowest credit rating -- a grade that symbolizes its fiscal troubles, and adds to them; a lower score makes it costlier to borrow.

But the rating won't drop any further just yet.

That's in part because Moody's Investor Service's Ted Hampton says Illinois' propensity to delay tough decisions is already a factor in the score. Or, as a new Moody's report phrases it, the "impasse underscores the state's governance weaknesses."

"But that could change," Hampton says. "We're not setting a deadline, we're just observing that if this impasse goes on, or looks as though it's going to go on, beyond September, it's really going to be hard to see how the state comes out of this without a significantly deteriorated credit profile overall."

September closes out the fiscal quarter. Further, as time goes on, it becomes harder for politicians to retroactively hike taxes. Or if they go the opposite route reduce spending -- the value of the cuts on the budget decreases, while the impact of cuts becomes more painful.

Hampton says for now, what legislators and the governor ultimately agree to do about the state's finances is more important than the time it's taking to get there.