Moody’s Investors Service, a major Wall Street credit rating agency, announced yesterday that it has revised its rating outlook for the State of Illinois from stable to negative. Illinois is already Moody’s lowest-rated state. From the agency’s website Thursday:
Rating Action: Moody’s revises State of Illinois’ rating outlook to negative from stable; general obligation rating affirmed at A2
Global Credit Research – 13 Dec 2012
Action applies to approximately $33 billion of outstanding general obligation and related debt
New York, December 13, 2012 — Moody’s Investors Service has revised the State of Illinois’ credit outlook to negative from stable, while affirming the state’s general obligation debt rating at A2. The state has about $28 billion of G.O. bonds outstanding. We have also affirmed related ratings assigned to state borrowings, including about $2.6 billion of debt issued by the Metropolitan Pier & Exposition Authority, rated A3, and the state’s Build Illinois sales tax revenue bonds, rated A2, of which $2.7 billion are currently outstanding. The negative outlook is linked to ratings on the G.O. as well as the related credits.
SUMMARY RATING RATIONALE
The negative outlook reflects our view that the state’s pension funding pressures are likely to persist and perhaps worsen in the near term. Moreover, fiscal 2014 marks the last year before Illinois’ 2011 income tax increases are partly unwound, putting the state on track to deal with simultaneous growth in pension funding needs and loss of revenue. If the legislature in coming weeks or months enacts significant pension reforms, they are almost certain to be challenged, given the state’s constitutional protection of retiree benefits. Political pressures, coupled with the threat of litigation, may mean that any reforms enacted have only a marginal effect on liabilities. Despite a diverse economy with above-average wealth, lackluster demographic and economic characteristics indicate that, even with continued US economic improvement, the state’s existing tax structure will not provide enough revenue to address the rising cost of pension benefits and other state expenses. In addition, the state’s payment backlog remains high.
(Editor’s note: Italics added for emphasis)
Back on January 13, 2011, Illinois Governor Pat Quinn signed legislation authorizing a 67 percent increase in the personal income tax of Illinois residents and a 46 percent increase in corporate income taxes on Illinois businesses. In 2015, these taxes are scheduled to be rolled back from 5 percent to 3.75 percent and 7 percent to 5.25 percent respectively. However, as I noted that same day:
The last time income tax rates in the “Land of Lincoln” went up in 1989, politicians also claimed it was as a temporary increase to combat a financial “rough patch.” But the rates never came down and by 1993 were designated permanent. Until now, that is.
I won’t be surprised if lighting strikes Illinois residents and businesses twice.
You can read the entire rating action report on the Moody’s website here.
No comments yet.
Leave a comment
Christopher E. Hill, Editor
11,976 Visits in June
454,328 Visits from
Please Rate this Blog HERE
- Final Vote Next Tuesday On Niles, Illinois, Gun Store And Range
- Does Robert Shiller See ‘Froth’ In U.S. Housing And Stocks?
- USGS Updates National Seismic Hazard Maps
- Downtown Chicago Could Receive Resilient Electric Grid
- Peter Schiff On Gold: ‘We’re Going To Have A Big Rally Probably Beginning Here In The Second Half Of 2014’
- Detroit Police Chief: ‘Good Detroiters Are Armed And Will Use That Weapon’
- Chicago Train Passengers Robbed At Gunpoint
- Jim Rogers: Some Currencies, Real Assets Could Shine When Coming Bust Arrives
- Illinois Governor Pushes Ban On ‘Assault Weapons,’ ‘High-Capacity’ Ammo Magazines
- Chicago’s Gun ‘Control’ Fetish Costing City Big Bucks
- Editor on 82 Shot, 14 Killed In Chicago Over Long July 4 Weekend
- Derek @ MoneyAhoy.com on 82 Shot, 14 Killed In Chicago Over Long July 4 Weekend
- Editor on Dick Cheney Warns Of Massive Terrorist Attack On U.S. Before Decade Is Out
- tj & the bear on Dick Cheney Warns Of Massive Terrorist Attack On U.S. Before Decade Is Out
- Editor on U.S. Senator Michelle Obama (D-IL)?
- Bill Taylor on U.S. Senator Michelle Obama (D-IL)?
- Not Prepared: 17 Signs That Most Americans Will Be Wiped Out By The Coming Economic Collapse | All Self-Sustained on The Percentage Of Adult Americans That Own Investment Gold Is…
- Editor on Deadly MERS Virus Lands In Chicago, Discovered In Indiana
- Editor on Video: SHTF In Venezuela
- tj & the bear on Deadly MERS Virus Lands In Chicago, Discovered In Indiana