Moody's Says Junk Status Still Possible for Illinois Despite Budget Deal

Jul 6, 2017

Even though the Illinois House voted to override the governor's veto to give the state its first budget since 2015, the state's bonds may still reach "junk" status, according to Moody's Investors Service.

In a press release, Moody's says they've placed the state's rating "under review for possible downgrade."

The decision to place the state's ratings under review for downgrade incorporates Moody's concerns about its severely underfunded pensions and a backlog of unpaid bills, which has doubled during the past year.

Moody's says the plan lacks broad bipartisan support, which may hurt its effectiveness once implemented. In addition, Illinois' baseline tax collections declined in fiscal 2017, suggesting that any tax increase may yield less revenue than anticipated in coming months.

If Moody's decides to downgrade Illinois, the state will be the first in the nation to ever fall to junk status.