A major credit rating agency has again downgraded Illinois' rating, citing the "unprecedented failure" to approve a state budget.
Fitch Ratings lowered the rating Wednesday on nearly $26 billion of general obligation bonds from BBB+ to BBB. That's a few levels above "junk" status.
Illinois already has the worst rating of any state. The lower rating means taxpayers pay more when Illinois borrows money.
Fitch noted lawmakers haven't passed a budget for two consecutive years and spending is occurring at levels "far in excess" of what the state is bringing in.
The agency says even if efforts in the Illinois Senate to pass a budget deal are successful the prolonged inaction "has fundamentally weakened the state's financial profile."
Fitch warns another downgrade would be warranted if the issue isn't resolved.
FLASH INDEX:
Meanwhile, a monthly indicator of Illinois’ economy continues to improve, despite uncertainty in the state and nation.
The University of Illinois Flash Index rose to 104.4 in January, the second straight increase after three months of declines.
Author and U of I Economist Fred Giertz says he’s surprised, given Illinois’ ongoing budget impasse, and a change in the country’s leadership.
“This is one of the most uncertain times in terms of economic policy, as well as lots of other things, with the Trump Administration. But it does not seem to affect the markets too much. I think there’s more stability than most people would have predicted at this point.”
The Flash is made up of corporate earnings, consumer spending, and retail sales. A reading above 100 indicates growth, and it’s been between 104 and 105 since last July.
Giertz says Illinois’ economy is still growing at a slower pace than the rest of the country, and the state has a jobless rate of 5.7%, just above the national level.
