The chances that Illinois will reach a budget before May 31 and avoid seeing its bond rating lowered to the worst of any state in history are 50-50 at best, according to Mark Glennon, founder of the business and government website WirePoints told the Sangamon Sun recently.
With the state already nearly two years into a stubborn budget battle that has left it billions in arrears, several major credit agencies have warned that Illinois could become the first state with its bonds downgraded to "junk" status.
“Junk bond status would raise the cost of borrowing for everyone and have spill-off on other bond related issues,” Glennon said. “The drop would be significant, and it would represent a major black eye for the state.”
Illinois already has the lowest credit rating in the country. Another downgrade could scare potential job creators away from investing in the state and exacerbate an out-migration trend that has seen tens of thousands of residents leave for better opportunities.
“The best we can hope for is that all this chaos and dysfunction prompts people to elect a new Legislature,” Glennon sad. “I think it will take many years to put Illinois back on a healthy sustainable path. We should view this as an exercise of disaster mitigation.”
According to Illinois Policy Institute experts, the state hasn’t had a balanced budget in 16 years, during which time it also has seen its pension debt balloon to as much as $130 billion -- nearly $100 billion of which came over the last decade alone.
The Commission on Government Forecasting and Accountability reports that Illinois has been downgraded 19 times by the three major rating agencies in the last eight years.
Meanwhile, Chicago has already been saddled with a junk-bond rating, and the cash-strapped Chicago Public School system is in even deeper junk territory.
“The state will never balance its budget until we start to deal with real numbers,” Glennon said. “Most people have come to accept the phony numbers, which aren’t real because of pension issues that don’t count growing pension deficits.”
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