AP Political Writer
SPRINGFIELD, Ill. (AP) – Two of the nation’s top credit-rating houses smiled favorably on Illinois financial outlook Monday following votes the previous day in the House of Representatives to end the nation’s longest budget standoff
Fitch Ratings and S&P Global each issued encouraging notices despite Republican Gov. Bruce Rauner’s immediate threat to veto the 32 percent tax hike approved to finance the budget. And they came despite a slowing of momentum Monday to resolve the ongoing budget deadlock. Only Democrats attended a meeting of legislative leaders and Senate President John Cullerton was noncommittal about when he’d begin budget concurrence action.
But the credit agencies, which had warned that inaction before the July 1 start of the fiscal year would mean downgrading the Prairie State’s creditworthiness to “junk” status, were cautious in announcing no immediate action.
“If a budget is enacted, the degree to which it closes the state’s structural deficit, provides a pathway for addressing the backlog of unpaid bills, and its impact on cash flows, will be important factors in our review of its effect on Illinois’ credit quality,” the S&P analysis read.
Illinois has been without an annual budget for two years, the longest of any state in at least 80 years. The state is carrying a $6.2 billion annual deficit and $14.7 billion in overdue bills. The state has crept along on spending ordered by courts, but a federal judge last week ordered that the state pay nearly $300 million more a month to managed-care Medicaid billers.
Fitch puts Illinois bond rating at “BBB-minus,” or one step above “junk,” a designation that would signal to investors that buying Illinois debt is a speculative venture. S&P has Illinois one notch higher, at “BBB.” Moody’s Investors Service was closed for the holiday.
The vote Sunday came after a raucous weekend of swings from bipartisan cooperation, to name-calling, to enough agreement to approve the income tax increase on a 72-45 vote, one more than necessary to override a governor’s veto. A $36 billion spending plan also won endorsement 81-34.
Both measures return to the Senate for concurrence. But the Senate had not convened by early afternoon Monday. Cullerton, a Chicago Democrat, emerged from what was billed as an afternoon meeting of legislative leaders to say only he and Chicago Democratic House Speaker Michael Madigan attended.
Cullerton said he would meet with his caucus to discuss next steps.
“We have to do something,” Cullerton said. “The House has acted but we’d prefer to do it in agreement with Republicans.”
Rauner’s dismay stems from the Legislature’s failure thus far to send him legislation outlining the “structural” changes he wants to boost business, curtail costs for state-employee pensions and freeze local property taxes. Democrats protest that they’re continuing to negotiate those items with GOP colleagues.
His message was carried Monday by major business groups who disparaged the tax hike at a Statehouse news conference.
“Illinois needs a balanced budget but manufacturing companies also need stability and predictability from job crushing taxes and regulations,” said Greg Baise, president and CEO of the Illinois Manufacturers’ Association. “Adding billions of dollars in permanent tax hikes without reducing pension costs, lowering property taxes, or enacting economic development reforms is a recipe for disaster.”
Fitch called the tax-and-budget vote “concrete progress on reaching an agreement to break the two-yearlong budget impasse.” But it pointed out that the court-ordered spending that has kept the government functioning since July 2015 without appropriated spending is increasing pressure on the treasury. A federal judge on Friday ordered the state to pay nearly $300 million more a month to managed-care Medicaid providers.
And Fitch said it wants to see a full-year spending plan, not a stop-gap measure agreed to a year ago that financed Illinois government for just the last six months of 2016.
“Temporary or partial measures, or a failure to enact a budget within the context of this session, would result in a downgrade,” the Fitch statement warned. With the order on Medicaid vendors and other legal challengers to the state’s bill-paying decisions, Fitch said, “The state risks losing full control of its budgetary decisions, which would be inconsistent with the current rating.”
The budget bills are SB6 and SB9 .
Associated Press writer Sophia Tareen contributed from Chicago.
Contact Political Writer John O’Connor at https://twitter.com/apoconnor. His work can be found at https://apnews.com/search/john%20o’connor
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